Regulatory burden on small firms in Europe

The cost of regulation is a global problem affecting both developed and undeveloped countries. Despite the variety of approaches adopted to control regulatory costs, burdens seem to have grown everywhere.

The tax system has been estimated to account for 40 percent to 50 percent of the paperwork costs imposed on businesses, particularly for small and medium enterprises (SMEs).

In the early 1980s paperwork burdens on business large and small in the United Kingdom (U.K.) and Germany were estimated to be in the order of 2 percent to 4 percent of Gross Domestic Product (GDP) and certainly have increased since.

More recent estimates indicate a range of 3 percent to 4 percent in Europe for SMEs alone.

A recent survey by the Organisation for Economic Cooperation and Development (OECD) provides estimates of regulatory costs, again only for paperwork and excluding large firms, in a range of 1.3 percent to 6.8 percent for seven European states, and between 1.8 percent and 3.7 percent for three non-European countries.

Federal regulatory costs in the U.S. are 7.7 percent of GDP.

Regulation is necessary and inevitable in a modern society, say observers, but like anything else, without real discipline, it can get out of hand and damage the interests of those it seeks to protect.

Source: Graham Bannock, Controlling Regulation, Economic Affairs, June 2001, Institute of Economic Affairs.

For more on IEA http://www.iea.org.uk
For more on Economic Costs of Regulations http://www.ncpa.org/iss/reg

FMF Policy Bulletins 30 April 2002

Publish date: 07 May 2002
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