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Brussels, 28th January 2009

Cutting administrative burden under full steam

The programme for cutting administrative burden made good progress in 2008 again. So far, reduction measures presented or foreseen represent savings in excess of €30 billion. For example, the integrated customs territory in the EU and a paperless environment should generate benefits for traders estimated at €2.5 billion per year. The Report “Reducing Administrative Burdens in the EU” presented today states that twenty one Fast Track Actions (FTA) were tabled in 2007 and 2008 representing estimated savings of more than € 2.3 billion for EU businesses, in particular for small and medium sized enterprises (SMEs). To further help businesses, the Commission plans to propose to allow Member States to exclude micro-enterprises from the scope of EU accounting directives, which could bring substantial savings of € 7 billion. The Commission proposes an ambitious revision of the VAT Directive to remove the barriers to electronic invoicing and to modernise the system. This will bring substantial economic benefits for enterprises and will significantly lower their costs in complying with VAT rules. The maximum yearly reduction potential could be as high as EUR 18 billion in the mid-term.

In January 2007, the Commission presented an ambitious Action Programme aimed at reducing administrative burdens on businesses in the EU by 25% in 2012. It covers the large-scale baseline measurement of administrative burdens (see below) as well as concrete reduction proposals, such as the measures presented above and the Fast Track Actions.

Active contribution from almost all Member States: The momentum created by the EU Action Programme for reducing administrative burdens is illustrated by the important increase of the number of Member States having set national reduction targets. The number raised from 7 at end 2006, to 14 at end 2007 and 21 at end 2008, and most of the remaining Member States are expected to announce targets before the Spring European Council. In addition, a large majority have aligned their objective with the 25% reduction target set for the EU level.

2008 saw also considerable progress on the large scale baseline measurement of administrative costs incurred by businesses. These are costs arising from EU legislation and national measures implementing or transposing this legislation. The screening of the 42 EU acts covered by the measurement resulted in the identification of 356 EU information provisions. The implementation or transposition of these provisions led to the adoption of national information obligations across the 27 Member States out of which some go beyond what is required by EU law. All in all, the costs incurred by these obligations for EU businesses are approximately € 115 to 130 billion. Following this stock taking, every effort will now be made to present reduction measures before the end of this Commission mandate.

1. Large-scale baseline measurement of administrative costs

The baseline measurement of administrative costs incurred by businesses under 42 EU acts indicates where most of the burden lies, who imposes it and therefore allows to quickly determine where reduction work could start for bringing the biggest relief.

The measurement identified among the 13 priority areas taxation and company law as the ones with the highest potential for administrative burden reduction, representing respectively about 60% and 20% of total administrative costs found. Food safety, Working environment, Agriculture and agricultural subsidies and Transport are next on the list, each of them bearing administrative costs of between € 5.7 billion and € 3 billion.

Following the widely accepted Standard Cost Model, the measurement process focused on the amount of time and money spent by businesses to meet the identified information obligations. A very large amount of data was collected or retrieved through three main sources:

  • around 3000 individual interviews with businesses and more than 50 workshops with local business associations, hundreds of sectoral experts and national ministries across the EU
  • existing national measurements in 5 Member States
  • and extrapolation.

The identification of reduction measures is well on track for the two largest priority areas. For the other priority areas, detailed sectoral reduction plans will follow by the end of 2009, listing reduction measures already adopted, pending and under preparation.

As for the analysis of measurement results, preliminary findings indicate that:

  • the level of possible reduction in terms of administrative burdens is not strictly correlated to the level of administrative costs ; in a number of areas, companies would still perform some of the activities required by the information obligations even in the absence of a legal obligation;
  • in a majority of priority areas, "cooperation with audits and inspections by public authorities" is the most expensive type of activity for business; such cooperation is often mobilising highly qualified staff for fairly extensive time; while these activities are necessary to achieve public goals, administrative burdens could be very significantly reduced notably by improving risk assessment at the basis of enforcement activities;
  • irritation created by EU law is highly variable among Member States but also among legal requirements.

2. We can do it! Successful removal of administrative burdens

The Commission did not wait for the results of the measurement exercise to put forward first concrete reduction proposals to relieve businesses.

Twenty one Fast Track Actions (FTA) were tabled in 2007 and 2008 represented estimated savings of more than € 2.3 billion for EU businesses. Among those, twelve are already adopted (see full list in Annex 1).

Stand alone measures

In addition to the FTA, the Commission has already presented proposals amending 26 acts out of 42 in scope. Out of these proposals, 16 have already been adopted as of December 2008.

The measures include a Community-wide management of customs procedures and a paperless environment, which may generate benefits for traders estimated at €2.5 billion per year. In the area of statistics, the reduction proposals concerning intra-Community trade in goods (Intrastat) adopted since 2004 or pending before the legislators allow MS to exempt an estimated 370,000 companies (in particular SMEs) from the obligation to report. This represents more than €100 million of savings per year until 2010 and more than €200 million of savings per year from 2010 onwards.

So far, reduction measures presented or foreseen in the short run, represent savings in excess of €30 billion

3. Stakeholders give important inputs

Reducing burdens is not something the Union can do on its own. Community legislation indeed is mostly implemented at Member State level. The Action Programme therefore needs outside expertise, so that the concrete experience of stakeholders is fully taken into account. Stakeholder involvement is mainly structured around the three following pillars:

  • an extensive consultation: EU businesses can voice their concerns and present concrete suggestions directly to the European Commission through an online consultation in 22 EU official languages. 237 reduction ideas were also sent through offline channels such as reports and letters. A significant part of these submissions are pointing at issues concerning cross border trade, VAT, internal market, environment and food safety.
  • decentralised communication events such as a series of public events co-organised with the Member States, email campaigns and other electronic means as well as by hosting a major conference in Brussels on the topic - “Cutting Red Tape for Europe”.
  • the High Level Group of Independent Stakeholders on Administrative Burdens (HLG AB) chaired by Dr. Edmund Stoiber. In 2008 it delivered key opinions related to various policies, both supporting on-going reduction initiatives and promoting new ones. In particular, it supported reduction ideas in the areas of company law & annual accounts, e-invoicing (VAT legislation) and public procurement as well as a number of on-line and off-line suggestions from stakeholders. In addition the HLG initiated the launch of the EU competition for the “Best Idea for Red Tape Reduction”. In 2009, the HLG will drive the process forward in all remaining priority areas.

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