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Cutting red tape to spur growth

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Last October in Brussels, Vice-President Tajani spoke at a conference on making public administration more business-friendly.

In order to prosper, businesses need efficient, cost-effective public services. With a sluggish investment environment and weak access to finance, European enterprises cannot afford to sift through layer upon layer of red tape. The European Commission is therefore finding ways to simplify administrative and regulatory processes and allow businesses to focus on what matters most.

Time-consuming, resource-draining procedures – also known as red tape – are a foe of any business. That is why smart public administration is crucial for industrial competiveness and economic growth.

For example, businesses too often face cumbersome tax procedures, which result in an excessive amount of time spent compiling tax returns. In Luxemburg, Ireland, Estonia and Finland, it takes less than 100 hours to comply with tax return rules. However, in the Czech Republic and Bulgaria, it takes more than 400 hours. Overall, the average EU company spends 193 hours per annum on tax compliance procedures.

In addition to taxes, start-up procedures can also hamper growth. The Competitiveness Council of May 2011 determined that Member States should ensure that companies are set up in three days at a maximum cost of €100. While progress has been made, this target has not been reached: In Belgium, Portugal, the Netherlands and Hungary, it takes less than five days to start your own company. But in Malta, Poland, Spain and Austria, it takes more than 20 days. On average, it still takes 5.4 days at a cost of €372.

Of course companies should comply with local, national and EU regulation. However, in response to the 74 % of Europeans who believe that the EU generates too much red tape, the Commission is making a concerted effort to streamline legislation and improve – or withdraw – certain EU laws.

To that end, the Directorate-General of Enterprise and Industry organised a public administration conference in October 2013 to highlight best practices and identify particularly burdensome policies. At the conference, European Commission President José Manuel Barroso and Vice-Presidents Antonio Tajani and Maroš Šefčovič highlighted the essential role of public administrations for the implementation of growth-enhancing policies, and called on governments to make administrations across Europe more business-friendly.

In addition, the Commission launched the Regulatory Fitness and Performance Programme (REFIT), which will help identify both strengths and weaknesses in Member States’ regulatory processes and catalyse change throughout the EU. The Commission is also encouraging Member States to take small and medium-sized enterprises (SMEs) – which are especially vulnerable to red tape – into account to maximise the impact of their simplification procedures. Currently, only a handful of Member States have integrated an SME test into their analyses of policy options and decision-making.

The EC’s emphasis on reducing red tape has already yielded tangible results, including the Water Framework Directive; the Schengen Visa Code Initiative; the Consumer Rights Directive; and many more. In total, the Commission has approved 660 initiatives designed to simplify regulations and foster growth, resulting in a 26 % reduction in administrative burden.

While this is no doubt a step in the right direction, Tajani says the EU can do better. ‘We have achieved the objective set out in the Small Business Act of reducing this burden by 25 %, with an estimated saving – particularly for SMEs – of €30.8 billion,’ he said in October. ‘But we want to go further. This is why we have already proposed simplification measures affecting 33 % of this burden, for total annual savings of over €41 billion.’

Examples of good practices

While the EU must collectively continue to evolve, some Member States have shown the foresight and flexibility to begin implementing measures to curb red tape.

The United Kingdom, for example, introduced the ‘one-in, two-out’ rule in January 2013. Designed to reduce the number of regulations imposed on businesses, the rule requires that all new quantifiable burdens on firms are offset with the removal or modification of an existing regulation – and that the changes result in savings that are twice as much as new costs.

Portugal, meanwhile, is rolling out a programme to address excessive industrial licensing procedures. The new procedures will classify industries in three groups based on the risk they pose to people and the environment. Those in the low and medium categories – which include more than 90 % of all industries – will be subject to less stringent licensing, while procedures in the highest-risk category will be sped up.

Finally, in an effort to simplify payment of taxes, duties and services, Latvia introduced an e-payment office called ‘eKase’ (eCash) in 2012, which made administrative procedures easier for entrepreneurs. To that end, the simplified requirements reduced the time needed for payment of taxes by nearly 10 %.

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