Reducing compliance costs : the role of regulatory impact assessments

Abstract

The study inquires into the burden of the Maltese regulatory framework and analyses the contributions that Regulatory Impact Assessments could make in the formulation of efficient and effective regulations. The objective was fulfilled by carrying out a survey through which primary data on the compliance costs emanating from the implementation of the VAT was compiled. In preparation to this analysis, the application of Regulatory impact assessments in the United Kingdom, Australia, and New Zealand was reviewed and a related economic model was presented. In line to a priori expectations, the compliance costs associated with the VAT were found to be substantial, reaching 0.5% of the GDP or 6% of consumption tax revenue. Empirical investigations showed that a 1% increase in the size of the firm leads approximately to a 1% decline in the compliance costs-to-labour ratio. The thesis attributed the relatively high compliance costs to the decision making process, which leaves much to be desired. Regulatory Impact Assessments were suggested as a means through which the Maltese regulatory framework could be made more business friendly, thus fostering an environment where business can thrive and prosper.