Download 28.01.2016 - USAID Business Enabling Project

Third Administrative Cost
Measurement Study Serbia
Branko Radulović
Third Administrative Cost Measurement Study
• First Study: 2010; Second Study: 2012
• Third Study: 2014
• Objectives
– Identify burden of administrative costs faced by businesses
– Identify new cost-cutting options
– Comparison (limited) with countries where findings of similar
studies are available
Standard Cost Model
• The Standard Cost Model (SCM, or ‘Dutch Model’) is
a simple method for measuring administrative costs
and burden of compliance
• Used to:
– Examine new regulations and burden of compliance they
may pose
– Measure current administrative costs (burden of compliance)
Standard Cost Model (Continued)
– Works by disaggregating procedures (information
requirements) imposed on entities subject to regulation into
individual administrative activities that entities subject to
regulation are required to perform
– Based on time needed to perform each activity and cost of
each activity, the SCM measures administrative costs and
undue administrative burden
Costs of Compliance
Financial costs (taxes,
customs duties, etc.)
Costs of
compliance
Structural costs of
compliance – Changes to
production processes or
products to ensure alignment
with regulations
Administrative costs
incurred to activities of the
business it would perform
even in absence of
regulation
Administrative costs
Administrative burden:
Administrative costs
incurred due to presence of
regulation
Information Requirements
• Entail collection, reporting, or recording of information
as mandated by regulatory authorities
– Not just data collection and reporting: this also includes
keeping records of information for the purpose of making it
available to inspection authorities or submitting it when
required
• May include requirements to notify the state or third
parties
• Each information requirement entails undertaking
various administrative actions, such as collecting
data, becoming acquainted with regulations, etc.
What is not measured?
• Costs of:
– Paying taxes, customs
duties, charges, fines...
– Compliance with technical
requirements and standards
– Obtaining professional titles
– Waiting to obtain licences,
approvals, etc.
– Appeals and court
proceedings
– ‘Annoyance costs’
What is measured?
• National level
– Construction permitting
procedures not taken into
account
• Business sector
– Not administrative costs
incurred by private
individuals
• As a rule, includes
administrative fees but
not charges
Standard Information Requirements – 12 Requirements
No.
1
Standard Requirement
Notice of activity or event
2
Reporting
3
Information (labelling) for use by third parties
4
Other information for use by third parties
5
Application for individual licence or approval
6
Application for general authorisation or approval
7
Registration
8
Product or process certification
9
Inspection by government authority
10
Co-operation with inspections and record-keeping
11
Application for subsidy, grant, etc.
12
Other
Standard Administrative Activities
No.
Standard Activity
1
Understanding information requirement
2
Staff training in connection with information requirement
3
Collecting necessary information based on existing data
4
Adjustment of existing data
5
Preparation of new data and documentation
6
Preparation of information materials (e.g. advertisements, etc.)
7
Submission of forms
8
Meetings (internal and with third parties)
9
Verification (includes assistance to inspection authorities)
10
Photocopying, labelling, etc.
11
Provision of information
12
Completion of forms
13
Procurement of IT equipment and supplies
14
Other
Regulation
Law, Government Order, Rulebook...
Information requirements and specific data
Reports, licences, permits, certificates, registration
Administrative activities
Standardised means of applying legislation
Time
(H)
x
Tariff
(T)
+
Additional cost
(A)
No. of entities
subject to regulation
(N)
Cost of individual administrative activity (P)
Administrative costs = P x Q
x
Frequency
(F)
No. of administrative activities per year (Q)
How were procedures selected?
• Primary criteria – reach, frequency, cost
• Slightly under 800 administrative requirements
considered
• ‘80:20’ Rule applied:
– 20% of administrative requirements create 80% of
administrative costs
– Marked concentration of administrative costs: limited number
of administrative requirements create most administrative
costs
Renewed Increase in Regulatory Activity in 2014
400
350
300
250
200
150
100
50
0
2011
2012
2014
2011
Novi
2012
Izmene i dopune
Zakoni
Uredbe
Pravilnici
2014
81 laws and 900 byelaws enacted in 2013
Annual regulatory activity in 2014: over 1,000 regulations
NEW REGULATION BY TYPE, 2014
TOTAL
ENTERED
INTO FORCE
REPEALED
Laws (new)
29
26
3
Laws (amended)
70
36
34
Government Orders (new)
115
79
36
Government Orders (amended)
45
21
24
Decisions (new)
411
221
190
Decisions (amended)
83
40
43
Rulebooks (new)
209
183
26
Rulebooks (amended)
131
77
54
Orders (new)
5
2
3
Orders (amended)
1
0
1
Instructions (new)
8
3
5
Instructions (amended)
3
2
1
1110
690
420
Total
Example: Savings due to amended requirement to
audit financial statements
Business Size
Large
Medium-sized
Small
Micro
Total
Old Law, Financial
Statements for 2013
New Law, Financial
Statements for 2014
925
2,878
92,104
/
336
1,225
8,812
83,386
95,907
93,759
Audit is mandatory for financial statements of large and medium-sized legal entities
(categorised as such under accounting legislation), public entities (under legislation
governing capital markets, regardless of size), as well as of all legal entities and sole
traders with annual revenues of more than EUR 4.4 mn in the preceding fiscal year
(‘statutory audit’)
Savings due to limited reach of mandatory audit of
financial statements
Online tax returns
• Introduction of online tax returns has contributed to
quicker, more efficient, safer, and cheaper filing: all
documents can be filed using the Tax
Administration’s e-Porezi portal
• Major step in eliminating unnecessary administrative
procedures
Example: VAT return
• Procedure has remained the same (i.e. taxpayer is still required
to complete VAT return; this is a recurring activity at the monthly
or quarterly level, depending on volume of turnover)
– Taxpayer may file individually or through accountant
– Monthly or quarterly
– Key assumption: percentage of taxpayers filing individually vs. through
accountants
• Quarterly VAT filings: vast majority of taxpayers use accountants
• Measurement of administrative costs associated with VAT
has revealed the average user now needs just five minutes
to file a return, as opposed to one hour under the old
arrangement
Costs of filing VAT returns reduced by 48%
Findings: 3.46% of GDP
Assumption
Lower
Higher
salaries
salaries and
and costs
costs of
of engaging
engaging
third
third
parties
parties++
Fixed costs
(x1.2)
80:20 rule
Initial
estimate
before
adjustment
I
II=Ix1.2
IIIa=Ix1.2
IIIb=IIx1.2
IV a
IV b
V
2010
2.26%
2,72%
2.72%
3.26%
3.39%
4,07%
4.20%*
2012
1.95%
2.34%
2.34%
2.81%
2.92%
3.50%
3.67%*
2014
1.93%
2.32%
2.32%
2.78%
2.88%
3.46%
• Initial and first estimate were adjusted following publication of revised GDP data and new data needed for
calculation
++ Salaries of staff with undergraduate degrees higher by 50%; salaries of staff with college degrees higher
by about 5%; costs of engaging third parties vary widely, highest and lowest values must be determined
Indicator
GDP (RSD mn) at current prices
GDP (EUR mn)
Average gross monthly salary
Average gross hourly rate* (at 168 hours per month)
Average gross hourly rate (EUR)
Calculated total administrative costs (TACs), RSD mn at current
prices
Total administrative costs as % of GDP
TACs as % of GDP (80:20 rule)
TACs, assumed lower costs w/ fixed costs and 80:20 rule
TACs, assumed higher costs w/ fixed costs and 80:20 rule
Pregled ključnih indikatora
Initial estimate (before data review)
TACs, higher level (RSD mn)
Change to TACs (higher level, RSD mn)
Inflation (2010 cumulative = 100) GDP deflator
TACs as % of GDP, change relative to 2010
TACs in EUR mn
RSD/EUR exchange rate (annual average)
RSD/EUR exchange rate (at end of year)
2010
3,067,210
29,766
54,532
324.6
3.15
2012
3,584,236
31,683
57,430
341.8
3.02
2014
3,908,470
33,319
61,426
365.6
3.12
69,319
69,733
75,101
2.26%
2.83%
3.39%
4.07%
1.95%
2.43%
2.92%
3.50%
1.92%
2.40%
2.88%
3.46%
4.20%
3.67%
124,835
100
1,211
103.0
105.5
125,519
684
116
-13.96%
1,110
113.1
113.7
135,182
10,347
125
-15.02%
1,152
117.3
121.0
Costs and savings in EUR
Registration
Tax Administration
Accounting
Customs – foreign trade
Intellectual property
Maternity leave
Transportation
Labour law
Insolvency
Other
Inspections
NBS / Commercial banks
2012
18,442,871.24
109,145,576.72
281,775,387.11
35,447,646.21
621,318.01
2,644,072.69
5,923,693.78
38,124,288.70
721,567.66
117,075,420.05
1,310,592.81
662,996.46
2014
20,813,660.78
105,972,053.44
272,047,592.92
42,300,752.64
674,529.98
2,846,201.77
6,930,033.96
42,111,316.14
578,219.35
123,917,563.68
1,266,531.16
732,114.12
TOTAL
611,895,431.47
620,190,569.93
Calculated Total estimated
savings
savings
2,370,790
4267422
-3,173,523
-5712341.4
-9,727,794
-17510029.2
6,853,106
12335590.8
53,212
95781.6
202,129
363832.2
1,006,340
1811412
3,987,027
7176648.6
-143,348
-258026.4
6,842,144
12315859.2
-44,062
-79311.6
69,118
124412.4
8,295,138
14931248.4
Reduction in administrative costs of 15 %
• Usual EU target is to reduce administrative burden by
25%
• Between 2010 and late 2014 Serbia managed to
reduce administrative costs by 15%
– Review of some calculations is expected to reveal slightly
greater savings
• This is a relatively good result
Comparison with other countries
• Administrative burden by country: Austria 2.8%,
Czech Republic 2.9%, Denmark 2.1%, Netherlands
1.7%
• Latest calculations: Greece (13 areas in 2011 –
2.3%), Cyprus (8 areas – 4.38%)
• Serbia has begun to reduce costs but a lot remains to
be done
– EU countries needed five to seven years to reach 25% target
Key actual savings?
• Application of new accounting and auditing regulations
• Electronic tax returns
• Some recommendations and easy savings remain to be
calculated but are to be implemented – regulations amended in
2015:
– Health insurance cards
– KEPU ledger