Shed no tears for the ‘Think Small’ crusade | PKF Malta

The government triumphantly announced the holding of the first meeting of the recently set up College of Regulators. This was convened on 17 April 2017. The Small Business Act was piloted by the PN government in 2011 and among others things it provided for the college to be convened at least three times each year.

It was addressed by the Minister for the Economy, Investment and Small Business, Chris Cardona, Parliamentary Secretary for Planning and Simplification of Administrative Processes, Deborah Schembri, Commissioner for the Simplification and Reduction of Bureaucracy and Chairman to the College of Regulators, Anthony Agius Decelis. This first meeting was held after an absence of six years and this speaks volumes for the esteem that is lacking for small and medium-sized enterprises.

A follow-up meeting of The College of Regulators was convened for the second time this month. It was chaired by the new Commissioner for Simplification, Rosianne Cutajar. The College for Regulators is constituted under the Small Business Act Chapter 512 Article 13 with the aim to simplify the regulatory burdens on SMEs by increasing cooperation between the Regulating Entities. Readers may ask –  why do meetings of The College of Regulators not convene as stipulated at law?

The answer is that the spirit is willing but the body is weak.

Can the new Commissioner face the challenge to inculcate a ‘Think Small’ concept as was originally mandated by the EU directives? It is good to know that the promulgation of the monolithic Small Business Act was piloted by the parliamentary secretary Jason Azzopardi in July 2011. Historically it formed part of the ubiquitous Small Business Act for Europe (SBA) endorsed by the European Council on 12 December 2008.

It now sits silently in a library of dead letter legislation which is gathering dust on some nondescript shelf in a majestic building called the Main Guard facing the palace in Valletta. Observers lament that the “Think Small First” principle is not a reality yet and the tool box for SME’s is spartan. Theoretically this law once enacted is the starting point for all legislation both new and revised – it targets small enterprises (employing less than 250), i.e. in Malta the overwhelming majority of enterprises.

It is a pity that eight years down the line, really and truly the ‘think small first’ concept has never quite taken off the ground. Some say this needs a cultural change in local politics and therefore is difficult to achieve – so just be contrite and take a long breath. Just grin and bear it that SMEs in Malta have for a long time been seen as the Cinderella of the business community.

Unfortunately, much too often SMEs are deemed to be a necessary evil and given second preference as such opportunities are usually the domain of mega businesses (government agencies prefer the latter when issuing tenders even though the EU encourages us to be more supportive to start-ups and when merited to concede a second chance to relatively untested SME bidders).

It goes without saying that this handicap discourages the small business sector in its quest to become more entrepreneurial. The real “think small first” principle should in practice mean that the starting point to test for any negative effect of legislation (new and revised) should be the smallest enterprises. Rules written for a small business can be easily scaled up to cover bigger enterprises, while the contrary is terribly complicated.

Ideally, this motto should be used consistently and with more determination throughout the whole regulatory and implementing process. Applying this principle will dramatically ease administrative burdens. It is pertinent to mention that the union for SMEs (GRTU) has been active to support the ‘Think First’ policy and since 2010 was arguing with the authorities to resist the temptation to tinker with the SBA directives by the use of “Gold plating”. Simply put this is the practice of exceeding the terms of EU legislation and adding undue and unnecessary clauses, which in turn feeds more red tape.

In particular government departments are encouraged to respect the proportionality principle when it comes to compliance and administrative requirements. This principle means that legislative or political provisions should scale down on the demands posted on SMEs since as can be expected the impact on their activities compared to large enterprises is enormous.

But this is Utopian.

In fact the seven-year delay in setting up a College of Regulators did not help the SBA’s cause. Unless regulators meet frequently in an effort to shift through thousands of acts that generate unnecessary bureaucracy then the molehill turns into the proverbial mountain and no Colossus will be strong enough to dismantle it. Nostalgically we recall how the introduction to the act in 2011 solemnly asserts that “It further sets up the Enterprise Consultative Council and the College of Regulators, which aim to provide a forum for consultation and social dialogue, advise Government on challenges faced by the business enterprise, address grievances which emanate from the business enterprise and come up with remedial action.

Reality has shown us a different picture. Undoubtedly our political mindset tainted with a colonial past and an ingrained prejudice against ‘small is beautiful’ guides politicians to support anything that is larger than small which in their own misguided perception leads to the hubris when big numbers are at play. It is fair to comment that the island is now enjoying full employment and a robust economic growth which is registering a modest surplus on the national accounts. All this positive economic transformation lifts the confidence levels of SMEs which are enjoying better business opportunities and can look forward to reach international markets once the mindset towards them improves.

Moving on now that the College of Regulators have met for the second time one augurs that the government enacts  the provision relating to the holding of a two month cooling-off period between the date of publication of laws, and their implementation. Government entities need to conduct regulatory and independent surveys about their deliverables to ensure that they continue giving services in an efficient manner.

The uniqueness of the College of Regulators is that various regulators can in theory work in harmony and remove overlapping and unnecessary bureaucracy. Last though not least the SBA mandates that any public sector entity offering services to businesses shall carry out a customer satisfaction survey every two years, with the aim to establish the impact which the service is having on the community.

One augurs the new Commissioner for Simplification, Rosianne Cutajar, a good start in her awe-inspiring task to resuscitate the SBA provisions.

George M. Mangion

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George Mangion is a senior partner of an audit and consultancy firm, and has over twenty-five years’ experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF be instrumental in establishing many companies in Malta and places PKF in the forefront as professional financial service providers on the Island.