Compliance cost

A compliance cost is expenditure of time or money in conforming with government requirements such as legislation or regulation. For example, people or organizations registered for value added tax have the extra burden of having to keep detailed records of all input tax and output tax to facilitate the completion of VAT returns. This may necessitate them having to employ someone skilled in this field, which would be regarded a compliance cost.

Compliance costs normally include all costs associated with obeying the law, including planning and administration, in addition to the direct time and money spent filing paperwork.^[1]

Bylaws

Bylaws with a high cost of compliance can suffer from not being taken seriously & often being broken. For example, jurisdictions which ban smoking in all public areas theoretically have higher rates of people smoking in public areas as it would be inconvenient for them to go all the way home. Lawmakers therefore need to consider cost of compliance.

Tax Compliance

Compliance with tax laws, such as income tax or sales tax legislation, is a common topic of political debate, primarily because these taxes affect the majority of citizens in a society. By contrast, environmental regulations, such as those on sulfur dioxide emissions, only affect a minority of businesses within an economy.

See also

• Taxation in the United States

Further reading

• Barbone, L., Bird, R. M., & Vázquez Caro, J. (2012). The costs of VAT: A review of the literature. Case Network Reports, (106). CASE-Center for Social and Economic Research.

References