A tangled web: regulation, compliance costs slow online businesses’ push to expand
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“Outdated financial and regulatory barriers are still slowing down innovation and growth for online businesses, but it’s no longer an option to make plans to expand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.”
John Collison, co-founder of tech company Stripe