Explainer: What is Red Tape?

Red tape is a term often mentioned by politicians promising to slash it. But what is red tape? And how problematic can it be for small business owners?

Rob Bazzani - National Managing Partner Enterprise, KPMG

Rob Bazzani - National Managing Partner Enterprise, KPMG Source: SBS

In the business world red tape is synonymous with bureaucratic waste and obstacles to action.

Tax forms, compliance issues and local government requirements all fit the "red tape" bill.

So where did it come from? The phrase "red tape" is thought to have originated in the 16th century when the King of Spain, Charles V was managing his vast empire.

Administrative documents were bound in tape and important papers were strung together using red ribbon.

The practice quickly spread to other governments and rulers, including England's King Henry VIII.

To this day red tape is associated with fussy bureaucracy.

Paper work can easily pile up for owners who have to deal with reporting requirements like business activity statements.

"So you're talking about quite a large administrative burden that is on small business," National Managing Partner Enterprise, KPMG, Rob Bazzani told SBS.

"Ultimately what it does do is create frustration for the owner, it's a distraction, it can also add extra costs to the running of the business."

When it comes to serving food, regulations are there for a reason.

But it's not unusual for rules to differ widely from council to council.

Joe Jackson forked out $100,000 dollars to set up his food truck, Vejoes, last year, and said red tape has had a solid impact on his business.

"When I originally bought the truck a year ago I had the truck in my street parked and I wasn't able to open the side door in my street just because of regulations," Mr Jackson told SBS.

"So I had this capital that I'm not using ...I worked fulltime doing just admin."

Mr Jackson now does more private events to ensure a more stable income.

Food truck vendors can face tens-of-thousands of dollars in upfront council fees to serve in high traffic areas.

"In a perfect world from my point of view it would be not upfront payment and also a percentage of your payment.

"At the moment this upfront, massive payment is just too hard for businesses like me."
Joe Jackson food truck
Joe Jackson's food truck. Source: SBS

Green tape a growing burden

From electricity targets to transport plans - green tape is another thing on small business owner's mind's, and is an area that's grown significantly in recent decades according to experts.

"Green tape is the extra environmental overlay that you have," KPMG's Mr Bazzani said.

"From remediation to make good, anything to do with air, noise, water, pollution that might impact your business going forward."

Sydney based icecreamery Serendipity is a carbon neutral business by choice.

"We're an environmentally friendly business in a number of ways," Serendipity CEO, Sarah Medelson said.

"We've developed our own carbon emissions calculator so we can calculate our carbon footprint."

"Being an environmentally conscious business also has its benefits in terms of engaging with the community.

So, taking control of green tape responsibilities can boost your business, but it also means customers can enjoy your sweet or savoury products without the guilt.

Want to find out the secret to small business success? Tune into #BizSecretsSBS at Sundays 5pm on SBS, stream on SBS Demand, or follow us on FacebookTwitter or Instagram.



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By Hannah Sinclair
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Explainer: What is Red Tape? | SBS Small Business Secrets