Red tape: Do regulations help or hinder businesses?

Ah, the dreaded red tape. For years, businesses have been fighting against it because it costs money. In fact, it can cost a fortune because regulations are time-consuming and tricky targets to hit. On the whole, the industry sees red tape as a hindrance which needs abolishing.

But, just because a few corporations don’t like government interference doesn’t mean it’s a terrible thing. The truth is that many federal and local authorities attempt to help businesses. Even when it doesn’t seem like it, the regulations are there for a reason.

So, the question is: which argument is correct? Are regulations helpful or hurtful? The only way to find out is to weigh up the pros and cons and come to an informed decision. Here are the points SMEs should understand before concluding.

Anti-business examples

To start with, let’s take a look at the examples of government rules and regs which are anti-business growth.

Corporation tax:

Everyone has to pay tax, whether it’s the local store owner next door for a huge corporation such as Apple. Well, Apple may not pay the amount it should but that is a different story.

No boss believes a firm shouldn’t make contributions to the cause. After all, the state is one reason the business is up and running and flourishing in the first place. However, corporation tax around the world seems to be higher than ever before thanks to public opinion. Studies show a typical man or woman tends to agree with businesses paying more in tax.

Sadly, local authorities play the game of politics and succumb under pressure. But, if companies paid less in tax, it would encourage new enterprises to set up shop in the area. As a result, business would boom and the local economy would receive a massive lift.

Environmental protection:

The planet is suffering and CO2 levels are higher than ever before in human history. There’s no doubt global warming is real and that humans are the cause. Also, no one argues businesses don’t have to use green policies to reduce carbon footprint. The issue is the rapid introduction of rules without a flexible alternative.

Yes, solar energy is an excellent way to power the office and save the planet. However, the majority of SMEs can’t afford the cost of installation. The same goes for wind power and hydroelectric energy. A government may provide subsidies but the expenses don’t clear for years. A small to a medium-sized firm that is already on the breadline is bound to struggle with the extra debt.

Business fraud:

A regulation which deals with fraud shouldn’t be anti-business. OK, some companies that engage in illegal activities won’t like it, but they are in the minority.

For the most part, legitimate business owners try to run a tight ship which complies with the rules. Thanks to the Sarbanes-Oxley Act, it is getting harder and harder for firms to comply, though. The initial problem is the time-consuming nature of the regulations. Because it attempts to cut out a whole of fraudulent activities at once, the red tape is extensive. Many critics think there should be an easier and quicker way to comply. More importantly, there are complaints which state it doesn’t work. Reuters points out that only a handful of people have been indicted since the act was signed into law. That was 15 years ago when George W. Bush was in power.

Pro-business examples

Health and safety:

“Whoa, wait a minute and let me process this information. You mean health and safety rules are helpful?” Yep, you got it in one. Across the industry, businesses see H&S as an unnecessary evil which is raging out of control. Once a person trips in the workplace, a lawsuit gets filed and the company has to defend itself in court. For one thing, it’s not true as not every person who has a trip of fall sues. Secondly, it promotes a culture of safety within the workplace.

The best employers’ health and safety procedure guidelines cover every base. More than that, they encourage cooperation throughout the organization. With the whole team looking out for hazards, there should be fewer incidents. And, if there are fewer trips and falls, there will be fewer lawsuits.

Small business loans:

Big companies don’t have a problem getting a loan. They call the bank manager and get the agreement sanctioned within a matter of minutes. SMEs have it differently because of a lack of cash flow.

Also, having a bad credit rating doesn’t help the cause. With a conventional lender such as a bank, no money and no trust results in a firm rejection.

Thankfully, new lenders are making it easier for small businesses to secure finance. Some don’t even care about the firm’s credit score. Governments could succumb to pressure to ban payday lenders but are regulating the sector instead. These people know money is essential to the survival of the business middle-class.

Patenting and trademarks:

Often overlooked, patents and trademarks are vital to protecting a company’s intellectual property. It’s a fact that rivals steal information and ideas to steal a march on their competitors. And, they don’t care about being subtle as long as it makes them money.

The initial aim of patenting arms around the world is to stop this from happening. Once it has an official patent or trademark, other companies can’t use the idea without your approval. At the very least they should have to pay money as a form of compensation. There is another benefit which isn’t as apparent: creativity. Because an organization can’t steal, they have to come up with new and engaging ideas. Sure, it’s harder than copying a strategy that works and milking it for money. But, it creates a positive culture in the long-term.

The bottom line is simple: some policies work and others are not as helpful. However, one thing to keep in mind is the intention. Almost every regulation is there to either help companies or its employees.

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