title: 2014/724/EU: Commission Recommendation of 10 October 2014 on the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems

text:
               18.10.2014

               EN

               Official Journal of the European Union

               L 300/63

         COMMISSION RECOMMENDATION
   of 10 October 2014
   on the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems

      (2014/724/EU)

   THE EUROPEAN COMMISSION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular Article 292 thereof,
   Whereas:

               (1)

               Smart grids are an enabler for implementing key energy policies. In the 2030 policy framework context, smart grids, as the backbone of the future decarbonised power system, are recognised as a facilitator for the energy infrastructure's transformation in order to accommodate higher shares of variable renewable energy, improve energy efficiency and ensure security of supply. Smart grids provide an opportunity to boost EU technology providers' competitiveness, as well as a platform for traditional energy companies and new market entrants to develop innovative energy services and products in grid infrastructure and related information and communications technology (ICT), home automation and appliances.

               (2)

               Smart metering systems are a stepping stone towards smart grids. They provide the tools to empower consumers' active participation in the energy market, and enable system flexibility through demand response schemes and other innovative services. In accordance with Directive 2009/72/EC of the European Parliament and of the Council (1) and Directive 2009/73/EC of the European Parliament and of the Council (2), Member States are required to ensure the implementation of smart metering systems that assist the active participation of consumers in the electricity and gas supply markets.

               (3)

               The operation of smart metering systems — and a fortiori any further developments of smart grids and appliances — hold the potential to process data relating to an individual, i.e. personal data as defined by Article 2 of Directive 95/46/EC of the European Parliament and of the Council (3).

               (4)

               Opinion 12/2011 (4) of the Working Party on the protection of individuals with regard to the processing of personal data set up in accordance with Article 29 of Directive 95/46/EC states that smart metering systems and smart grids hold the potential to process increasing amounts of personal data and to make that personal data available to a wider circle of recipients than at present, thus creating new risks for data subjects that were previously unknown to the energy sector.

               (5)

               Opinion 04/2013 (5) of the Working Party states that smart metering systems and smart grids foreshadow the impending ‘Internet of Things’, and that the potential risks associated with the collection of detailed consumption data are likely to increase in the future when combined with data from other sources, such as geo-location data, tracking and profiling on the internet, video surveillance systems, and radio frequency identification (RFID) systems (6).

               (6)

               Raising awareness about the features and substantial benefits of smart grids should help this technology fulfil its full potential, while at the same time mitigating the risks of it being used to the detriment of the public interest, thus enhancing its acceptability.

               (7)

               The rights and obligations provided for by Directive 95/46/EC and by Directive 2002/58/EC of the European Parliament and of the Council (7) are fully applicable to smart metering systems and smart grid environments when personal data are processed.

               (8)

               The package adopted by the Commission for reforming Directive 95/46/EC includes a ‘Proposed Data Protection Regulation’ (8), which, when adopted, would apply to smart metering systems and smart grid environments when personal data are processed.

               (9)

               The Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 12 April 2011 on ‘Smart Grids: from innovation to deployment’ (9) highlighted data protection and security as one of the five challenges for smart grid deployment and identified a number of measures to accelerate this deployment, including the ‘privacy by design’ approach and assessment of network and information security and resilience.

               (10)

               The Digital Agenda for Europe lists a set of appropriate measures, in particular on data protection in the Union, on network and information security and on cyber-attacks. The ‘Cybersecurity Strategy for the European Union: An Open, Safe and Secure Cyberspace’ (10) and the Commission proposal for a Directive concerning measures to ensure a high common level of network and information security across the Union of 7 February 2013 (11) put forward legal measures and set incentives to foster investments, transparency and user awareness, aiming at making the EU's online environment more secure. Member States, in collaboration with industry, the Commission and other stakeholders, should take appropriate measures to ensure a coherent approach in security and personal data protection.

               (11)

               The opinions of the Working Party on the protection of individuals with regard to the processing of personal data set up in accordance with Article 29 of Directive 95/46/EC, and the European Data Protection Supervisor's opinion of 8 June 2012 (12) provide guidance to safeguard personal data and guarantee data security when data are processed in smart metering systems and smart grids. Opinion 12/2011 of the Working Party on smart metering recommends Member States to proceed with implementation plans which require a Privacy Impact Assessment.

               (12)

               In order to leverage the benefits generated by smart metering systems, one of the key preconditions for the use of this technology is to find appropriate technical and legal solutions which safeguard privacy of the individual and protection of personal data as fundamental rights under Articles 7 and 8 of the Charter of Fundamental Rights of the European Union and Article 16 of the Treaty on the Functioning of the European Union. The Commission Recommendation 2012/148/EU (13) sets out specific guidance on data protection and security measures for smart metering systems and invites Member States and stakeholders to ensure that smart metering systems and smart grid applications are monitored and that fundamental rights and freedoms of individuals are respected.

               (13)

               The Recommendation 2012/148/EU states that data protection impact assessments should make it possible to identify data protection risks in smart grid developments from the start, following the principle of data protection by design. It announces the development by the Commission of a Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems, to be submitted for opinion to the Working Party on the protection of individuals with regard to the processing of personal data.

               (14)

               The Recommendation 2012/148/EU further indicates that the Data Protection Impact Assessment Template should guide data controllers in conducting a thorough data protection impact assessment which describes the envisaged processing operations, an assessment of the risks to the rights and freedoms of data subjects, the measures envisaged to address the risks, safeguards, security measures and mechanisms to ensure the protection of personal data and to demonstrate compliance with Directive 95/46/EC, taking into account the rights and legitimate interests of data subjects concerned.

               (15)

               The ‘Proposed Data Protection Regulation’ replacing Directive 95/46/EC would render Data Protection Impact Assessments mandatory under certain conditions, as a key instrument to enhance data controllers' accountability. In this respect, the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems, albeit itself non-compulsory, will serve the purpose, as an evaluation and decision-making tool, of supporting data controllers in the smart grids sector to comply with a future legal obligation under the ‘Proposed Data Protection Regulation’.

               (16)

               A Template developed at Union level for conducting data protection impact assessments aims at ensuring that the provisions of Directive 95/46/EC and Recommendation 2012/148/EU are followed coherently across Member States and that a common methodology for data controllers guaranteeing adequate and harmonized processing of personal data throughout the EU is promoted.

               (17)

               Such a Template should facilitate the application of the principle of data protection by design by encouraging data controllers to carry out an impact assessment of data protection as soon as possible, hence allowing them to anticipate potential impacts on the rights and freedoms of data subjects and implement stringent safeguards. Such measures should be monitored and reviewed by the data controller throughout the lifecycle of the application or system.

               (18)

               The report produced from the Template's implementation should also contribute to national Data Protection Authorities activities regarding the monitoring and oversight of the compliance of processing and, in particular, the risks for the protection of personal data.

               (19)

               The Template should not only facilitate the resolution of emerging data protection, privacy and security issues in the smart grid environment, but also contribute to addressing data handling challenges linked to the development of the retail energy market. Indeed, an important part of value in the future retail market will stem from data and wider integration of ICT into the energy system. The collection and organisation of access to this data are key to the creation of business opportunities for newcomers, especially aggregators, energy service companies or the ICT branch. Data protection, privacy and security will therefore become increasingly important issues for utilities to handle. The Template will help ensure, especially in the initial phase of the roll-out of smart meters, that smart metering system applications are monitored and that fundamental rights and freedoms of individuals are respected, by identifying data protection risks in smart grid developments from the start.

               (20)

               Following submission of the Template — as formulated by the smart grid sector's main stakeholders through a process monitored by the Commission — to the Working Party for formal consultation, Opinion 04/2013 was issued. Subsequent to the submission of a revised Template based on Opinion 04/2013, the Working Party issued Opinion 07/2013 of 4 December 2013 (14). The recommendations formulated in these two opinions were taken into account by the stakeholders.

               (21)

               Opinion 07/2013 of the Working Party recommends the organisation of a test phase for the implementation of the Template, in which individual Data Protection Authorities may consider offering support. This test phase should contribute to ensure that the Template provides improved data protection to individuals in the context of the deployment of smart grids.

               (22)

               In light of the benefits generated by the Template for industry, consumers and for national Data Protection Authorities, Member States should cooperate with industry, civil society stakeholders and national data protection authorities to stimulate and support the use and deployment of the Data Protection Impact Assessment Template at an early stage in the deployment of smart grids and the roll-out of smart metering systems.

               (23)

               The Commission should contribute to the implementation of this Recommendation directly and indirectly by facilitating dialogue and cooperation amongst stakeholders, in particular through the centralisation and dissemination of information feedback during the test phase between industry and national data protection authorities.

               (24)

               In light of the test phase's conclusions and subsequent to the revision of Directive 95/46/EC, the Commission should assess the need to review and refine the methodology promoted in the Template.

               (25)

               This Recommendation respects the fundamental rights and observes the principles recognised by the Charter of Fundamental Rights of the EU. In particular, this Recommendation seeks to ensure full respect for private and family life (Article 7 of the Charter) and the protection of personal data (Article 8 of the Charter).

               (26)

               After consulting the European Data Protection Supervisor,

         HAS ADOPTED THIS RECOMMENDATION:
   I.   SCOPE

               1.

               This Recommendation provides guidance to Member States on measures to be taken for the positive and wide-ranging dissemination, recognition and use of the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems (hereinafter referred to as ‘DPIA Template’), to help ensure the fundamental rights to protection of personal data and to privacy in the deployment of smart grid applications and systems and smart metering roll-out.
               The DPIA Template is available on the website of the Smart Grid Task Force (http://ec.europa.eu/energy/gas_electricity/smartgrids/smartgrids_en.htm).

         II.   DEFINITIONS

               2.

               Member States are invited to take note of the following definitions:

                           (a)

                           ‘smart grid’ (15) means an upgraded energy network to which two-way digital communication between the supplier and consumer, smart metering and monitoring and control systems have been added;

                           (b)

                           ‘smart metering system’ means an electronic system that can measure energy consumption and production, adding more information than a conventional meter, and can transmit and receive data using a form of electronic communication (16);

                           (c)

                           ‘data protection impact assessment’ means a systematic process for evaluating the potential impact of risks where processing operations are likely to present specific risks to the rights and freedoms of data subjects by virtue of their nature, their scope or their purposes to be to carried out by the controller or processor or the processor acting on the controller's behalf;

                           (d)

                           ‘data protection by design’ requires to implement, having regard to the state of the art and the cost of implementation, both at the time of the determination of the means for processing and at the time of the processing itself, appropriate technical and organisational measures and procedures in such a way that the processing will meet the requirements of Directive 95/46/EC and ensure the protection of the rights of the data subject;

                           (e)

                           ‘data protection by default’ requires to implement mechanisms for ensuring that, by default, only those personal data are processed which are necessary for each specific purpose of the processing and are especially not collected or retained beyond the minimum necessary for those purposes, both in terms of the amount of the data and the time of their storage;

                           (f)

                           ‘best available techniques’ means the most effective and advanced stage in the development of activities and their methods of operation, which indicate the practical suitability of particular techniques for providing in principle the basis for complying with the EU data protection framework. They are designed to prevent or mitigate risks on privacy, personal data and security.

                           (g)

                           The Article 29 Data Protection Working Party was set up under the Directive 95/46/EC.

         III.   IMPLEMENTATION

               3.

               In order to guarantee protection of personal data throughout the Union, Member States should encourage data controllers to apply the DPIA Template for Smart Grid and Smart Metering Systems, and in doing so, encourage them to take into account the advice of the Working Party on the protection of individuals with regard to the processing of personal data, in particular its Opinion 07/2013 (17). The opinions of the Working Party are available on the Smart Grid Task Force's webpage (http://ec.europa.eu/energy/gas_electricity/smartgrids/smartgrids_en.htm).

               4.

               Member States should cooperate with industry, civil society stakeholders and national data protection authorities to stimulate and support the dissemination and use of the DPIA Template at an early stage in the deployment of smart grids and the roll-out of smart metering systems.

               5.

               Member States should encourage data controllers to consider as a complementary element to the Data Protection Impact Assessment, the Best Available Techniques to be determined by Member States in collaboration with the industry, Commission and other stakeholders for each of the common minimum functional requirements for electricity smart metering as listed in point 42 of Recommendation 2012/148/EU.

               6.

               Member States should support data controllers in developing and adopting Data Protection by Design and Data Protection by Default solutions enabling effective data protection.

               7.

               Member States should ensure that the data controllers consult their respective national data protection authorities on the data protection impact assessment, prior to processing.

               8.

               Member States should ensure that data controllers, following the conduct of a data protection impact assessment, and in line with their other obligations under Directive 95/46/EC, take the appropriate technical and organisational measures to ensure protection of personal data, and review the assessment and continued appropriateness of the identified measures throughout the lifecycle of the application or system.

         IV.   TEST PHASE

               9.

               Member States should support the organisation of a test phase (18) with deployment of real cases, including by seeking and encouraging testers from the smart grid and smart metering industries to engage in this test phase.

               10.

               Member States should ensure, during this test phase, that all relevant applications or systems apply the Template, the advice (19) of the Working Party on the protection of individuals with regard to the processing of personal data, as well as the provisions contained in Section III of this Recommendation, in order to have the best impact on data protection and to provide as much input as possible for the Template's subsequent review.

               11.

               Member States should encourage and support national authorities competent for data protection to offer their support and guidance to data controllers throughout the test phase (20).

               12.

               The Commission intends to directly contribute to the implementation and monitoring of the test phase by facilitating dialogue and cooperation amongst stakeholders, in particular by providing the stakeholder platform (21) for the organisation of stakeholder meetings involving the testers, industry and civil society representatives, national data protection authorities and energy regulators.

               13.

               Member States should encourage the testers to communicate and share the results of the test phase with the national authorities competent for data protection and with the other relevant stakeholders in the framework of the stakeholder platform based on three categories of evaluation criteria:

                           (a)

                           efficiency of the Template in assessing the impact of individual smart grid applications on data protection;

                           (b)

                           usefulness of the Template in guiding the data controller in the conduct of the impact assessment according to the concrete circumstances of the application or system; and

                           (c)

                           user-friendliness of the Template from the data controller's perspective.

                     The reporting on these evaluation criteria should focus on providing information relevant to the application of the Commission Recommendation and of the Template across all relevant applications or systems.

               14.

               The Commission intends to ensure the compilation of an inventory of data protection impact assessments conducted during the test phase. The inventory of data protection impact assessments will be made available on the Smart Grid Task Force's webpage throughout the test phase and will be regularly updated in order to foster continuous and prompt improvement in the Template's application.

         V.   REVIEW

               15.

               Within two years of publication of this Recommendation in the Official Journal of the European Union, Member States should provide the Commission with an assessment report highlighting the relevant conclusions stemming from the test phase.

               16.

               Two years after the publication of this Recommendation in the Official Journal of the European Union, the Commission intends to assess the need for revision of the DPIA Template based on the test phase reports provided by Member States and in light of the abovementioned evaluation criteria. The Commission will consider organising a dedicated stakeholder event to exchange views on this assessment prior to undertaking a revision.

               17.

               This revision should contribute to ensure that the DPIA Template provides improved data protection to individuals in the context of the deployment of smart grids and adequately reflects the provisions of the revised Directive 95/46/EC and the Working Party's Opinion 07/2013.

      Done at Brussels, 10 October 2014.

            For the Commission

         Günther OETTINGER

            Member of the Commission

      (1)  Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ L 211, 14.8.2009, p. 55).

      (2)  Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211, 14.8.2009, p. 94).

      (3)  Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31).

      (4)  Article 29 Data Protection Working Party, Opinion 12/2011 on smart metering, 00671/11/EN, WP183, 4 April 2011.

      (5)  Article 29 Data Protection Working Party, Opinion 04/2013 on the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems (‘DPIA Template’) prepared by Expert Group 2 of the Commission's Smart Grid Task Force, 00678/13/EN, WP205, 22 April 2013.

      (6)  Ibid. and Recommendation CM/Rec(2010)13 of 23 November 2010 of the Council of Europe Committee of Ministers to Member States on the protection of individuals with regard to automatic processing of personal data in the context of profiling.

      (7)  Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37).

      (8)  COM(2012)11 final.

      (9)  COM(2011) 202 final.

      (10)  Joint Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, ‘Cybersecurity Strategy for the European Union: An Open, Safe and Secure Cyberspace’, 7 February 2013, JOIN(2013) 1 final.

      (11)  COM(2013) 48 final.

      (12)  European Data Protection Supervisor's Opinion of 8 June 2012 on the Commission Recommendation on preparations for smart metering roll-out: https://secure.edps.europa.eu/EDPSWEB/webdav/site/mySite/shared/Documents/Consultation/Opinions/2012/12-06-08_Smart_metering_EN.pdf

      (13)  Commission Recommendation 2012/148/EU of 9 March 2012 on preparations for the roll-out of smart metering systems (OJ L 73, 13.3.2012, p. 9).

      (14)  Article 29 Data Protection Working Party, Opinion 07/2013 on the Data Protection Impact Assessment Template for Smart Grid and Smart Metering Systems (‘DPIA Template’) prepared by Expert Group 2 of the Commission's Smart Grid Task Force, 2064/13/EN, WP209, 4 December 2013.

      (15)  The DPIA Template, developed by the Smart Grid Task Force, defines smart grids as energy networks that can cost-efficiently integrate the behaviour of all users connected to them in order to ensure an economically efficient, sustainable power system with low losses and high quality and security of supply and safety: http://ec.europa.eu/energy/gas_electricity/smartgrids/doc/expert_group1.pdf

      (16)  Interpretative note on Directive 2009/72/EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas — Retail markets, p. 7.

      (17)  See footnotes 4, 5 and 14.

      (18)  See footnote 14.

      (19)  See footnotes 4, 5 and 14.

      (20)  See footnote 14.

      (21)  The Stakeholder Platform will be the Smart Grid Task Force, which was created by the European Commission in 2009 as a policy platform to discuss and advise the Commission on policy/regulatory directions and coordinate the first steps towards smart grid deployment: http://ec.europa.eu/energy/gas_electricity/smartgrids/taskforce_en.htm


Avis juridique important

|

31997H0344

97/344/EC: Commission Recommendation of 22 April 1997 on improving and simplifying the business environment for business start-ups

Official Journal L 145 , 05/06/1997 P. 0029 - 0051

COMMISSION RECOMMENDATION of 22 April 1997 on improving and simplifying the business environment for business start-ups (97/344/EC)THE COMMISSION OF THE EUROPEAN COMMUNITIES,Having regard to the Treaty establishing the European Community,Having regard to the Council Resolution of 10 October 1994 on giving full scope to the dynamism and innovatory potential of small and medium-sized enterprises, including the craft sector and micro-enterprises, in a competitive economy (1),Having regard to the Commission Report presented to the Madrid European Council of 15 and 16 December 1995 on small and medium-sized enterprises: a dynamic source of employment, growth and competitiveness in the European Community (2),Having regard to the Commission Communication on an integrated programme in favour of small and medium-sized enterprises (SMEs) and the craft sector (3) and the Council Resolution of 9 December 1996 (4),Having regard to the Council Resolution of 8 July 1996 on legislative and administrative simplification in the field of the Single Market (5),Having regard to the European Parliament Legislative Resolution of 19 September 1996 embodying Parliament's opinion on the proposal for a Council Decision on a third multiannual programme for small and medium-sized enterprises (SMEs) in the European Union (1997 to 2000) (6),Having regard to the Commission Action Plan for Innovation (7) which inter alia underlines that cumbersome administrative formalities can have a negative effect on businesses' potential for innovation,Having regard to Council Decision 97/15/EC of 9 December 1996 on a third multiannual programme for SMEs in the European Community (1997-2000) (8),Whereas:I. INTRODUCTION (1) Improving and simplifying the business environment is considered by European business organizations to be of the highest priority as business today has to operate in a complex and ever changing environment. Many regulations have been brought into force over the last twenty years and, together with administrative procedures, they have a cumulative effect on enterprises which stifles their daily operations and affects their competitiveness. Moreover, the burden is disproportionately heavy on smaller enterprises which, in comparison to large enterprises, do not have the human or financial resources to cope with it (9). Since it is widely acknowledged that SMEs (10) are the greatest potential job creators, public authorities should now consider, as a matter of priority, ways of reducing the administrative burden on these enterprises. It is vital that their potential for growth and job creation is encouraged and supported.II. A FRAMEWORK FOR A SIMPLIFICATION POLICY (2) Regulatory and administrative burdens stem mainly from the Member States' regulations. Through the application of the subsidiarity principle, decisions and measures are taken at all levels, national, regional and local. The number of regulations issued by Member States is higher by far than the number of Community regulations and directives.(3) A framework for a simplification policy therefore requires coordination between the public authorities in the Member States, not only between the central departments but also between them and local authorities. France, Portugal and the United Kingdom have set up a specific department, under the responsibility of the Prime Minister, whereas most of the other Member States have set up advisory committees which often do not have the same authority. The task of simplification is difficult and requires authority and power with respect to ministerial departments, as well as adequate financial and human resources (11). The awareness of officials should be raised with the help of information campaigns and officials who handle SME matters should receive appropriate training (12). There needs to be a change of culture towards a more customer-oriented approach between administrations and businesses with public administrations proactively thinking more about how to help business rather than how to control it (13). Finally, a successful simplification policy is dependent on continuous and systematic assessment and the monitoring of the results achieved in consultation with business organizations.III. THE REGULATORY ENVIRONMENT (4) A difficult or complex regulatory environment can discourage entrepreneurship and the creation of new businesses. This is particularly the case when a business decides to develop its operations in another Member State, where it is not so familiar with the language, the culture, or how foreign administrations work. Whereas the need for appropriate regulations is not questioned, it is the cumulative effect of regulations, their complexity and their compliance costs which cause concern, and risk making the impact on business disproportionate to the objective of the regulations. In the end, complex and costly regulations are difficult to implement and lead to criticism and avoidance.(5) Member States should therefore be more aware of the effects of regulation on business. The aim should be to identify the improvements that are necessary, bearing in mind that a balance has to be struck between the need for changes and the burden imposed on business because it has to assimilate the change, even if it is a positive one.(6) When proposing new legislation, the legislator should have full knowledge of the impact the regulation will have on businesses in terms of compliance costs and administrative burdens. Business-impact assessments and cost-benefit analyses, where appropriate, should be carried out in close cooperation with the business community. In doing so, the legislator should give special attention to the compliance requirements for SMEs. If SMEs can comply with the regulation at a reasonable cost, then so too can large firms, whereas the reverse is not necessarily true. This 'think small first` principle should act as a litmus test (14).(7) The compliance costs for business resulting from necessary regulations have to be balanced against other policy requirements, for example in respect of health and safety or the environment. Member States should consider introducing, where appropriate, derogations or simplified procedures to help SMEs which do not unacceptably reduce the objective of the regulation. For example, in regulations dealing with taxation, company law, statistics or the environment, the introduction of threshold levels or reduced monitoring and reporting requirements can significantly reduce the burden and compliance costs for SMEs. Threshold levels should not, however, act as a disincentive to growth and should be applied with some flexibility. For example, enterprises should be allowed to remain in a specific SME scheme as long as their turnover does not exceed the turnover threshold level of the scheme by a certain percentage (15).IV. SIMPLIFYING BUSINESS START-UP FORMALITIES (8) In addition to the general principle mentioned above, the Commission wants to highlight some practices which it considers useful to promote in the Member States because they are important elements in facilitating the start-up phase of a business. The first part concerns better coordination of the way public authorities deal with the start-up process and simplification of the administrative procedures.(9) Most Member States require a number of different kinds of registration, (tax, social security, statistical, business and trade registers, and so forth). The number of different contact points for registration purposes varies from one Member State to another, but can easily be in as many as ten different locations which makes registration time consuming for the businessman/woman, particularly when the same registration point has to be revisited. At each registration point a form has to be filled in, often containing similar requests for information. The number of formalities and procedures depends on the legal structure that a business chooses. It is the highest for limit companies, for which in one Member State, for example, 23 different procedures and forms are necessary (16). In addition, authorizations to start up a business are delivered by different authorities, which again makes it complicated for the new businessman/woman to find his/her way quickly. As a result, it can take weeks or even months before a business can actually start operating. This first exposure to bureaucracy, together with the cost of registration which varies from one Member State to another but can be as high as ECU 2 000 (17), is very discouraging and sets the scene for future relations between the new business and the administration.Single contact points(10) The Commission proposes that Member States should identify all the formalities at all levels that are required when starting up a business and consider ways to coordinate and simplify them. A good example is the Belgian Auditform project which includes an inventory of all the procedures and administrative formalities imposed on business, with a view to assessing their efficiency and the burdens they cause for SMEs. A further example of coordination can be found in the French system of Enterprise Formalities Centres, (Centres de formalités des entreprises - CFEs) (18) and in the German 'Gewerbeämter`. These systems are based on the principle of a single contact point or communication point between business - according to their type and/or nature - and public authorities at all levels.(11) Experience shows that administrative start-up formalities in Member States can be dealt with in between one and five days, as compared to a delay of 120 days which is the longest period reported to the Commission.(12) Such a single contact point for business start-ups can play an even more important role if it becomes an intermediary for all the formalities that have to be complied with during the life of a business, e.g. change of address or statutes, transfer of ownership, employment issues, permits and licences, etc. In France, for example, discussions are underway to integrate into the CFEs the formalities relating to employment. While reaching such a level of coordination between public authorities requires a high degree of determination and persuasion, the Commission knows from its contacts with business that such a single contact point is very welcome.A single registration form(13) Another important element is the need to coordinate the information that is requested from business, not only in the start-up phase, but also in the development phase. France has interesting experience to share in this area as well. Information requested from a new business is incorporated into a single questionnaire managed by the CFEs (19). This questionnaire is developed by CERFA (20) which is the central authority responsible for all information-gathering formalities.(14) A single form constitutes a major simplification for the new entrepreneur as it gathers all the information required by any part of the administration to register the new enterprise. The advantage of such a system is that the information necessary for registration purposes is given only once and queries about the filling-in of the form can be answered by the CFE. However, the single form system in France has a drawback in that the form has to be accompanied by supporting documents which take time to gather and authenticate. Administrations should avoid sending a newly registered business large numbers of forms and questionnaires from different authorities as this significantly reduces the advantages of the single form.(15) Public administrations should be encouraged to share information and to make greater use of available databases and information technology and should adapt, where appropriate, their regulations regarding data protection (21). It is to be understood that this sharing of information relates to non-confidential data. In Italy, Law No 241 of 1990 introduced various administrative simplification measures. For example, it states that whenever a person who is being asked for specific information declares that the information is contained in documents which are already in the hands of the administration that is asking for it, or in another branch of the administration, then the administration itself must obtain the information. Similarly, in Denmark, a Bill is in preparation which would prohibit public authorities from requesting information from a business if that information can be obtained elsewhere in the administration. It would seem to follow that businesses are allowed to remain silent if information requested has already been given to another public authority.A single identification number(16) In line with the proposals for a single contact point and a single form, a single identification number for enterprises is a useful simplification measure. Such a system exists in France, Sweden, Portugal, and Denmark (22). The basic advantage for business is that it can use the same number for all its contacts with different administrations. It is also very useful for public authorities as it simplifies the management of databases and the sharing of information.Authorizations, licences and permits(17) Apart from the abovementioned registration formalities, a new business also has to obtain a number of authorizations giving it the right to start-up an activity and/or access to a specific occupation. This can be a general authorization to start an economic activity, as is the case in Luxembourg, or a more specific authorization to pursue a particular occupation, e.g. tourist guide, hairdresser, or travel agent. Permits or licences are also often needed for construction works, environmental protection purposes or health and safety reasons, etc. The type and complexity of authorizations necessary vary considerably from one to another. Sometimes, establishment criteria have to be satisfied, e.g. good repute, financial soundness, professional qualifications or experience. The Commission is concerned to ensure the general freedom of establishment in the Single Market, notably through the mutual recognition of professional qualifications. It considers that the Member States should regularly review and simplify, where appropriate, their authorization procedures in order to maximise the potential for the creation of new business.(18) Lengthy procedures, the need to obtain authorizations, and the number of different awarding authorities can constitute a disincentive to business. Italy has adopted two laws (23) which set out in general terms, principles designed to simplify authorization procedures. These include the possibility of starting an economic activity without an explicit authorization order, and the principle of consent by silence (24). This means that if the administration concerned fails to take a decision before a fixed deadline, the application for an authorization is deemed accepted. In January 1996, Germany adopted a series of laws to speed up authorization procedures with the objective of reducing the length of time taken for planning procedures. This was seen as making Germany more attractive as a business location, and part of its programme to generate higher investment and more jobs.(19) It is difficult to assess the results of the laws in Italy. On the other hand, some positive experience is reported from Baden-Württemberg which launched such simplification reforms in 1992. The underlying principles of these initiatives in respect of authorizations are worth promoting in other Member States (see Annex I). The simplification of authorization procedures often requires a change of working practices and culture in the civil service, and a move towards more self-regulation on the part of business.(20) The aforementioned proposals should greatly simplify the development of trading activities in the European Community. It will be much easier for a businessman/woman to start operating in another Member State if he/she can turn to a single contact point, only has one form to fill in, receives a single identification number in that Member State, and is quickly granted the necessary authorizations to start operating. Moreover, the single identification number could be used for other policy areas, such as VAT, which is the case in France and would be a relatively easy simplification measure for other Member States. Finally, these measures should greatly facilitate the work of any private or public organizations which are advising businesses interested in establishing an activity in the European Community.V. STIMULATING NEW BUSINESS (21) There are other areas where best practice could be promoted from one Member State to another. These relate to taxation, social security, accounting and statistical requirements as well as company law. Some Member States (25) have introduced incentives or simplification measures in these fields, notably for new enterprises as well as with a view to encouraging self-employment (see Annex II). Most of these measures relate to the first years of development of a business rather than the start-up phase. These measures are important bearing in mind that although approximately 80 % of new firms are still in existence after the first year, only 65 % are still in business after three years, and only 50 % after five years (26). Measures in this field are also of importance because very often the legislation they cover (taxation, company law, employment issues, etc.) discourages those who wish to start up a company. For example, taking-on an employee means filling in over ten different forms. Mandatory filing requirements vary from one field of regulation to another (27), and procedures required in company law for shareholders' meetings are often inappropriate for small companies. This is why Germany adopted legislation simplifying procedures in the kleine Aktiengesellschaft (28).(22) In respect of improving the fiscal environment, a large number of Member States have introduced some kind of tax relief for SMEs or for new business (29) (see Annex III). In addition, France, the United Kingdom and the Netherlands have introduced tax reductions for private individuals investing in start-ups, rather similar to the Business Angels concept in the United States (30).(23) Tax administration is also an area which needs reform as the number of different taxes that have to be paid, the different dates for payment, the long delays for reimbursement of taxes, the use of stamps and other administrative procedures are time consuming and cumbersome.(24) In the view of the Commission, tax obligations will be substantially simplified by the implementation of the proposals set out in its Programme for the introduction of the New Common System for VAT (31). The cost of compliance with tax obligations borne by all businesses should be reduced by these proposals, and proportionally to a greater extent for SMEs. In this respect, the most significant element in the proposals is the principle of a single place of supply. This will mean that any business trading in more than one Member State will need to account for the tax on all its activities to the Member State in which it is established, thus eliminating the need to deal with more than one tax authority. In addition, it will be accompanied by a radical review of reporting and accounting obligations which will achieve a better balance between the needs of the tax administration and those of business.(25) In the current VAT system, there is scope to alleviate the burden on SMEs. Most Member States exempt micro-enterprises from VAT liability, although the threshold for such an exemption varies widely, e.g. a turnover of ECU 2 500 in Denmark and ECU 56 850 in the United Kingdom.(26) For those enterprises which are liable for VAT, the frequency of VAT declarations and payments can be a great burden. Some Member States have introduced simplification measures including a VAT declaration on an annual basis for small companies and/or a payment term which is identical to the declaration term. In the case of monthly payments, small enterprises are often paying VAT on invoices where payment has not yet been received from their client. This is why many Member States require only quarterly and, for micro businesses, yearly payments (32). In addition a number of Member States permit small enterprises to pay VAT after receipt of the client's payment rather than when establishing the invoice (cash accounting) (33). The European Parliament has published a working paper on the impact of VAT and Intrastat obligations on SMEs (34) which gives an outline of potential measures including switching to a system of quarterly VAT declarations.(27) Administrative obligations arising from intra-Community trade is another field for possible simplification. France and Italy have integrated the Intrastat obligation and the recapitulative statement required by the Sixth Council Directive on VAT (35). This means that enterprises only have to fill in a single form which can be used by both competent authorities. The French and Italian system is not at present ideal because both can require monthly returns for the combined Intrastat/VAT declaration, and the threshold below which SMEs are exempted is still quite low. Another simplification relates to consolidation of the time periods adopted for returning the Intrastat declarations and VAT recapitulative statements following the implementation of different kinds of regulations. Where Member States still apply different time periods for Intrastat declarations and VAT recapitulative statements using different threshold levels, they are invited to align these requirements and to adopt quarterly or annual returns for SMEs.(28) Member States should consider the benefit of specific cooperation between the social security and taxation departments. These departments constantly interact with business and impose most of the administrative burdens on enterprises. Such cooperation can result in both administrations using a common identification number, sharing information and criteria, deciding to fix the same payment dates or to collect income tax and social security contributions through one system (36). The fact that employment is the major priority for the European Community and the governments of the Member States makes it all the more important that time is devoted by public authorities to examining why employers are discouraged from taking on employees. Member States should take the necessary steps to remove the administrative burdens which accompany taking on employees (37) and encourage a more flexible labour market (38).(29) Some Member States have also introduced schemes where businesses which take on one or more employees for the first time (39) have their social security contributions reduced or even waived.(30) Most of the Member States have regulations limiting access to certain occupations, such as hairdressing, plumbing, operating travel agencies or taxis, etc., which often act as a barrier to entry. Often these regulations have been requested by business themselves as a form of protection against bad or illegal operators. The Commission recommends that these regulations should be re-examined on a case-by-case basis, and assessed to see that the right balance exists between protection for the consumer and necessary competition.(31) Micro enterprises, in particular self-employed entrepreneurs, face particular problems and probably represent the category of SMEs which, proportionately, suffer most from administrative burdens and regulations, because they have to deal with both the relevant legislation and the attendant administrative burdens on their own. This, together with the financial risks and the lack of social security, discourages many young people from starting a business on their own. Some Member States have specifically addressed this problem and have adopted tax incentives, accounting simplifications, and pension schemes, with a view to encouraging young people and the unemployed to develop their own businesses (40).VI. CONCLUSION (32) The exchange of best practice on improving and simplifying the environment for new businesses showed that there is substantial interest from public authorities and business representatives concerning simplification measures experienced elsewhere. Although similar simplification initiatives in Member States are implemented in different ways and the regulatory environment for business start-ups differs widely in the Member States, it is possible to identify some best practice which can be used as a benchmark by the other Member States. Some general principles were identified and should be brought to the attention of the Member States and other interested parties. Concrete measures should therefore be adopted by the Member States to reduce and simplify the administrative and regulatory burdens imposed on new firms, with the practical effect of saving time and reducing the costs that are imposed on these enterprises,HEREBY RECOMMENDS:Article 1 Objectives Member States should take the necessary measures to improve and simplify the business environment, in particular relating to the establishment of new businesses and their first years of development, thus stimulating their potential for innovation and encouraging the growth of enterprises and subsequent job creation.Member States are invited to take the most appropriate measures to reorganize, simplify and update their own administrative, legal and fiscal systems, in order to:(a) improve the interface between the administration and the business community, become more customer-oriented, reduce the time taken to process requests from businesses, and give authorizations within a specified time;(b) encourage business start-ups by means of a favourable regulatory environment and simplify, amend or abolish existing regulations that hamper the creation of businesses and their first years of existence.Article 2 Framework for a simplification policy A long-term and coherent policy is needed to implement simplification measures successfully and to ensure effective coordination between public administrations. To this end, the Commission recommends that Member States and public authorities at all levels develop in consultation with the business community a simplification policy to which they are strongly committed and which should comprise:(a) the setting-up of a specific department or unit at the appropriate level with the authority to coordinate the simplification policy and measures;(b) proper information and training of officials with a view to developing a service-oriented attitude towards business, thus improving the interface between public administrations and enterprises.Article 3 Regulatory environment 1. The impact of regulation on businesses, in particular on SMEs, should be continuously assessed in full consultation with the business community and in particular:(a) Member States should apply 'the think small first` concept which takes account of the interests of SMEs at the earliest stage of considering new legislation and its accompanying administrative procedures;(b) where appropriate, derogations, thresholds or simplified procedures benefiting SMEs should be introduced. However, thresholds should allow the necessary flexibility so that they do not act as a disincentive to growth;(c) the effects of regulation and administrative procedures on enterprises should be assessed wherever appropriate with the assistance of a Committee composed of government and business representatives.2. Member States should consider introducing a systematic evaluation procedure to asses the impact on business of regulatory proposals to ensure that the appropriate balance between the objectives and the means is achieved and the compliance costs and administrative burdens understood.3. Business impact assessment systems should include cost-effectiveness analysis or cost-benefit analysis as appropriate, and there should be comprehensive consultation procedures with business organizations, including those representing SMEs.Article 4 Simplifying business formalities at the start-up phase 1. Administrative procedures which are required for starting up a new business should be simplified and made more user-friendly, so that entrepreneurs can obtain a quicker and more efficient service and are encouraged in their new business venture. The Commission therefore recommends that Member States, or any appropriate level of public authority, consider the advantages of:(a) introducing a single business registration form;(b) setting up single contact points where enterprises can deposit the single registration form mentioned in point (a). The contact points would be responsible for forwarding the information contained in the application to all other administrative departments within a fixed period of one or two working days;(c) introducing a system whereby a business is identified by a single number which it can use with any public or government department;(d) ensuring that the different government departments avoid introducing duplicated or superfluous forms and/or contact points;(e) allowing business to reject a demand for non-confidential information, if this information is available from another government department;(f) using information technology and databases as much as possible for the transmission and authentication of the information supplied and for the sharing of information between departments, subject to appropriate safeguards protecting private data;(g) setting clear targets in terms of deadlines for the processing of enterprises' requests and the granting of licences or authorizations;(h) introducing, where appropriate, a system whereby an application is deemed to have been automatically granted if the administration has not responded within a fixed deadline.2. Member States are also invited to examine the possibility of extending the scope of the contact points so as to cover the whole life cycle of an enterprise, not only the start-up phase, and any administrative interface between public authorities and enterprises.Article 5 Stimulating businesses in their first years of development 1. Constraints of a tax, social, environmental and statistical nature that hamper the establishment and first years of development of an enterprise should be alleviated or abolished. Member States are invited to:(a) examine any possible improvements in the fiscal treatment of newly established enterprises;(b) take the appropriate fiscal measures to encourage outside investment in start-ups, e.g. the 'business angel` concept;(c) alleviate employers' social security contributions, at least for a certain period, when employees are taken on;(d) examine possible improvements to the administrative or legal provisions which can discourage companies from taking on employees in order to promote a more flexible labour market;(e) establish a dialogue between social security and taxation offices with a view to reaching a coordinated interface with business;(f) examine the different reporting requirements to which SMEs are subject, e.g. the nature of the reports, their frequency, and the period of time that records have to be kept, in order to simplify and consolidate requirements as much as possible;(g) examine existing administrative or legal provisions with a view to simplifying or abolishing those which unnecessarily limit access to certain occupations.2. Member States are invited to reduce the impact of VAT and/or Intrastat obligations on SMEs. Small enterprises should be allowed to make quarterly VAT returns, and an optional VAT exemption should be offered.3. Member States are invited to examine ways of improving the situation for micro-enterprises, in particular for self-employed entrepreneurs, in the fields of taxation, social security and pension schemes.Article 6 Coordination at Community level 1. The Commission will continue its coordinating role with the Member States and the European business organizations within the framework of the group on improving and simplifying the business environment, to establish benchmarking of best practice.2. To enable the Commission to evaluate the progress that has been made, Member States are requested to report to the Commission, on a yearly basis, concerning the measures which they have adopted in order to put this Recommendation into effect.The Commission will keep the European network of Euro Info Centres fully informed of those developments in order to enable them to supply information to enterprises required to comply with administrative formalities in other Member States.Article 7 This Recommendation is addressed to the Member States.Done at Brussels, 22 April 1997.For the CommissionChristos PAPOUTSISMember of the Commission(1) OJ No C 294, 22. 10. 1994, p. 6.(2) CSE(95) 2087, European Commission, DG XXIII, 1995.(3) COM(96) 329 of 9 July 1996.(4) OJ No C 18, 17. 1. 1997, p. 1.(5) OJ No C 224, 1. 8. 1996, p. 5.(6) OJ No C 320, 28. 10. 1996, p. 163.(7) COM(96) 589 of 20 November 1996.(8) OJ No L 6, 10. 1. 1997, p. 25.(9) According to three studies, the average cost of administrative burdens is between 6 and 30 times higher for SMEs than that for larger businesses (EIM: Administratieve lasten bedrijven 1993; G. Barbieri and V. Lo Moro: Utenti e Pubblica Amministrazione, il Mulino, 1996; Institut für Mittelstandsforschung: Bürokratie - ein Kostenfaktor: eine Belastungsuntersuchung bei mittelständischen Unternehmen, 1995).(10) Defined by the Commission recommendation of 3 April 1996 concerning the definition of small and medium-sized enterprises, OJ No L 107, 30. 4. 1996, p. 4.(11) An interesting example is the United Kingdom's Deregulation Unit which is charged with coordinating the UK Government's deregulation policy between all government departments and ensuring that the business community's point of view is taken into account and that compliance costs and administrative burdens are minimized. The Unit comes under the responsibility of the Deputy Prime Minister and the Cabinet office, which gives it the necessary authority vis-à-vis other ministerial departments.(12) The Flemish Institute for Self-employed Entrepreneurs - VIZO - in Belgium is a government institution founded in 1991. Its mission is to promote and stimulate free and creative entrepreneurship, notably by training and by simplifying administration. VIZO gives advice, undertakes research and takes initiatives in raising awareness among those concerned, while at the same time developing methods and techniques for simplifying administrative tasks. For example, VIZO has organized a training course for civil servants who handle SME matters within the Flemish administration. The aim is to provide these civil servants with an insight into, and knowledge of, the basic principles and techniques involved in simplification and quality services, and to demonstrate how they themselves can function as initiators within their administration.(13) The Municipality of Korsør, in Denmark, is a municipality with a population of 20 000. The municipality has set up a development department which acts as a consultancy partner providing qualified know-how and expertise to the business sector. This requires both training for the employees and changes in the organizational set-up in order to meet demands. The department functions as the coordinating body for all business matters with the local authority.(14) As part of its task the United Kingdom Deregulation Unit is responsible for ensuring that new regulations and administrative procedures are introduced only when strictly necessary. Before any new regulation is made the Government must assess its cost to business and publish the results. Ministers must satisfy themselves that the cost is justified by the benefits. Because SMEs are most vulnerable to overregulation and red-tape, Ministers must also carry out the 'small business litmus test`. This means that small businesses must be consulted on every new regulation to ensure that they will be able to cope. In Germany, it was recently decided that a similar assessment be made relating to the administrative costs imposed by new legislation, in particular on SMEs.(15) An example of this is the United Kingdom annual accounting scheme for VAT where there is flexibility in the upper threshold of £ 300 000 so that firms can remain in the scheme until their turnover exceeds £ 375 000.(16) Study by Logotech Étude comparative des dispositions légales et administratives nécessaires pour la formation de PME dans six pays de l'Union européenne (FR, DE, GR, IT, IRL, UK) and IDEM CD-ROM by the Paris Chamber of Commerce and Industry.(17) Id.(18) The Centres de Formalités des Entreprises were set up in France in 1981 with a view to simplifying the completion of some of the formalities that an enterprise has to comply with, for example, legal, fiscal, social and statistical formalities linked to events in the lifetime of a business, including the creation or start-up phase. The CFEs act as single contact points to the various administrations, such as the local trade register, the taxation office, the administrations in charge of social security and pensions, the statistical office, etc. Once the enterprise has given the required information to the CFE, the latter transmits this information to the other relevant administrations, including the Statistical Office (Insee). Insee also plays an important role as it is in a charge of the national enterprise discretory (Sirene) and gives a national identification number (Siren) to the new enterprises.(19) The French questionnaires M0 and P0 (one for individual entrepreneurs, one for corporate bodies) issued by the Centre for the registration and revision of forms (CERFA) gather, on a single page, all the information required by any administrative body to register the new enterprise and to apply the relevant rules to this new enterprise. The applicant must attach to the completed questionnaire a number of relevant documents. These documents, which may be the original or a certified copy, are usually the birth and nationality certificates for natural persons and members of a partnership and articles of association for corporate bodies. They may also be proof of preliminary registration for regulated professions.(20) Cerfa: Centre d'enregistrement et de révision des formulaires administratifs/Committee for the registration and revision of forms.(21) For example, the Business Register in Italy, administered by the Chambers of Commerce, gives information about all enterprises (name, address, statutes, annual accounts). Part of this information was previously stored, in paper form, at the local court. This new register offers in a single database information regarding business which should systematically be used by the public administration. This is unlikely to raise any concern regarding data protection principles. See also Directive 95/46/EC of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJ No L 281, 23. 11. 1995, p. 31.(22) In Sweden, a single identification number has existed since 1975. This number is used by the enterprise from the start-up phase until its dissolution. The number can be kept by the company even if it changes its name and is used for administrative purposes in areas such as taxation, insurance, banking and telecommunications. In France, the single number 'Siren` was established by decree in 1974.(23) Law No 241 of 1990 and Financial Law No 537 of 1993.(24) In the view of the Commission, this possibility would not cover authorizations dealing with such issues as emissions of dangerous substances. In this case, according to Community law and national law, an explicit authorization is necessary and is in the interests of the business itself.(25) In the framework of the Danish 'new business creation` policy, the Danish Government has proposed an action plan, including actions to lighten the administrative burdens by:- removing or simplifying existing administrative regulations,- removing or simplifying taxes and duties,- setting up a single information point,- developing new procedures to assess the administrative consequences of new legislation.(26) Enterprises in Europe - Fourth Report, p. 62.(27) According to a publication entitled Überprüfung von administrativen Pflichten für Unternehmen by the German Independent Commission Rechts- und Verwaltungs-vereinfachung des Bundes, the so-called Waffenschmidt-Kommission (Federal Ministry of the Interior, 1994) there is a large variety of requirements for maintaining records. For example, in the area of personnel and salary administration, the publication indicates that the conditions for maintaining 119 different records could be alleviated.(28) See also Article 4 (b) of the Commission Recommendation on the transfer of SMEs of 7 December 1994, OJ No L 385, 31. 12. 1994, p. 14.(29) In Belgium, a system of reduced corporation tax is available for SMEs. Provided certain conditions are met, a company whose assessable profit does not exceed ECU 25 733 is charged at the reduced rate of 28,84 % instead of the standard rate of 40,17 %. In addition, there is some flexibility in the system for advance payment of income tax for persons aged under 35 setting up in business as a sole trader or as an active member of a company. They pay no penalty during the first three years for unpaid or insufficient advance payments.(30) Commission Communication on the improvement of the fiscal environment of small and medium-sized enterprises, OJ No C 187, 9. 7. 1994, p. 5, paragraph 6.(31) COM(96) 328 of 22 July 1996.(32) The United Kingdom annual accounting scheme allows one VAT return each year (rather than quarterly). There is flexibility in the upper threshold of £ 300 000 so that firms can remain in the scheme until their turnover exceeds £ 375 000.(33) The United Kingdom cash accounting scheme allows SMEs with a turnover below £ 350 000, to account for VAT on the basis of payments made and received, rather than on invoices. Germany has a similar scheme. See also Article 2 (3) (a) of the Commission recommendation on payment periods in commercial transactions of 12 May 1995, OJ No L 127, 10. 6. 1995, p. 19.(34) European Parliament, Directorate-General for Research, Economic Affairs Series W-25, 5-1996.(35) OJ No L 145, 13. 6. 1977, p. 1.(36) In the UK and Ireland, separate departments are responsible for income tax and social security contributions, but both contributions are collected together via the payroll system 'PAYE`.(37) Since January 1996, businesses in France only have to fill in one form, (déclaration d'embauche unique), instead of the eleven that were previously necessary when taking on an employee. A single contact point for social security contributions dealing with all the formalities required in this field is also planned. Moreover, a pilot scheme is currently underway where seasonal or part-time work within enterprises can be paid for with a 'service voucher`. There is no need for a contract and the formalities with the authorities are reduced because the voucher is both a means of payment and an instrument for informing the relevant authorities.(38) Germany has raised the threshold below which the unfair dismissal law is inapplicable from five to ten employees with a view of increasing micro-enterprises' propensity to take on employees.(39) In Belgium, the Plan Plus Un grants reductions in employer's social security contributions for businesses who hire a first employee. No social security contributions are due for the first year, 75 % and 50 % reductions are foreseen for the second and third years respectively. A similar scheme exists when a second and a third employee is taken-on (Plan plus-deux, plus-trois). The Plan Avantage à l'embauche involves cuts in employer's social security contributions for the hiring of long-term unemployed.(40) In Belgium and Finland, for example, self-employed persons who start a business for the first time can maintain the right to unemployment benefit. In France, self-employed persons can benefit from simplified accounting rules which are harmonized with the taxation requirements. As a result, only one accounting book has to be kept instead of three.ANNEX I SEVEN BASIC PRINCIPLES FOR PROMPT AUTHORIZATION - The decision should be 'centralized` at one point (for example, the single contact point).- Where appropriate, the principle of, 'consent by silence`, should be applied.- The licensing authorities should operate strict management systems, in particular:- someone must be appointed to take specific charge of the licensing procedures and should be responsible for completing them on time,- a target deadline must be set for the completion of the procedures and should be binding on the decision-making authorities. Unless otherwise stated, the deadline should be 30 days,- advice should be given to the entrepreneur even before his application has been submitted. This includes advice on the type and extent of the documents required for the application.- The licensing authorities should have adequate staff and resources to be able to attend to procedures quickly. Provision should be made so that flexible human-resource allocation is possible for authorization procedures for large projects.- The licensing authorities should hold regular discussions with their 'clients` to receive feedback about how the procedures are going, to identify weaknesses in the authorization procedures and to receive suggestions for improvement.- The central authorities should support the local licensing authorities when they are implementing difficult administrative procedures. An especially effective way of doing so is by producing clear internal rules, guidelines and check lists.- The legal provisions on which the authorities base their decisions must allow authorization to be as rapid as possible.ANNEX II IMPROVING THE BUSINESS ENVIRONMENT: BEST PRACTICE FOR START-UPS Overview of measures taken by Member States A. POLICY COORDINATION>TABLE>A. POLICY COORDINATION (continued)>TABLE>B. COMPANY REGISTRATION AND FORMS>TABLE>B. COMPANY REGISTRATION AND FORMS (continued)>TABLE>C. SIMPLIFICATION OF REGULATIONS AND DEROGATIONS FOR SMEs>TABLE>C. SIMPLIFICATION OF REGULATIONS AND DEROGATIONS FOR SMEs (continued)>TABLE>D. LABOUR MARKET FLEXIBILITY>TABLE>D. LABOUR MARKET FLEXIBILITY (continued)>TABLE>ANNEX III SIMPLIFYING TAX ADMINISTRATION IN THE MEMBER STATES >TABLE>


				|

		52012DC0326

			Recommendation for a COUNCIL RECOMMENDATION on Slovakia’s 2012 national reform programme and delivering a Council opinion on Slovakia’s stability programme for 2012-2015 /* COM/2012/0326 final  */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on Slovakia’s 2012 national reform
programme
and delivering a Council opinion on Slovakia’s stability programme for
2012-2015
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,
Having regard to the recommendation of the
European Commission[2],
Having regard to the resolutions of the
European Parliament[3],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)       On 26 March 2010, the European Council agreed to the
European Commission’s proposal to launch a new strategy for jobs and growth,
Europe 2020, based on enhanced coordination of economic policies, which will
focus on the key areas where action is needed to boost Europe’s potential for
sustainable growth and competitiveness.
(2)       On 13 July 2010, the
Council adopted a recommendation on the broad guidelines for the economic
policies of the Member States and the Union (2010 to 2014) and, on 21 October
2010, adopted a decision on guidelines for the employment policies of the
Member States[4],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(3)       On 12 July 2011, the
Council adopted a recommendation on Slovakia’s national reform programme for 2011
and delivered its opinion on Slovakia’s updated stability programme for
2011-2014.
(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European Semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy. On 14 February 2012, the Commission, on
the basis of Regulation (EU) No 1176/2011, adopted the Alert Mechanism Report[5], in which it did not identify
Slovakia as one of the Member States for which an in-depth review would be
carried out.
(5)       On 2 March 2012, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to pursue
differentiated, growth-friendly fiscal consolidation, to restore normal lending
conditions to the economy, to promote growth and competitiveness, to tackle
unemployment and the social consequences of the crisis, and to modernise public
administration.
(6)       On
2 March 2012, the European Council also invited the Member States participating
in the Euro Plus Pact to present their commitments in time for inclusion in
their stability or convergence programmes and their national reform programmes.
(7)       On 30 April 2012, Slovakia
submitted its stability programme covering the period 2012-2015 and its 2012 national
reform programme. In order to take account of their interlinkages, the two
programmes have been assessed at the same time.
(8)       Based on the assessment of
the 2012 stability programme pursuant to Council Regulation (EC) No1466/97, the
Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is plausible. It is broadly in line with
the Commission's 2012 spring forecast, although the latter assumes somewhat
higher real GDP growth in 2012. The stated objective of the budgetary strategy
outlined in the programme is to ensure the long-term sustainability of public
finances. The intermediary steps defined to reach this are a rigorous
implementation of the 2012 budget and a reduction of the headline deficit below
3% of GDP in 2013, the deadline for correction of the excessive deficit set by
the Council. The achievement of the headline deficit target in 2013, however, may
fall short of plans. The programme has changed the medium-term budgetary
objective (MTO) from a close-to-balanced budget to a structural deficit of 0.5%
of GDP, which is not foreseen to be achieved within the programme period. The
new MTO adequately reflects the requirements of the Stability and Growth Pact. Based
on the (recalculated) structural budget balance[6],
the average annual fiscal effort in 2010-2013 amounts to 1.3% of GDP, well
above the required value recommended by the Council, whereby the residual fiscal
effort is somewhat back loaded to 2013. The target for 2013 is subject to
risks, as suggested revenue measures may fall short of the objective;
simultaneous implementation of all small-scale measures can be difficult to
implement, and Slovakia has a history of significant ex-post upward revisions
of the deficit targets. In addition, further across-board expenditure cuts may
prove unsustainable in the medium term. In 2014 and 2015, the average fiscal
effort stands at 0.3% of GDP annually, which is below the required adjustment
of 0.5% of GDP for countries which have not yet reached the MTO. Nevertheless,
according to the programme the growth rate of government expenditure, taking
into account discretionary revenue measures, is in line with the expenditure
benchmark of the Stability and Growth Pact in the outer years of the programme.
Government debt would remain well below 60% of GDP. While Slovakia passed
legislation establishing the Fiscal Council, so far it has not been set up and
the legislation on expenditure ceilings has not yet been adopted.
(9)       Given the diminishing
scope for further expenditure-based consolidation and the need to support
continuing convergence through expenditure in key areas such as education,
innovation and transport infrastructure, there is scope for measures aimed at
broadening the tax base, limiting tax avoidance and improving tax compliance,
without hurting near-term growth prospects. Tackling one of the largest VAT
gaps in the EU could bring significant additional revenue. There is also room
for increasing receipts from taxes that are least harmful to growth, including
real estate taxation, and environmental taxation. Effective taxation of labour
income varies according to different types of employment. This encourages a shift
towards more flexible job arrangements with negative short- and long-term
impacts on public accounts.
(10)     Slovakia has only partially
addressed the long-term sustainability of its public finances, as it has not implemented
the envisaged changes to the pay-as-you-go pillar of its pension system. Measures
were taken to enhance the viability of the fully funded pension pillar. However,
an unstable legal environment with frequent significant changes in the past entailed
non-negligible adjustment costs and introduced uncertainty in the fully funded
pillar.
(11)     No significant measures have
been taken to address Slovakia’s unemployment problem. There is still a need to
improve the effectiveness of active labour market policies and the capacity of
the public employment service. There is also a need for measures to increase the
labour market participation of older workers and women, in particular through
childcare provision. The tax wedge, including all compulsory payments, remains
relatively high for low-income workers and a proportion of jobseekers have
little incentive to move from social assistance to a low-paid job.
(12)     Only limited measures were
adopted to improve the low quality of the education and training system. To
tackle Slovakia’s high youth unemployment, the Youth Action Plan should be adopted
and implemented without delay, in line with the outcome
of the Slovakia - Commission joint action team on youth unemployment, including the reform of vocational education and training as well as
higher education. An updated strategy on lifelong learning was adopted. However,
no particular incentives were introduced to ensure higher participation rates.
(13)     Marginalised communities,
including the Roma, are largely excluded from the labour market and the mainstream
education system, representing a significant underutilised labour potential in the
Slovak economy. In order to tackle this problem, Slovakia should step up efforts
to improve educational outcomes of marginalised groups and reinforce its
reintegration policies for adults.
(14)     Slovakia has substantially
enhanced the transparency of public procurement rules and judiciary, although
judicial proceeding remains long and costly. However, the overall quality and
capacity of public institutions remains weak. The public administration lacks
strategic approach, suffers from high turnover of staff and insufficient
capacity building, which hampers policy development and implementation and delivery
of public services.
(15)     Slovakia has made a number
of commitments under the Euro Plus Pact. The commitments, and the
implementation of the commitments presented in 2011, relate to fostering
employment, improving competitiveness, enhancing sustainability of public
finances and reinforcing financial stability. The Commission has assessed the
implementation of the Euro Plus Pact commitments. The results of this
assessment have been taken into account in the recommendations.
(16)     In the context of the
European Semester, the Commission has carried out a comprehensive analysis of Slovakia’s
economic policy. It has assessed the stability programme and national reform
programme. It has taken into account not only their relevance for sustainable
fiscal and socio-economic policy in Slovakia but also their compliance with EU
rules and guidance, given the need to reinforce the overall economic governance
of the European Union by providing EU-level input into future national
decisions. Its recommendations under the European Semester are reflected in
recommendations (1) to (7) below.
(17)     In the light of this
assessment, the Council has examined Slovakia’s stability programme, and its
opinion[7]
is reflected in particular in recommendation (1) below,
HEREBY RECOMMENDS that Slovakia
should take action within the period 2012-2013 to:
1.           Take additional measures in
2012 and specify the necessary measures in 2013, to correct the excessive
deficit in a sustainable manner and ensure the structural adjustment effort
specified in the Council recommendations under the Excessive Deficit Procedure.
Implement targeted spending cuts, while safeguarding
growth-enhancing expenditure, and step up efforts to improve the efficiency of
public spending. Thereafter, ensure an adequate
structural adjustment effort to make sufficient progress towards the
medium-term objective, including meeting the expenditure benchmark. Accelerate
the setting up of the Fiscal Council and adopt rules on expenditure ceilings.
2.           Increase tax compliance,
in particular by improving the efficiency of VAT collection; reduce distortions
in taxation of labour across different employment types, also by limiting tax
deductions; link real estate taxation to the market value of property; make
greater use of environmental taxation.
3.           Further adjust the
pay-as-you-go pension pillar, mainly by changing the indexation mechanism,
introducing a direct link between the statutory retirement age and life
expectancy and introducing a sustainability factor in the pension calculation
formula reflecting demographic change. Ensure the stability and viability of
the fully funded pillar.
4.           Enhance the administrative
capacity of public employment services with a view to improve the targeting,
design and evaluation of active labour market policies to ensure more
individualised employment services for the young, long-term unemployed, older
workers and women. Ensure the provision of childcare facilities. Reduce the tax
wedge for low-paid workers and adapt the benefit system.
5.           Adopt and implement the
Youth Action Plan, in particular as regards the quality and labour market
relevance of education and vocational training, including through the introduction
of an apprenticeship scheme. Improve the quality of higher education by
strengthening quality assurance and result orientation.
6.           Take active measures to improve
access to and quality of schooling and pre-school education of vulnerable
groups, including Roma. Ensure labour market reintegration of adults through
activation measures and targeted employment services, second-chance education
and short-cycle vocational training.
7.           Strengthen the quality of the
public service, including by improving management of human resources. Further shorten
the length of judicial proceedings and strengthen the role of the Public
Procurement office as an independent body..
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 02.08.1997, p. 1
[2]               COM(2012)325 final
[3]               P7_TA(2012)0048 and P7_TA(2012)0047
[4]               Council Decision 2012/238/EU of 26 April 2012
[5]               COM(2012) 68 final
[6]               Cyclically adjusted balance net of one-off and
temporary measures, recalculated by the Commission services on the basis of the information provided in the programme, using
the commonly agreed methodology.
[7]               Under Article 5(2) of Council Regulation (EC) No
1466/97.


				|

		52011SC0825

			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Romaniaand delivering a Council opinionon the updated Convergence Programme of Romania 2011-2014 /* SEC/2011/0825 final */

			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Programme 2011 of
Romania
and delivering a Council opinion
on the updated Convergence Programme of Romania 2011-2014
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148
(4) thereof,
Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1],
and in particular Article 9(3) thereof,
Having regard to the recommendation of the European
Commission[2],
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)
On 6 May 2009, the Council adopted a Decision
(2009/459/EC) to make available to Romania medium-term financial assistance for
a period of three years under the provisions of Article 143 of the Treaty. The
accompanying Memorandum of Understanding signed on 23 June 2009 and its
successive supplements lay down the economic policy conditions on the basis of
which the financial assistance was disbursed. The Council Decision was amended
on 16 March 2010 by Decision 2010/183. Following Romania’s successful
implementation of the programme, and given a partial adjustment of the current
account because of remaining structural weaknesses in Romania’s product and
labour markets which make the country sensitive to international price shocks,
on 12 May 2011 the Council adopted a Decision (2011/288/EU) to make
precautionary medium-term financial assistance available to Romania for a
period of three years under Article 143 of the Treaty. The accompanying
Memorandum of Understanding will be signed in [June
2011].
(2)
On 26 March 2010, the European Council agreed to
the European Commission’s proposal to launch a new strategy for jobs and
growth, Europe 2020, based on enhanced coordination of economic policies, which
will focus on the key areas where action is needed to boost Europe’s potential
for sustainable growth and competitiveness.
(3)
On 13 July 2010, the Council adopted a
recommendation on the broad guidelines for the economic policies of the Member
States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision
on guidelines for the employment policies of the Member States[3],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(4)
On 12 January 2011, the Commission adopted the
first Annual Growth Survey, marking the start of a new cycle of economic
governance in the EU and the first European semester of ex-ante and integrated
policy coordination, which is anchored in the Europe 2020 strategy.
(5)
On 25 March 2011, the European Council endorsed
the priorities for fiscal consolidation and structural reform (in line with the
Council’s conclusions of 15 February and 7 March 2011 and further to the Commission’s
Annual Growth Survey). It underscored the need to give priority to restoring
sound budgets and fiscal sustainability, reducing unemployment through labour
market reforms and making new efforts to enhance growth. It requested Member
States to translate these priorities into concrete measures to be included in
their Stability or Convergence Programmes and National Reform Programmes.
(6)
On 25 March 2011, the European Council also
invited the Member States participating in the Euro Plus Pact to present their
commitments in time to be included in their Stability or Convergence Programmes
and their National Reform Programmes.
(7)
On 2 May 2011, Romania submitted its 2011
Convergence Programme update covering the period 2011-2014 and its 2011
National Reform Programme. The two programmes have been assessed at the same
time.
(8)
Between 2002 and 2008 the Romanian economy grew
strongly, with real GDP growth averaging 6.3%, above its level of potential
growth. Economic growth was primarily driven by domestic demand, as strong
credit and wage developments boosted private consumption and investment. This
boom was also fuelled by foreign capital inflows, led to overheating and
unsustainable external and fiscal imbalances. The current account deficit
peaked at 13.6% of GDP in 2007 and decreased only marginally to 11.4% of GDP in
2008. The high external borrowing was driven by a pro-cyclical fiscal policy,
with headline deficits increasing from 1.2% of GDP in 2005 to 5.7% of GDP in
2008 as a result of recurrent budgetary slippages, notably with respect to
current spending. The financial crisis and the ensuing global economic downturn
increased risk-aversion amongst investors, leading to a significant tightening
of capital flows to Romania. Labour market participation did not rise despite
the favourable economic conditions; the employment rate changed very little
during the boom years. The employment rate then fell to 63.3% by 2010 while the
unemployment rate increased from 5.8% in 2008 to 7.3% in 2010 as a result of
the economic downturn. Unemployment remains particularly high among the Roma
population. Against this background and facing acute financing needs, the
Romanian authorities requested international and EU financial assistance in May
2009.
(9)
Following the successful implementation of the
EU-IMF adjustment programme, and in order to consolidate these positive
achievements, a precautionary EU-IMF programme for 2011-2013 was negotiated
with the authorities. The new programme continues the fiscal consolidation,
fiscal governance reforms and preservation of financial stability started under
the 2009-2011 programme. In addition, it puts a strong emphasis on the
structural reforms in product (in the energy and transport sectors) and labour
markets necessary to unleash Romania's growth potential, foster job creation
and increase the absorption of EU funds. Romania remains on track to achieve
the cash deficit target of 4.4% of GDP in 2011 (below 5% of GDP in ESA terms).
This would also provide an adequate basis for achieving the deficit target of
below 3% of GDP for 2012, although further measures would have to be taken
according to the Commission Services' Spring 2011 Economic Forecast. The
authorities have also taken steps to achieve the structural reform objectives
of the new programme and continue to maintain financial stability.
(10)
Based on the assessment of the updated Convergence
Programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the
opinion that the macroeconomic assumptions underpinning the projections in the
programme are plausible. The Convergence Programme aims to correct the
excessive deficit by the 2012 deadline set by the Council in its recommendation
of 16 February 2010. The programme targets headline deficits of 2.6% of GDP in
2013 and of 2.1% of GDP in 2014, with the envisaged consolidation being mostly
expenditure-based. According to the structural balance recalculated by
Commission services, the medium-term objective (MTO) will not be achieved
within the programme period. The consolidation strategy appears to be
frontloaded with the structural improvement being concentrated in 2011 and
2012. In contrast, there is no improvement in the structural balance in 2013
and 2014. The deficit path foreseen is appropriate in 2011 and 2012, but not in
2013 and 2014. The main risks to the budgetary targets are implementation risks,
the arrears of state-owned enterprises which represent a serious contingent
liability for the budget, and the reservations expressed by the Commission
(Eurostat) about Romania’s excessive deficit procedure notification[4].

(11)
Romania has made its commitments under the Euro
Plus Pact[5] in its National Reform
Programme and Convergence Programme, which were submitted on 2 May 2011. Most
of these commitments have been or are being met as part of the medium-term
financial assistance programme and are broadly appropriate to address existing
challenges under the Pact.
(12)
The Commission has assessed the Convergence
Programme and National Reform Programme, including the Euro Plus Pact
commitments[6]. It has taken into
account not only their relevance to sustainable fiscal and socio-economic
policy in Romania but also their conformity with EU rules and guidance, given
the need to reinforce the overall economic governance of the European Union by
providing EU level input into future national decisions.
(13)
In light of this assessment, also taking into
account the Council Recommendation under Article 126(7) of the Treaty on the
Functioning of the European Union of 16 February 2010, the Council has examined
the 2011 update of the Convergence Programme of Romania and its opinion[7]
is reflected in the recommendation set out below. Taking into account the
European Council conclusions of 25 March 2011, the Council has examined the
National Reform Programme of Romania,
HEREBY
RECOMMENDS that Romania should:
Implement the measures laid down in Council
Decision 2009/459/EC as amended by Council Decision 2010/183/EU, together with
the measures laid down in Council Decision 2011/288/EU and further specified in
the Memorandum of Understanding of 23 June 2009 and its subsequent supplements,
and in the Memorandum of Understanding of [June
2011] and its subsequent supplements.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 209, 2.8.1997, p. 1.
[2]               OJ C , p. .
[3]               Maintained for 2011 by Council Decision 2011/308/EU
of 19 May 2011.
[4]               Eurostat expressed reservations as to the quality of
the Romanian EDP figures due to: (i) uncertainties about the impact of some
public corporations on the government deficit, (ii) the reporting of ESA95
categories ‘other accounts receivable and payable’, (iii) the nature and impact
of some financial transactions and (iv) the consolidation of intra-governmental
flows.
[5]               More details on the commitments made under the Euro
Plus Pact can be found in SEC(2011) 731.
[6]               See SEC(2011) 731.
[7]               Foreseen in Article 9(3) of Council Regulation (EC) No
1466/97.