Third Administrative Cost Measurement Study Serbia

1. Third Administrative Cost Measurement Study Serbia Branko Radulović

2. 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

3. 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)

4. 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

5. Costs of Compliance

6. 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.

7. What is not measured? 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 • 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’

8. Standard Information Requirements – 12 Requirements

9. Standard Administrative Activities

10. Regulation Law, Government Order, Rulebook... Information requirements and specific data Reports, licences, permits, certificates, registration Administrative activities Standardised means of applying legislation Time (H) Tariff (T) Additional cost (A) No. of entities subject to regulation (N) Frequency (F) x x + Cost of individual administrative activity (P) No. of administrative activities per year (Q) Administrative costs = P x Q

11. 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

12. Renewed Increase in Regulatory Activity in 2014

13. 81 laws and 900 byelaws enacted in 2013Annual regulatory activity in 2014: over 1,000 regulations

14. Example: Savings due to amended requirement to audit financial statements 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’)

15. Savings due to limited reach of mandatory audit of financial statements

16. 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

17. 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

18. Costs of filing VAT returns reduced by 48%

19. Findings: 3.46% of GDP • 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

20. Pregled ključnih indikatora

21. Costs and savings in EUR

22. 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

23. 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

24. 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