Compliance cost

The neutrality of this article is disputed. Relevant discussion may be found on the talk page. Please do not remove this message until conditions to do so are met. (October 2023) (Learn how and when to remove this message)

Compliance costs are all expenses that a company uses up to adhere to government regulations. Compliance costs incorporate salaries of employees in compliance, time and funds spend on announcing, new system necessitated to meet retention, and so on. Compliance costs happen to be as results of local, national or even international regulation (for instance MiFID II or GDPR applying to countries in European Union). Global firms operating all over the world with varying new regulations in each country tend to face significantly larger compliance costs than those functionating solely in one region.^[1] Example – people registered for value added tax (shortly VAT) have to keep records of all tax (input and output) to simplify the completion of returns. They need to employ someone skilled in this domain, which is regarded as compliance cost.^[2]
Compliance cost mostly includes following:

• The cost to assemble and issue reports
• Cost of creating and maintenance of the system needed to collect facts and details for compliance reporting
• Cost of person to monitor compliance systems and to construct them ^[3]

Compliance costs are often combined and misunderstood with regulatory risk or conduct costs. Compliance costs are simply onward for following rules as they arise. It may include variance compliance – human resources policies, independent audits, quarterly reports, environmental assessments etc.^[1]