In the United States, regulatory compliance is a sprawling, complicated, unwieldy, and very expensive thing.
Companies register themselves with secretaries of state, file tax returns with the Internal Revenue Service and state equivalents, send financial disclosures to the Securities and Exchange Commission, report on retirement plans to the Department of Labor -- and report to an alphabet soup of dozens of industry-specific regulators.
Every agency has its own rules and its own reporting requirements. Often companies end up reporting the same information many times to different agencies, with small variations. Sometimes they report the same information to multiple offices within just one agency.
Every reporting requirement is unique. Sometimes a PDF document must be uploaded to an agency’s portal. Sometimes a person has to sign into a system and type information into fields. Sometimes a paper document has to be notarized and mailed. Every reporting requirement has its own processes, its own software, and its own branch of the compliance department.
All of this is very, very expensive. The Competitive Enterprise Institute estimates that regulatory compliance costs American companies $1.9 trillion every year.
This complexity is unnecessary.
There is a way to simplify regulatory compliance, streamline these processes, and save these costs. And it can be done without deregulating and without changing the substance of the information companies report to government.
Australia’s Standard Business Reporting program shows us how.
Standard Business Reporting is the adoption of a common data structure across multiple agencies’ regulatory reporting requirements.
What does that mean? It means the agencies agree, together, on common data fields and formats for all the information that they collect from companies - tax, securities, retirement, and so on.
Starting in 2010, the Australian Tax Office (equivalent to our IRS), the Australian Securities & Investments Commission (equivalent to our SEC), the Australian Prudential Regulation Authority (equivalent to many U.S. agencies), and other agencies created a common data structure for tax, registration, securities, banking, and other types of regulatory filings. They then allowed companies to report their information using this common data structure.
The Australian government’s common data structure, which is called a “taxonomy,” specifies the fields and formats of all the information that the regulators collect from the companies. Because the taxonomy makes the fields and formats predictable and standardized, Australian tech firms can build products that help companies comply with reporting obligations automatically, within the same software environment.
Standard Business Reporting now saves Australian agencies and companies over $1 billion annually in compliance costs, and that savings is expected to grow dramatically in the years ahead.
Last March, the Data Foundation and PwC published Standard Business Reporting: Open Data to Cut Compliance Costs, describing how this works.
But the savings of Standard Business Reporting has to be shown, not just described, to be understood.
We’re excited to present a new video created by the leading Standard Business Reporting software company, Xero, working with the Australian government and the Australian Business Software Industry Association, showing Standard Business Reporting in action.
This video shows how an Australian company can comply with five different regulatory reporting requirements in the space of fifteen minutes, within one piece of software.
The video leads us through a typical Australian company’s regulatory reporting requirements: registering a new employee, paying into that employee’s retirement account, paying state sales tax, changing the company’s registration, and filing an income tax return. All of the information needed for these reports is standardized by the Australian Standard Business Reporting taxonomy.
Thanks to the taxonomy, Xero’s software is able to lead a business owner through all these different reporting requirements in minutes, with just a few clicks and entry points. It’s a far cry from the same challenge in the United States, where we run a different process, with different software (and sometimes old-fashioned documents) for each of these same reports.
The U.S. economy is much bigger than Australia’s -- about fifteen times bigger. But that’s no reason not to modernize. Australia’s experience proves that if regulatory agencies work together, and agree on common data standards, the burden of regulatory compliance can be lifted.
Australian companies save over $1 billion a year, thanks to Standard Business Reporting. Simple math suggests Standard Business Reporting could save U.S. companies $15 billion a year. Consider the investment, growth, and jobs U.S. companies could create with an extra $15 billion.
Regulatory compliance doesn’t need to be sprawling, complicated, unwieldy, or nearly as expensive.
All we have to do is this: Congress should enact reforms to start a Standard Business Reporting project, U.S. regulatory agencies should work together, and a U.S. taxonomy should be created.
The future of regulatory compliance is already underway in Australia -- and in countries like the Netherlands too. We shouldn’t wait any longer to embrace it here.
Want to learn more? Join us at Data Transparency 2017!
John McAlister, former assistant commissioner at the Australian Taxation Office, and one of the chief architects of the Australian government’s Standard Business Reporting program, will be headlining our annual conference, Data Transparency 2017, on Tuesday, September 26th, in Washington. John will be presenting a live demonstration of Standard Business Reporting on our stage.
If you’d like to learn more about Standard Business Reporting, how it works in Australia, and how it could work in the United States, you can join us at Data Transparency 2017.
See you there!