Excessive regulations hinder productivity and undermine entrepreneurship because entrepreneurs waste time and resources which could be used for developing their businesses. The European Union (EU) emphasises the importance of making the legislation that regulates businesses more transparent and clear, because the EU considers it to be one of the primary methods for improving the business environment. Also, one of the most important goals of the Lisbon strategy is to simplify legislation and decrease administrative costs. The administrative costs have been diminished in Netherlands, Denmark, Sweden and Norway by conducting evaluations of enterprises’ administrative burden.

Administrative burden is defined as fulfilling the legislated duties, which involve collecting information and transmitting it to the state or other third parties. The Ministry of Economic Affairs and Communications, who has a responsibility to encourage entrepreneurship, ordered two pilot studies from Praxis: ‘The value-added tax (VAT) law’s administrative burden on entrepreneurs’ and ‘Entrepreneurs’ administrative burden associated with presenting wages and earned income data to the Statistics Estonia and the Estonian Tax and Customs Board.’ The first study evaluated the administrative burden associated with the implementation of VAT law and the second focused on assessing the administrative burden of presenting data about wage and labour costs.

The first study found the following:

  • Estonian enterprises spend on average 5195 Estonian kronor (approx.  332 €) on administering value-added tax and being informed of VAT law;
  • The cost of administering value-added tax is 243 million Estonian kronor (approx. 15,5 million €) for the whole economy, which is 0.25% of the GDP;
  • The administrative burden associated with value-added tax creates a proportionally greater cost for small than for big enterprises. For this reason, it is common in other countries that the duties to inform associated with administrating VAT are dependent upon the size of the enterprise.

The second study found that:

  • The collection and transmission of data about wage and labour expenses costs 70 million Estonian kronor per year (approx. 4,8 million € per year) for all Estonian enterprises.

As administrative burden is measured by the standard cost model, the results of the two studies provide an opportunity to consider when, in which conditions and areas of economic activity it would be possible to apply the standardised cost model in Estonia.

See also

Eesti Statistikaamet
Maksu- ja Tolliamet