Cutting Victoria’s red tape could save up to $1.6 billion a year

An internal state government review found Victoria has the second-highest number of business licences and permits in the nation, but the Allan government is yet to deliver an overhaul despite forecasts it could reap up to $1.6 billion in benefits every year.

Amid a difficult financial environment, Victoria’s peak business body says reducing red tape is vital to keeping many businesses running in the state.

Industry experts says red tape is still holding back economic activity.Credit: Chris Hopkins

Freedom of information documents from February 2023, obtained by the Victorian opposition, show Treasurer Tim Pallas sought advice on how to encourage government departments to reduce the number of business licences in Victoria.

Advice from Treasury in the ministerial briefing found that Victoria had the second-highest number of business licences, registrations and other approvals relative to other states.

Feedback from industry in the report also described the current system as “complex, slow and cumbersome” at state and local levels. An overhaul was estimated to benefit businesses and government by between $820 million and $1.6 billion each year.

Pallas accepted a recommendation that Treasury lead the charge on a “centrally co-ordinated” approach to reduce the number of licences across the state.

But more than a year later, industry says the system is still holding back growth. The Allan government did not provide a figure on how many licences had been eliminated since the process began, but said changes were being introduced as a part of a regulatory reform program.

Victorian Chamber of Commerce and Industry (VCCI) chief executive Paul Guerra said tax and red tape remained handbrakes on business in the state.

“Any improvement to both reducing red tape and unnecessary approval delays remains essential for the ongoing viability for many businesses,” he said.

“Victoria should strive to be the best place to operate a business and both tax and regulation need to be addressed.”

Victorian Chamber of Commerce and Industry boss Paul Guerra and Treasurer Tim Pallas.Credit: Joe Armao

In its 2024 budget submission, VCCI called for a specialist unit within the government agency Better Regulation Victoria to simplify regulatory improvements.

“Almost 40 per cent of business owners report that time is a bigger cost to doing business than money, largely due to unproductive activities,” they said.

“Furthermore, 55 per cent of businesses report that it is more difficult to do business in Victoria compared to other states.”

The government has pointed to streamlined quarry approvals, standardisation of permits for roadside trading, and an online tool on the Service Victoria app to help food, health and beauty businesses find permits and licences as examples of recent improvements.

“We’re continuing to make Victoria the best place to run a business … which includes simplifying licensing requirements to help new businesses open sooner and make it easier for established businesses to operate,” a government spokesperson said.

“Our regulatory reform program is simplifying processes and fast-tracking approvals … reducing red tape and overhauling Victoria’s licensing system to save businesses and taxpayers time and money.”

The Allan government is also considering significant reforms as part of its Economic Growth Statement, a new policy document due by the end of 2024. VCCI is leading an advisory committee assisting this process.

But opposition economic reform spokesperson Jess Wilson said the government was letting down businesses by failing to act faster.

“These stalled reforms will do nothing to reverse the decline in the number of registered businesses or attract new investment and economic opportunity to our state,” she said.

“The Allan Labor government must explain why after a year and a half, no meaningful progress has been made to make Victoria an easier place to start and grow a business.”

Australian Industry Group Victorian director Tim Piper said insurance costs and taxes were the biggest concern for the private sector.

“Not just the increase in taxes as a result of the value of their property going up, but also because of the land tax increase that came out of last year’s budget,” he said.

“Even with companies that are still trading, they are finding things really difficult, and they’re losing business.”

The Victorian government estimates the state has added 130,000 new businesses between 2017-18 and 2022-23, more than any other state.

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