Better Regulation

Legal framework

Better regulation

Since the 16th legislative term, the participation of the independent National Regulatory Control Council in the preparation of Federal Government regulatory initiatives has been compulsory.

Better regulation/ legal frameworks

Better regulation/ legal frameworks

Photo: Bundesregierung/Bergmann

In addition to other measures designed to improve regulation, such as the voluntary participation of the Legal Drafting Support Unit in the formulation of draft provisions, the OECD evaluated the work of the Federal Government in 2009, comparing it with that of 14 other Member States of the European Union and with the work of the European Commission. In its concluding report, the OECD emphatically acknowledged and commended the Federal Government’s efforts.

On the basis of numerous indicators, an analysis of the OECD report and their own experiences, the parties of the governing coalition, in their coalition agreement of October 2009, considerably widened the scope of their existing activity in this sphere.

Since 2011, for example, not only the administrative costs for business arising from information obligations but the entire compliance costs incurred by citizens, business and the administration have been assessed, presented and subjected to critical scrutiny.

To this end, cooperation is being increased between the Federal level, the Länder and the local authorities and other bodies with devolved administrative responsibilities, such as the chambers of industry and commerce, as is cooperation between the Bundestag, Bundesrat and Federal Government and the National Regulatory Control Council. The core principles of this enhanced cooperation were adopted by the Federal Government on 27 January 2010, and the revised National Regulatory Control Council Act entered into force on 22 March 2011.

How are the costs calculated?

For each legislative proposal, the staff of the respective lead ministries assess the total compliance costs for citizens, business and the administration. On the basis of these assessments, the legislative actors are able to consider, when contemplating the adoption of a law, the implications of compliance costs arising as a result of those legislative drafts. The way in which compliance costs are calculated is described in a mandatory guideline.

Citizens, businesses and administrative authorities often have many requirements and obligations to fulfil. The programme for Bureaucracy Reduction and Better Regulation ensures that the costs arising from compliance with Federal legislation are reduced and that any new costs are kept to a minimum.

Back in 2006, the Federal Government opted for the Standard Cost Model (SCM) for the measurement of compliance costs. This procedure is used to calculate the cost of information obligations imposed by Federal legislation. With the SCM, the Federal Government is resorting to an internationally tried and tested method, which assesses administrative burdens systematically and on the basis of verifiable facts. The procedure was adopted with a view to setting realistic reduction targets and to reducing red tape perceptibly, beginning with business compliance costs.

The method makes it possible to focus on the observable and measurable element of red tape. The administrative burden as defined in the SCM comprises costs incurred by natural or legal persons as a result of compliance with information obligations. It covers all cases in which the state requires businesses, citizens and administrative bodies to complete applications and forms or compile statistics. The obligation to produce evidence and documentation is also part of the burden.

In the first instance, the method requires all areas of legislation to be scanned for information obligations. If superfluous obligations are discovered, they can be simplified at the next stage. This, however, is preceded by a thorough examination.

The actual cost of complying with legal requirements depends on the number of companies affected, the intervals at which they are required to submit information and the time taken to compile and submit it.

Since the amendment of the National Regulatory Control Council Act, that body has also been examining the statement of compliance costs accompanying new regulatory instruments for plausibility and methodological soundness.

The Federal Ministries assess the compliance costs for regulatory proposals, including the cost of fulfilling information obligations, and present their assessments in the explanatory memorandum to the proposal. The guidelines describe the relevant steps in this process.