Cutting red tape as a strategy for growth

Transcription

1 Cutting red tape as a strategy for growth Presentation at Romanian Conference on Economic Recovery and Growth, October Peter Bay Kirkegaard Former Special Advisor and Project Manager for Danish Standard Cost Model measurements at Danish Commerce and Companies Agency peter.kirkegaard@gmail.com Thursday, 27 October

2 Why cut red tape? Practical reasons: It can be quantified! Businesses often complain about taxes and paperwork reducing paperwork is easiest. Economic reasons: Every 1 million reduction creates 1.4 million in economic growth. Harms all businesses, but especially SMEs and start-ups. Administrative burdens are direct costs for businesses difficult to transfer to consumers, especially for SMEs who don t have economies of scale in handling administrative tasks. 2

3 Impact of red tape on economy (share of GDP 2006) 8% 7% 6% 5% 4% 3% 2% 1% 0% AT BL CZ DE DK ES FI FR UK GR HU IE IT NL PL PT RE SK SI SE EU-25 Source: Based on Kox (2005): Intra-EU differences in regulation-caused administrative burden for companies. CPB Memorandum 136. CPB, The Hague. BL combines Belgium and Luxembourg; RE combines the Baltic Member States, Malta and Cyprus; EU-25 figures are GDP-weighted averages. 3

4 Danish strategy on red tape 25 pct. reduction by 2010 Systematic approach to simplification of regulation Better new regulation Better regulation in the EU Better communication and service from the public sector More businesses using more digital solutions SCM ex post analysis SCM ex ante analysis Both new and existing Communication plans Virk.dk 4

5 Why did Denmark adopt SCM? 2003-evaluation of progress towards the 25 pct. target conclusions: only marginal reductions had been achieved (< 2 pct) no clear picture on which regulation caused administrative burdens no clear linkage between ex ante and ex post measurements What was needed by ministries: a better overview of what parts of their regulation caused administrative burdens concrete recommendations on legislative simplification both ex ante and ex post precise knowledge of the effects of their initiatives towards reducing the burdens The Standard Cost Model has these advantages 5

6 Example of SCM measurement Regulation VAT regulation 50.9 million Information obligations Reporting VAT 47.9 million Data requirements VAT payable (10.1 mil.) VAT receivable (14.7 mil.) EU purchase of goods (1.6 mil.) Purchase of goods outside EU custom papers (6.7 mil) Purchase of goods outside EU import tax (1.8 mill) Sale of goods inside EU (1.1 mil.) Sale of goods outside EU (0.5 mil.) Real estate management (5.3 mil.) Review (6.2 mil.) Quarterly lists 1.6 million VAT id number of company VAT id number of buyer Total value of sales pr buyer VAT returnable Registration of business 1.4 mill Basic information Main line of business Owner Business sector 6

7 Baseline SCM-measurement Timeframe: August 2004 March 2006 (app. 6-8 months pr. ministry) Budget: 2 mil. euro in external consultancy fees Internal manpower: Six to eight project managers working fulltime on coordinating measurements Departmental manpower: One coordinator and legislative s Three consultancy firms, each employing five to six people full time

8 Coordination of measurements Project leader A consultants Project leader B consultants Project manager - consultants Project manager - DCCA Project leader A - DCCA Coordinator ministry A Project leader B - DCCA Coordinator ministry B 8

9 Steps on the way to 25 pct. 0% -5% -10% -15% -20% -25% -30% Source: Danish Commerce and Companies Agency (2011) 9

10 Results per ministry Ministry Administrative costs 2001 Administrative costs 2010 Mill. DKK Mill. DKK Mill. DKK Change in administrative costs Economic and Business Affairs 9,707 7,882-1, Taxation 10,588 7,424-3, Food, Agriculture and Fisheries 3,825 2,503-1, Employment 3,996 2,931-1, Environment Justice Other ministries[1] 1,029 1, ,4 Total 30,946 23,336-7, Pct. [1] Ministries of Science, Technology and Development Culture; Interior and Health; Transport; Climate and Energy; Social Affairs; Defence; Education; Finance; and Culture. 10

11 Lessons learned A clear strategy is everything Strong political backing is essential Central coordinating unit needs to do the work Results can be achieved, but they must also be felt by businesses 11