Productivity Commission Capacity Building On Regulatory Review Impact Analysis Module ‘ Compliance costs: Business Cost Calculator’ March 2011 Rod Bogaards Productivity Commission Australian Government

Productivity Commission ‘The BCC is just a calculator – it won’t do the hard work for you’

Productivity Commission 3 What is the Business Cost Calculator? The BCC is an IT-based tool designed to assist policy officers in estimating the business compliance costs of various policy options It provides an automated and standardised process for quantifying compliance costs of regulation on business using an activity-based costing methodology

Productivity Commission 4 What are compliance costs? Compliance costs are the direct costs to business of performing the various tasks associated with complying with government regulation

Productivity Commission 5 What are compliance costs? Policy Business Consumers Government Community costs benefits costs benefits costs benefits costs benefits compliance costs regulatory costs

Productivity Commission 6 Compliance task categories in the BCC Notification Education Permission Purchase cost Record keeping Enforcement Publication and documentation Procedural Other

Productivity Commission 7 Using the Business Cost Calculator Once a user has created an overview of the proposal, the BCC requires details to be inputted about: the compliance tasks associated with the options supporting evidence for this information the level of certainty about this information There may be a number of compliance tasks (with a number of associated compliance activities) for each option

Productivity Commission 8 Compliance activities BCC encourages you to think about the activities needed to comply with a regulation Most important step – mapping the compliance task

Productivity Commission 9 Compliance activities for starting a ‘hypothetical’ business 1.Obtain approval of company name 2.Pay fees for name registration 3.Register the company 4.Make a company seal 5.Register for income tax 6.Register for sales tax 7.Register for professional tax 8.Register with social security 9.Register with pension office 10.Register with labour department

Productivity Commission 10 Compliance activities Compliance activities drive compliance costs cost of fees and payments cost of business’ time to do each activity cost of waiting

Productivity Commission 11 Using the Business Cost Calculator Where options involve compliance costs, the BCC assists in quantifying these costs. Users are asked to detail: the number of businesses affected by each option the tasks that business will have to complete to be compliant with the regulation whether the task is an internal cost or an outsourced cost how long each task will take to complete how often each task will need to be undertaken the associated labour and other costs supporting evidence for all information

Productivity Commission 12 Using the Business Cost Calculator From this information, the BCC will provide an estimate of compliance costs for each option. The BCC data can be displayed, printed and downloaded to other applications in a range of reports A key report is the ‘BCC Report’ which is required to be provided to the gatekeeper to confirm that the best practice regulation requirements have been met

Productivity Commission 13 Steps for using the BCC Step 1: Launch the Business Cost Calculator Step 2: Start a new file/open existing file Step 3: Input Compliance Costs Step 4: See Reports

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Productivity Commission 15 Step 3: Calculate costs 3.1 – Overview 3.2 – Set up cost constraints 3.3 – Create and cost options break down the option into activities/tasks calculate the compliance cost for each activity/task

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Productivity Commission 17 Set up cost constraints Cost type constant costs variable costs Size of businesses affected small/medium/large

Productivity Commission Create an option Key inputs Compliance activities by business start up ongoing Number of businesses affected Time to perform each activity Staff/purchase costs

Productivity Commission 19 Options, tasks and activities Option: Implement mandatory body scanners (note: compliance activities are hypothetical)

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Productivity Commission 22 Data sources – collecting information Obtain information directly from individual businesses Approach industry associations or peak bodies Survey businesses Contact your government bureau of statistics (especially on business populations)

Productivity Commission 23 Step 4: See reports 5 different reports BCC report (for the gatekeeper) BCC present value report BCC detailed report BCC cost category report BCC supporting evidence report

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Productivity Commission 25 For more information More information about the BCC can be found at the Office of Best Practice Regulation (OBPR) website. The Business Cost Calculator can be accessed at: