A tan­gled web: reg­u­la­tion, com­pli­ance costs slow on­line busi­nesses’ push to ex­pand

The Australian - - BUSINESS - DAVID SWAN

Aus­tralia’s on­line busi­nesses are fall­ing be­hind those in the Asia-Pa­cific and Europe due to ex­ces­sive red tape, ac­cord­ing to a study from one of the world’s most valu­able pri­vate tech­nol­ogy firms.

The re­port, com­mis­sioned by US pay­ment in­fra­struc­ture com­pany Stripe and con­ducted in­de­pen­dently by re­search firm Viga across 15 mar­kets, found Aus­tralia’s busi­nesses are spend­ing more on reg­u­la­tory and com­pli­ance is­sues than their over­seas ri­vals, and spend­ing cap­i­tal that is af­fect­ing global ex­pan­sion plans.

It found Aus­tralian busi­nesses are slower than Asian and Euro­pean coun­ter­parts when it comes to global growth, with 66 per cent of Aus­tralia’s on­line busi­nesses sell­ing abroad com­pared to 88 per cent in Hong Kong and Sin­ga­pore.

A to­tal of 39 per cent of Aus­tralian busi­nesses said it is harder to op­er­ate in mul­ti­ple coun­tries now com­pared to five years ago, with those busi­nesses iden­ti­fy­ing gov­ern­ment tar­iffs (49 per cent), taxes (48 per cent), reg­u­la­tory bar­ri­ers (44 per cent) and high busi­ness ex­penses (44 per cent) as the top bar­ri­ers to op­er­at­ing abroad.

The re­search found 28 per cent of Aus­tralian on­line busi­nesses sell­ing in­ter­na­tion­ally spend an es­ti­mated $68,000-$139,000 a year on com­pli­ance and com­plex reg­u­la­tory is­sues, with a fur­ther 29 per cent spend­ing be­tween $139,000 and $689,000.

“Out­dated fi­nan­cial and reg­u­la­tory bar­ri­ers are still slow­ing down in­no­va­tion and growth for on­line busi­nesses, but it’s no longer an op­tion to make plans to ex­pand in­ter­na­tion­ally in one, two, or five years,” said Stripe’s Aus­tralia and New Zealand boss, Mac Wang.

Stripe, which of­fers an “At­las” pro­gram al­low­ing com­pa­nies from any­where in the world to in­cor- po­rate in the US for $500, last year raised $US245 mil­lion ($340m) in a Se­ries E fund­ing round valu­ing the com­pany at $US20 bil­lion.

The firm’s co-founder, John Col­li­son, who in 2016 with brother Patrick be­came the world’s youngest self-made bil­lion­aire at 26, said he wanted de­bate around tar­iffs and im­mi­gra­tion to fo­cus on in­tan­gi­ble goods such as those pro­duced by the tech in­dus­try.

“In­tan­gi­ble goods and in­tan­gi­ble cap­i­tal tend to fall out­side the usual dis­cus­sions,” he said.

“All the dis­cus­sion fo­cuses on things like alu­minium, and not, for ex­am­ple, in­tel­lec­tual cap­i­tal across bor­ders. We’re see­ing a glo- bal trend to­wards closed bor­ders … and a slight dip to­wards na­tion­al­ism and things like that.

“What gives me hope is there is one real long-term di­rec­tion, and that’s to­wards more mo­bil­ity, more op­por­tu­nity for peo­ple and more global in­te­gra­tion. There’s been some set­back but the longterm trends are pretty strong and, with the in­ter­net, phys­i­cal lo­ca­tion be­comes slightly less rel­e­vant.”

Aus­tralian start-up Vi­nomofo’s co-founder, Justin Dry, told The Aus­tralian red tape had of­ten proved a hur­dle, es­pe­cially when try­ing to en­ter over­seas mar­kets.

“One of the ma­jor chal­lenges we’ve faced when en­ter­ing new mar­kets is lo­cal reg­u­la­tory en­vi­ron­ments,” Mr Dry said. “The US is a per­fect ex­am­ple. Leg­is­la­tion af­fect­ing the sale of al­co­hol … is a com­bi­na­tion of fed­eral, state and lo­cal laws. Add to this that taxes are state-based and col­lected and you have a very com­plex land­scape. In some ter­ri­to­ries, a lo­cal direc­tor is re­quired, which has its chal­lenges, and the ‘know your client’ process can be rel­a­tively oner­ous.

“Fi­nally, the in­ter­pre­ta­tion of lo­cal liquor laws in re­la­tion to an over­seas-op­er­ated en­tity has been chal­leng­ing at times as we’re of­ten set­ting the prece­dent by be­ing the first in­ter­na­tional player in the on­line wine re­tail space.”

DAVID GER­AGHTY

John Col­li­son, co-founder of tech com­pany Stripe

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