Small business

1.2 Monitoring the impact of government legislation
Objective: To obtain evidence on the problems faced by SMEs in dealing with government regulation, indicating
areas where amendment is needed.
In general, regulatory policy should aim at creating a ‘level playing field’ for all types of businesses. In
practice, there is an imbalance in both economic and political power, which enables larger firms to influence
the environment more substantially, and there are particular difficulties for small and medium firms in
accessing information. In addition, the relative costs of conforming to regulations can be proportionately
higher for the small firm. These costs stimulate the growth of the informal economy.  
There are various models for monitoring. Annex 9 among others lists documents on the work of the US
Office of Advocacy in the Small Business Administration and the Business Environment Simplification Task
(BEST) Force of the European Community. Key areas to observe in monitoring the impact of regulation are:
• Direct and indirect tax at local, regional and national level;
• Business licensing and registration;

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• Impact on transactions between businesses and businesses and consumers;
• Protection of the environment, health and safety;
• Access of small enterprises to resources of the government and other public authorities.
In each of these areas it is necessary to monitor:
• Ease of compliance;
• Removal of barriers to SME development at various development stages;
• Removal of barriers to transactions between key economic and social agents;
• Harmony between local and national authorities;
• Management of regulatory processes;
• Initiation and preparation of legislation, particularly with regard to the SME sector and the
management of relations between different departments;
• The role of private-sector organisations in regulatory processes.
Many problems in the above areas will be avoided if care is taken in developing legislation to ensure
that it is:
• Necessary. How does it solve small business problems?;
• Effective. Do the benefits exceed the costs?;
• Consistent. Is it consistent in application and in linking with related aspects of law and policy?;
• Just. Is there are equal access and equal rights for all?;
• Transparent. Can implementation be properly monitored?;
• Simple. Can it be understood by all citizens and entrepreneurs affected?
These criteria set a general framework for monitoring existing and proposed legislation. But monitoring
the actual policy needs of SME is difficult even in advanced economies. There is a need to establish
mechanisms for effective public-private sector dialogue and feedback from those who implement legislation.
Business associations from time to time can undertake studies of members’ needs and governments
anticipating a particularly acute problem or proposing new forms of legislation may commission surveys. 
In some economies, independent agencies or semi-independent trusts undertake regular surveys for
this purpose. But it is extremely difficult, using survey methods, to explore the in-depth problems that a
particular piece of legislation may cause. Specialist government task forces (see Section 3.2) may provide
a more satisfactory instrument for this purpose.