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Reducing Bureaucracy and Better Regulation: Freeing Economy and Administration from Unnecessary Bureaucracy – Preparing the Location for the Future
The extent of bureaucracy has become an enormous burdensome factor for the economic location Germany and Europe.
Local companies face a multitude of reporting, verification, statistical, and documentation obligations – and the number of requirements is continuously rising. Not only the number of regulations, but also the level of detail and the application areas of European directives and regulations, as well as national regulations, often overlap. In the perception of businesses, the regulation is increasingly diverging from its goal of creating a uniform, coherent, and practical system.
Relative to their economic strength and available resources, the burden of bureaucracy is generally stronger for SMEs than for larger companies. At the same time, large companies are subject to numerous obligations and reporting requirements. In IHK organization surveys, bureaucratic burdens regularly top the agenda items addressed by companies to the government. Businesses are seeking a notable reduction in unnecessary bureaucracy, more entrepreneurial freedom again, and faster planning and approval procedures. Complex application and planning processes, for example, make investment activities more difficult and hinder the path to transformation (see chapter "Planning and Approval Procedures").
In order to significantly reduce bureaucracy, effective bureaucracy brakes are needed on the one hand. On the other hand, existing regulations should be evaluated, for example, using formats such as practice checks. This could also relieve administrative authorities that implement or monitor the regulations. In this context, digitization in administrations also plays an important role in reducing bureaucracy (see chapter "Digitization and the Digital Single Market").
The following guidelines should guide economic policy
The economy requires a mandate from policymakers for a major release from high levels of bureaucracy and enhanced trust in businesses. Given the trend toward more and increasingly specific regulations, current initiatives and measures at the national and European levels can only achieve limited progress. Bureaucracy persists as a continuous burden without systematic approaches. Initial efforts to establish these systems have yet to yield noticeable reductions in bureaucracy. Therefore, stronger systematic approaches at all government levels should be employed to decrease bureaucracy on a national scale. At a European level, there must be an inventory of existing laws and their accompanying reporting obligations to identify and eliminate redundancies, while ensuring their prevention moving forward. Moreover, the EU Commission should commit to measurable targets for reducing bureaucracy and align initiatives with a clear timeline, guaranteeing businesses reliability and legal certainty (refer to subsequent guidelines).
Reducing unnecessary bureaucracy includes eliminating duplicate and disproportionate—or nonsensical or unnecessary—reporting and information obligations, complete automation of (statistical) reporting requirements, and expedited, binding, and digital administrative or application processes.
Owing to the almost unmanageable number of information obligations, small and medium-sized enterprises (SMEs) often find it challenging to achieve legally binding transactions, particularly in the cross-border e-commerce space, without extensive legal consultation. Simplification needs, for instance, could be addressed via standardized "template" formulations or checklists provided by the EU Commission. Non-binding "template formulations" or "template forms" should ensure that their usage meets statutory information and advisory requirements. Furthermore, forms must be user-friendly to make legal applications or claiming funding less cumbersome (compare chapter "Research and Innovation").
Efforts to harmonize legislation should fundamentally support a functioning single market (compare chapter "Single Market").
A good legislative process with clear and understandable regulations contributes to the minimisation of bureaucracy costs. This starts with the consultation process. Economic actors should therefore be involved in legislative processes via an "ex-ante practical check" as early as possible. Companies need enough time to analyse laws and evaluate them in written statements. Short consultation periods significantly complicate the integration of practical expertise. Consultations should be made more user-friendly and also check the feasibility of the projects by the administration. This primarily concerns a timely publication of legislative proposals at the EU level, at least in the working languages of the EU. The evaluation should also be made transparent. New acts or laws should always allow those affected sufficient time for necessary adjustments or preparation for the implementation of measures.
Checks of existing regulations ("ex-post practical checks") are a topic-specific instrument to identify and reduce unnecessary bureaucratic burdens in certain areas. This format is included in the Federal Government's Growth Initiative and should be implemented by all federal ministries promptly, and subsequently transferred to the EU level.
Since 2023, laws in Germany have been subjected to a review of their digital suitability in their draft stage and are examined by the National Regulatory Control Council (so-called "digital check"). This concept should be transferred to the European level by the "Regulatory Scrutiny Board". Already at the preparation stage of EU legislative proposals, possibilities for relieving the economy and SMEs should be sought and a more coherent application of the SME test should be ensured (compare chapter "Strengthening SMEs"). In the further legislative process, the "dynamic impact assessments" previously discussed by the Council and Parliament should finally be established in case of substantial changes.
The effort required to adapt and transition existing regulations to new legal acts should be kept to a minimum for companies. Ultimately, new regulations should lead to less bureaucracy and lower costs for businesses. Impact assessments should present all possible options before adopting an EU legal act. Otherwise, the EU Commission's proposal for a legislative initiative should not be forwarded to the EU Parliament.
If additional burdens for the economy arise during the legislative process, they should be included in the EU Commission's annual effort report (the so-called "Annual Burden Survey"). Additional burdens should be offset at the latest by the end of the following year through another legislative initiative.
To realistically estimate bureaucracy costs, not only the absolute amount of the costs but also a bureaucracy cost index should be created, published, and regularly updated. Both the German and European indices must include not only the costs for submitting applications, performing labelling or reporting statistics but also adjustments to internal processes and procurements of goods and services such as additional personnel costs or IT infrastructure modifications. Furthermore, the implementation efforts in the member states should be reported at the EU level.
Both Germany and the European Commission have introduced a so-called 'One in, one out' rule as a measure to reduce bureaucracy. However, its effectiveness has been limited thus far. Both regulations should be made more effective and consistently adhered to in the future.
The German 'One in, one out' rule currently excludes EU regulations that need to be implemented and one-off efforts. These exemptions should be discontinued. The German government should apply the rule universally to all European legal acts that are to be implemented. Likewise, the European Commission should adopt the 'One in, one out' rule for all legislative acts that impose bureaucratic burdens in the future. Calculations of burdens and reliefs should be represented in a scoreboard. Measures classified as having a zero burden in the 'Annual Burden Survey' should be transparently justified and remain exceptions only.
Both the German and European 'One in, one out' rules should be further developed into a 'One in, two out' rule. Otherwise, the current high burden situation will persist as the 'One in, one out' rule merely replaces individual burdens with others. True reduction of bureaucracy requires more old rules being eliminated than new ones being introduced.
Good laws should enable entrepreneurial activity rather than hinder it. Legislations should be articulated clearly, implemented within deadlines without incurring undue costs, and easy to comply with. They should also provide a clearer and more reliable legal framework. Frequent and overly detailed amendments to laws should be avoided at all levels of government. Both in Germany and Europe, ministries or directorates-general should coordinate their initiatives in advance to prevent overlaps. Reliable legislation is especially important for long-term investment decisions. If businesses lose confidence in the legislative process due to frequent changes in direction, investment levels can be negatively impacted.
Legislators should use tools like experimental "Sandboxes" to test laws for relevance and current applicability, including evaluating thresholds. This would help avoid unnecessary bureaucratic burdens. With sunset clauses, regulations could be regularly reviewed, ensuring their appropriateness.
When deficiencies in the implementation of a regulation are identified by affected parties, the improved application of existing laws should take precedence over the adoption of additional regulations. Consistent, uniform, and practical procedures should be applied. Issues caused by inconsistent state laws or varied municipal implementations should be minimized, benefiting nationwide active enterprises significantly.
Furthermore, timely adjustments of laws to court decisions are vital to avoid creating legal uncertainty for businesses. This holds particular importance when regulations are declared unlawful by judicial bodies.
Member states are obligated to effectively and transparently implement EU law. This implementation should be monitored by the European Commission as the guardian of the treaties, including through infringement proceedings (refer to chapter "Internal Market"). The Commission should evaluate these processes solely from a legal standpoint in the interest of fair competition. Consistent and uniform enforcement of EU law across member states strengthens the internal market, ensuring fair competition and greater legal certainty for businesses.
EU regulations should be implemented by the German legislature as-is, without additions or stricter measures (also known as "Gold-plating"), to avoid competitive disadvantages for local businesses. To ensure this, the scope of the National Regulatory Control Council should include a "Gold-plating" review. This review should document, by federal ministries, when and why they exceed the requirements of EU law.
