With the burden of government spending rising beyond 50% of national income, there has been less attention in recent months given to the growing cost of government regulation. Increased regulation reduces the underlying growth rate of the economy, reduces employment and carries a very real cost for consumers, employees and business owners. Indeed, attempts to reduce government expenditure – though both welcome and essential – may lead to greater regulatory burdens on businesses as the government slims its machines and imposes more costs on the private sector.
Unfortunately, the costs of regulation are difficult to calculate and estimates tend not to reveal how the regulatory burden disproportionately penalises small firms. However, in one area of regulation – the costs to businesses acting as unpaid tax collectors – there has been a generation of research, and a new study, published by the Institute of Economic Affairs, builds on that earlier work .
The results of this research are alarming. The UK has the longest tax code in the world – with the possible exception of India. The UK’s tax code is about five times the size of the German tax code. Furthermore, the UK is one of only three countries in the developed world where the costs of complying with tax regulation are not decreasing. Perhaps this is not surprising given that the average Finance Act in the