The Crisis As a Wake-Up Call: Modernise Public Services, Build on the Momentum for Digital Change, Make Legislation Easy to Enforce

The Crisis as a Wake-Up Call: Modernise Public Services, Build on the Momentum for Digital Change, Make Legislation Easy to Enforce.

ANNUAL REPORT 2020 of the National Regulatory Control Council Annual Report 2020 of the National Regulatory Control Council pursuant to Section 6 (2) of the National Regulatory Control Council Establishment Act (NKRG)

Oktober 2020 Key Figures at a Glance

Development of Annual Compliance Costs, reporting period 2019/20

1,000 1,000 in million Euros Public Administration 589.8 million Euros 500 500

0 0 Third Bureaucracy Relief Act Businesses -641.9 million Euros -500 -500

Citizens -776.4 million Euros -1,000 -1,000 All areas -828.4 million Euros

-1,500 -1,500

-2,000 -2,000 Oktober 2019 Januar 2020 April 2020

Fig. 1: Development of annual compliance costs in the 2019/2020 reporting period

Compliance cost monitor 2011 - 2020 Reporting Period 8.0 8.0 in billion Euros First Insurance 7.0 7.0 Bureaucracy Distribution All Areas Rent Protection Act Relief Act Directive 6.0 5.7 billion Euros 6.0 E-Procurement 5.0 5.0 Businesses Minimum Wage Act Second Bureaucracy Relief Act 4.2 billion Euros 4.0 4.0 German Regulation on the Award of Public Third Bureaucracy 3.0 Supply & Service Contracts below EU Thresholds 3.0 Upstream Emissions Relief Act Public Administration Energy Savings Reduction Regulation 2.1 billion Euros 2.0 2.0 Ordinance 1.0 Illegal Labour Act 1.0

0 Citizens 0 Statutory Health Insurance -0.6 billion Euros -1.0 Burden Relief Act -1.0 July 2011 July 2012 July 2013 July 2014 July 2015 July 2016 July 2017 July 2018 July 2019

Fig. 2: Compliance cost monitor (as of 1 July 2020) Citizens — Top 5 burdens Citizens — Top 5 burden relief

-72 million Euros (8%) Harmonisation Act for Energy-Savings other legislative Legislation for Buildings (BMWi) -589 Third Bureaucracy Relief Act (BMWi) 28 initiatives other 102 measures Fourth Amendment Act of the German th 19 mill. Euros -112 7 SGB IV Amendment Act (BMAS) Skilled Crafts and Trade Code (BMWi) 23 (19%) 77 80 million Euros Passports and Identity Cards Security -803 mill. Euros -55 (81%) Basic Pension Act (BMAS) 10 Improvement Act (BMI) (92%) Top 5 measures containing 69 Ordinance Amending the Chimney Top 5 measures containing the largest annual burdens -25 Adoption Assistance Act (BMFSFJ) 10 and Inspection Ordinance (BMWi) the larguest annual relief for citizens for Citizens Ordinance for Extending Second Amendment Act of the Federal rounded values, rounded values, -21 10 Registration Act, other Regulations (BMI) Simplied Benet Access (BMAS) in million Euros in million Euros 0 10 20 30 -600 -500 -400 -300 -200 -100 0 Businesses — Top 5 burdens Businesses — Top 5 burden relief

Animal Welfare Labelling Act (BMEL) 169 -1,168 Third Bureaucracy Relief Act (BMWi) -27 million Euros (2%) from other measures other measures Patient Data Protection Act (BMG) 118 -139 7 th SGB IV Amendment Act (BMAS)

245 mill. Euros 496 mill. Euros Amendment Ordinance to Housing Property (33%) (67%) -19 the Fertiliser Ordinance (BMEL) 84 Modernisation Act (BMJV) -1,356 mill. Euros Top 5 measures (98%) containing the largest 18th Amendment Ordinance of the Law For Transferring Oversight Over Top 5 measures containing annual burden for -17 Medicinal Prescription Ordinance (BMG) 65 Financial Investment Brokers (BMF) the largest annual relief businesses for businesses 2nd Amendment of the Financial rounded values, First Ordinance Amending the Professional 61 rounded values, -13 Investment Intermediary Regulation in million Euros in million Euros Truck Driver Qualication Ordinance (BMVI) (BMWi) 0 50 100 150 200 -1,200 -1,000 -800 -600 -400 -200 0 Public Sector — Top 5 burdens Public Sector — Top 5 burden relief

Basic Pension Act (BMAS) 207 -92 Annual Taxation Act 2019 (BMF) -14 mill. Euros (7%) from other other th Third Bureaucracy Reduction Act (BMWi) 146 measures measures -55 7 SGB IV Amendment Act (BMAS)

Implementation Act of the EU Waste -196 mill. Euros 256 mill. Euros 544 mill. Euros Law for the further reduction of Residual -25 Disposal Framework Directive (BMU) 65 (93%) (32%) (68%) debt discharge proceedings (BMJV) Top 5 measures containing Posted Workers Top 5 containing the 64 the largest annual relief -19 Relatives Liabilities Relief Act (BMAS) Implementation Act (BMAS) largest annual burdens on for the public sector the public sector First Wind Energy-on-Sea- rounded values, Digital Access to Family Benet 61 rounded values, -5 Amendment Act (BMWi) in million Euros in million Euros Act (BMI) 0 50 100 150 200 -100 -80 -60 -40 -20 0

'One in, one out'-Monitor

Fig. 3: 'One in, one out'-Monitor 2015 - 2020 (as of 1 July 2020) 6 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Contents

Key Messages 8 Foreword 10

1. Legislation and Administrative Practices During the COVID-19 Pandemic 13 1.1 Crisis Legislation and Crisis Management in a Multilevel System (February to June 2020) 13 1.1.1 Measures to Contain the Pandemic and Its Economic Consequences Scrutinised by the NKR ...... 13 1.1.2 Immediate Assistance and Interim Aid Procedures of the Federal Government and the Federal States 18 1.1.3 (Temporary) Bureaucracy Reduction ...... 20

1.2 The COVID-19 Pandemic – a New Stress Test: Draw Lessons for Future Crises 21 1.2.1 Modernise the Reporting Channels Between Authorities 22 1.2.2 Crisis Management in a Federal System 23 1.2.3 Ensure That the Public Administration Can Do Its Job 24

1.3 Sustainable Modernisation Requires a Sparring Partner: “Modern Administration” Initiative 26

2. Better Regulation and Bureaucracy Reduction 29 2.1 Status of Digital Transformation in Government and Public Administration 29 2.1.1 Mid-Term Review of the Online Access Act ...... 29 2.1.2 Reduce Complexity and Standardise in a Competition-Friendly Manner ...... 32 2.1.3 Digital Certification Inspection: Make Legislation Easier to Enforce and More Digital-Friendly 36

2.2 Contents First, Legal Paragraphs Second: Effectiveness and Practicality of Legislation 38

2.3 Better Regulation and Bureaucracy Reduction Initiatives at the Federal Level 42 2.3.1 Further Development of the Evaluation Concept of the Federal Government ...... 42 2.3.2 Federal Government Decisions on the Improvement of Cost-Benefit Transparency and Cost Containment 46 2.3.3 Improved Involvement, Better Regulation: SME Test and Practicability Tests ...... 48 2.3.4 Federal Government and Federal States Develop New Package of Measures 51 2.3.5 Burden Relief Proposals of the NKR: Economic Stimulus Package at Zero Cost ...... 52

2.4 Better Regulation at EU Level and International Cooperation 56 2.4.1 Cooperation of Independent Councils in the RegWatchEuropeNetwork: NKR Chairmanship 56 2.4.2 Planned Introduction of ‘One-In, One-Out’-Rule at EU Level 57 2.4.3 Additional Better Regulation Measures by the EU Commission ...... 58 2.4.4 Cooperation With the Council of the European Union and the European Parliament ...... 59 Contents 7

3. Impacts of New Legislation 61 3.1 Quality of Impact Assessments for Legislative Initiatives of the Federal Government 61 3.1.1 Scrutiny Findings in Opinions of the National Regulatory Control Council ...... 61 3.1.2 Deadlines and Procedures ...... 66

3.2 Development of Compliance and Bureaucracy Costs 69 3.2.1 Transparency in Compliance Costs 69 3.2.2 Compliance Costs to Citizens ...... 72 3.2.3 Compliance Costs to Businesses and Impact of the ‘One-In, One-Out’-Rule ...... 74 3.2.4 Compliance Costs to Public Authorities 83

3.3 Ex-ante Scrutiny of Compliance Costs from EU Legislation 87

4. Annex 89 4.1 NKR Proposals for Burden Relief in Light of the COVID-19 Pandemic 89 4.2 NKR Expert Report 2019 “Content First, Legal Text Second”: Implementation Recommendations 91 4.3 List of NKR Expert Reports and Joint Publications 93 4.4 Evaluation of Regulatory Initiatives 2020-2021 94 4.5 Key NKR Diary Dates in 2019/20 96 4.6 Overview of NKR Rapporteurs 100 4.7 Overview over NKR-Members from Previous Terms of Office 101 4.8 Abbreviations and Acronyms 103 4.9 List of Illustrations 105 8 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Key Messages

1. The State Must Be Able to Act in a Crisis – Reducing Business Burden Is Now More Important Than Ever Aid programmes for crisis management were launched at a record pace. The Federal Government has made it possible for public participations, mandatory presence, general meetings or similar events to become more flexible. That should become the rule from now on. Further relief from bureaucracy is required and possible (see NKR proposals) - also to ensure that economic rebound investments do not kick in after the crisis.

2. There Is a Dearth of Digital Public Services – an Obstacle to Crisis Management The COVID-19 pandemic shows the dramatic backlog in the modernisation of the public administration across all levels of government. Whether it's fax-based reporting by public health offices, the lack in digital company accounts or the impossibility to electronically match registries - all of this could have been avoided. In short: Only the systematic implementation of digital public services enables efficient crisis management!

3. We Must Learn From the Crisis – Modernisation of the Administration Must Finally Be Taken Seriously First it was the refugee crisis, now it is the corona pandemic which subjects the administration to another stress test. The performance of public services must be systematically verified - rather than run the risk of being caught unawares by crises. An independent expert panel may be a source of creative ideas and a driving force in this process. It can support policy of the Federal Government and the Federal States - and call for unpopular but necessary decisions.

4. Second Halftime of the Online Access Act – Governance Means Understanding Where Things Stand The implementation of the Online Access Act (OZG) is entering its second phase. The planning phase has been concluded, but it is still unclear when which public service can be made available digitally, and in what form. What we need is more clarity and transparency - on the one hand, to allow local governments to see which online offers they can adopt, on the other hand, to allow decision-makers of the Federal Government and the Länder to recognise where to take corrective measures. What is lacking is thorough political monitoring. This is extremely urgent!

5. Money Is Not the Solution to Every Problem - There Is no Success Without Standardisation The billions of Euros from the stimulus package spent on the Online Access Act (OZG) are an important signal. They are intended to speed up the OZG implementation process using one-for-all solutions. Without a comprehensive standardisation, these solutions will hardly be used extensively - and the dependence on dominant IT service providers will further increase. That problem might jeopardise openness, innovation and competition - which are indispensable for a high-performance and manifold landscape of providers and software. In this respect, we are in need of an up-to-date architecture and standardisation management. Key Messages 9

6. No Draft Bill Without Digital Suitability Test – When Will We Have the Digital Certification Inspection? For the digital transformation of public administration, processes must be reviewed and legislation must be amended accordingly. Despite numerous recommendations from OZG laboratories, only a few laws have in fact been amended. Even the announcement of a digital certification inspection for new legislation by the Federal Government has been without result so far. We cannot allow this situation to continue. We need greater determination and more consistency when it comes to implementing digitally compatible legislation.

7. Legislation Is Out of Step With Technoloy – Practicality of New Rules Must Be Ensured Too many laws are out of step with practical requirements; efficiency and practicability are often neglected. The NKR has formulated specific proposals on how to improve the drafting of legislation to overcome this. Digital certification inspections, impact and enforcement models can be used to test draft legislation systematically to see if the new rules are fit for their practical purpose. In particular, those affected should provide feedback in legislation laboratories. The first pilots show tangible benefits. The motto “Contents First, Legal Text Second” can and must become the principle of the legislative process!

8. Violation of Deadlines and Procedural Rules, Working on Legislation Without Involving Those Affected Already prior to the outbreak of the corona pandemic, important draft legislation were prepared within a few days - too often without the involvement of those concerned and the local authorities. That is understandable in times of crisis - but the violation of rules has almost become the rule by now. Things can’t and mustn’t remain this way. For the involvement of associations and experts, the Federal States and the local governments in the preparation of legislation we must again apply the principle: as early as possible, as long as necessary. External expertise is indispensable for good policy making!

9. Decrease in Compliance Costs – but High One-Off Costs Cloud the Picture a Little The Third Bureaucracy Relief Act pays off: Last year, recurrent compliance costs decreased (-13 per cent). But: One-off burdens increased. The burden on businesses alone amounted to 2.6 billion Euros. That is too much. The Federal Government must prove that its decision to contain one-off costs is more than mere lip service!

10. Evaluation of Legislation Must Be Filled With Life – Apply Lessons Learned Systematically In cooperation with the NKR, the Federal Government has adopted ambitious rules for an ex-post evaluation of legislation, which is a milestone of better regulation. For any important law, it is required to find out - after a reasonable period of time has passed - whether the stated objectives have been achieved. Now, systematic use must be made of the lessons learned in order to establish better legal rules!

11. Red Tape and Compliance Costs in Brussels – Effective 'One-In, One-Out'-Rule Required It is more important than ever for the economic recovery in the context of the corona pandemic that businesses are not burdened with bureaucracy and government regulations any more than absolutely necessary. This also applies to EU law. For this reason, the Federal Government and the NKR made every effort to ensure that the 'one-in, one'-out rule announced by the President of the European Commission will indeed lead to a noticeable limitation of the statutory compliance costs. 10 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Foreword

The year 2020 was and is undoubtedly a difficult year for all of us. The outbreak of the COVID-19 pandemic in spring 2020 marked a turning point for the NKR as well. We were not able to imagine which impact the pandemic with all its consequences was going to have on citizens, businesses and public administration. For this reason, this reporting period is clearly divided into the “before” and the “after”: before the outbreak of the pandemic, and thereafter in the shadow of the crisis.

In autumn 2019, the NKR’s main focus was on the Third Bureaucracy Relief Act with the objective of providing significant relief to businesses - an objective which was achieved only in part. At the same time, there were intense discussions on how to further develop the evaluation procedure which the Committee of State Secretaries concluded with a remarkable decision in November 2019: In the future, the conditions for performing any mandatory evaluation of a given piece of legislation will already be laid down in the government draft. The Federal States as well as the various associations must be involved, and the process will end with a systematic quality assurance. All told, – this is a milestone for better regulation in Germany! However, the draft bill to reform the German pension system with a “Basic Pension” issued in February 2020 was quite another matter. Despite urgent warnings from almost all experts, an exceptionally bureaucratic and cumbersome procedure was chosen without having given other available alternatives serious consideration. This clearly illustrates that bureaucracy reduction and better regulation still cannot be taken for granted but must be called for time and again! Foreword 11

In March 2020, the COVID-19 pandemic finally hit Germany, and almost every sphere of life has been affected by it. Society at large, businesses and the public authorities faced immense challenges and do so even today. Within a few days, the Federal Government adopted a large number of laws and aid programmes. In general, the latter were implemented quickly and unbureaucratically; however, uncertainties as to the extent to which the identified target groups are indeed reached as well as errors and fraud unmistakably show the consequences of a long-neglected digital transformation, in particular the lack of company accounts and the missing matching of registers. Fax-based reporting procedures between public health offices and the Robert Koch Institute (i.e. Germany's Public Health Institute), the lack of home office capacity and, consequently, public authorities with only limited working capacity in essential areas such as citizens’ services offices, building authorities, education (especially schools) and justice complete this discouraging picture. However, it became evident at the same time that rapid modernisation is possible, e. g. the electronic application for short-time working allowance as well as the exemplary and prompt manpower support provided between the Federal Employment Agency and the Federal Office for Migration and Refugees.

Once again it has become evident that the public sector is as systemically important for businesses and society at large today as it was during the refugee crisis. It is now important to draw conclusions from this truism and to place the modernisation of public administration permanently on the political agenda - taking into account that each crisis also offers opportunities: “Never let a good crisis go to waste!” That was Winston Churchill’s maxim which is as relevant today as it was 80 years ago. In this respect, the COVID-19 pandemic could serve as a starting point for establishing a new form of good governance in the 21st century.

Dr Johannes Ludewig Prof Dr Sabine Kuhlmann (Chairperson) (Deputy Chairperson)

Dr Thea Dückert Gudrun Grieser Dr Rainer Holtschneider Prof Dr Conny Mayer-Bonde

Hanns-Eberhard Schleyer Dorothea Störr-Ritter Prof. Dr Andrea Versteyl Andrea Wicklein 1. Legislation and Administrative Practices During the COVID-19 Pandemic 1. Legislation and Administrative Practices During the COVID-19 Pandemic 13

1. Legislation and Administrative Practices During the COVID-19 Pandemic

The government and public authorities at all levels, i. e. the Federal Govern- ment, the Federal States and the local governments, but also the European Union and the international community are facing substantial challenges caused by the current pandemic. Better regulation and bureaucracy reduction are of major importance, especially in times of crisis. Based on its statutory mandate of inspection, the NKR was involved in the coordination of regulatory initiatives to master the challenges caused by the COVID-19 pandemic and its economic consequences. The NKR regards the COVID-19 pandemic as another stress test for the state and the administration. But it is important to draw lessons for future crises and to work very hard on the elimination of identified weaknesses.

1.1 Crisis Legislation and Crisis Management in a Multilevel System (February to June 2020)

Starting in March 2020, the past NKR reporting period (1 July 2019 – 30 June From March 2020, the 2020) was largely characterized by the Federal Government’s measures to Pandemic Largely Dominated contain the COVID-19 pandemic and to absorb the impending weakening the Legislative Agenda of the economic situation.

1.1.1 Measures to Contain the Pandemic and Its Economic Consequences Scrutinised by the NKR

In the reporting period, the NKR reviewed 433 pieces of legislation, 56 of which were draft laws and regulations addressing the pandemic and its social and economic fallout. From March to June 2020, the pandemic was a factor of central importance in the regulatory activity of the Federal Government.

Often, the proposed legislation was adopted upon within the Federal Gov- ernment within a few days. The NKR did not comment on a few very urgent regulations, provided that – from an ex-ante perspective – it had no grounds for objecting to the presentation of compliance costs in the draft within the framework of a short-term review. In the NKR’s view, it was important that Better Regulation Principles the principles of better regulation were observed as well and especially in Also Apply During a Crisis times of crisis: Evidence-based legislation where the objectives, alterna- 14 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

tives and the preferred regulatory option as well as the compliance costs are made transparent and subsequently reviewed in the evaluation context is the basis for efficient and appropriate regulations. Thus, it is possible to identify both effective and efficient political measures and those draft regulations which seem to be less suited with a view to the set objectives and the expected expenses.

NKR’s mandate of inspection Pertinent to the National Regulatory Control Council Establishment Act, it is the NKR’s role to support the Federal Government in implementing bureaucracy reduction and better regulation measures. The NKR scrutinises draft legislation of the Federal Ministries prior to their submission to the Federal Cabinet. In particular, the Council examines whether the compliance costs to the citizens, businesses and the public authorities arising from new regulations are described in a comprehensible and methodically correct manner, and, in addition, looks into the presentation of the other costs to businesses, especially small and medium-sized enterprises. The review by the National Regulatory Control Council can extend beyond the examination pursuant to the Act on the Establishment of a National Reg- ulatory Control Council to include the methodologically appropriate implementation and comprehensible presentation of the following aspects: • plausible presentation of the objective and the necessity of legislation, • considerations regarding other possible solutions, • considerations regarding effective date, time limits and evaluation, • simplification of legal and administrative procedures, • the extent to which further regulations must be laid down in addition to EU standards in the case of the implementation of a directive or other legislative act of the European Union.

Compliance costs are basically the “price tag” on legislation. The term compliance costs embraces the total measurable time and the costs incurred by the citizens, businesses and public authorities as a result of a new regulation. In order to provide the decision-makers and the public with a realistic image, both the continuous, i.e. annually recurrent, and the one- off burdens and reliefs must be presented in a comprehensible manner. These are ex-ante estimates; changes during the parliamentary procedures may also have an effect on the compliance costs. In the context of an ex- post measurement, the Federal Statistical Office reviews the actual costs. 1. Legislation and Administrative Practices During the COVID-19 Pandemic 15

At the end of January, the first regulatory initiative addressing the COVID-19 Many Legislative Initiatives in pandemic made the reporting of COVID-19 infections mandatory. Further a Short Period of Time measures followed from the middle of March. Based on the amended Pro- tection Against Infection Act (IfSG), the Federal Government, in particular, has been granted additional powers, without prejudice to the powers of the Federal States, after the determination of an epidemic situation of national significance to take measures by ordinance or statutory order without the consent of the German Bundesrat to ensure the basic supply of medicines, remedies and medical aids as well as measures to strengthen human resources in the healthcare sector. At first, regulations under Federal law relating to the pandemic mainly addressed health protection and inpatient care, but then increasingly focused on labour and social law aspects as well as tax measures. In addition, Federal State laws, particularly in the area of crisis management and with regard to public life restrictions, account for a very large part of the anti-crisis measures in the federal system of the Federal Republic.

Annual and one-off compliance costs have been identified for 18 of the COVID-19-related regulatory initiatives of the Federal Government. The annual compliance costs, i. e. annually recurrent compliance costs resulting from anti-crisis measures, amounted to 9.9 million Euros from March until the end of June. At the same time, many of the anti-crisis measures resulted Temporary Anti-Crisis in high one-off costs. The reason for this is that they are always limited in Measures Entail High time and, as a rule, they should not entail any costs after the end of that One-Off Costs period. In these cases, the compliance costs are considered to be “one-off”.

other measures Corona-Crisis 3.2 billion Euros 0.8 billion Euros (80%) (20%)

one-off compliance costs from new legislative initiatives in 2019/20

Fig. 4: Share of COVID-19-related regulatory initiatives of one-off compliance costs

A total of 792.1 million Euros in one-off costs was estimated for these measures. 449.4 million Euros of these costs were borne by businesses, 294.4 million Euros by public authorities, and 48.3 million Euros by citizens. 16 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Most of the high one-off compliance costs to businesses in connection with the coronavirus legislation resulted from a few regulatory initiatives, in Costly Temporary VAT Rate Cut particular the Second Coronavirus Tax Relief Act (247 million Euros to busi- – 247 Million Euros! nesses) and the ordinance to increase the supply of medicine for intensive hospital care (115 million Euros to businesses). The latter causes high costs as the hospitals must temporarily increase their stocks of certain medical products from currently two to three weeks for around 30,000 beds in intensive care. The purpose of the Second Coronavirus Tax Relief Act was to tackle the economic impact of the corona pandemic. The high compliance costs mainly resulted from the temporary reduction in VAT, which places a significant burden on businesses due to the required adjustments in the fields of accounting and cash registers (cf. page 81).

In many cases, high one-off compliance costs to the public authorities resulted from material costs for required IT equipment as well as the increase in applications following the limited expansion of social welfare benefits. The Social Protection Package caused compliance costs of 104 million Eu- ros to the public authorities.

Rapid progress in digitisation caused by COVID-19-related measures included in Social Protection Package II The Social Protection Package II was adopted to ensure that labour and social courts and other bodies (e. g. Minimum Wage Commission) were able to work during the COVID-19 pandemic. Proceedings brought before labour and social courts are characterized by the principles of publicity, di- rectness and orality, particularly at the first and second levels. Contact and travel restrictions implemented in spring 2020 significantly affected the operation of the courts and the effective decision-making in commissions’ meetings. The possibilities provided for so far in the procedural laws governing jurisdiction, namely to adopt decisions by written procedure in some cases with the consent of the parties, had proved inadequate in the light of the development of the pandemic because physical participation was no longer reasonable and practicable under the prerequisite of a comprehensive health protection of the persons concerned. Following the amendments of the labour and social legislation, the Social Protection Package II enabled the courts - according to § 5 (1), sentence 1 of the Protection Against Infection Act - to allow the parties involved in an oral hearing to participate from another place than the courtroom if it was unacceptable to appear in person before the court due to the epidemic situation. 1. Legislation and Administrative Practices During the COVID-19 Pandemic 17

In such cases, this Package provides for participation in the hearings by means of video conferencing technology. A rough estimate of the additional costs of telephone conference software for labour and social courts amounted to one-off costs of about 100,000 Euros in 2020. Similarly, during the negotiations in the context of the Declaration of General Application of Collective Agreements or meetings of the Minimum Wage Commission, physical participation was no longer possible. For this reason, Social Pro- tection Package II provides for amendments to the Collective Agreements Act and the Minimum Wage making it possible to conduct meetings and negotiations in a virtual environment.

Crises are often referred to as “the moment of the executive”. This is reflect- ed by the legislative process: A supplementary budget providing financial means amounting to 122.8 billion Euros to tackle the crisis and to offset the estimated losses in tax revenue was adopted at the end of March in an expedited procedure. Shortly afterwards, the Economic Stabilisation Fund Establishment Act provided a legal basis for the stabilisation measures for larger companies.

Economic Stabilisation Fund Establishment Act and associated ordinances On 23 March 2020, the Federal Government agreed upon the draft of the Economic Stabilisation Fund Establishment Act laying down the procedures for the provision of support to larger companies of the real economy. EUR 600 billion were provided for this purpose and are to be used first and foremost as guarantees. The measures apply until the end of 2021 (date of application). It is foreseeable that such high sums of money will imply a huge verification effort for the public authorities prior to and during the support measures. Time-limited one-off administration expenditures were estimated at 56.1 million Euros, which is understandable. We expect that public ownership of equity stakes will cause especially high costs. The administration expenditures will be offset by fees paid by the companies. The precise details are set out in three regulations (ESFEA implementing ordinance, transfer ordinance, cost ordinance). The NKR submitted a generic statement on all regulatory initiatives. In advance, the NKR had ensured that the costs were rendered transparent and evaluations were to be conducted speedily. The NKR asserts that the government must review the impacts of the provisions before the deadline has expired, i. e. in the year 2021. That is why the Economic Stabilisation Fund Establishment Act and the as- The Economic Stabilisation sociated ordinances will be evaluated only one year after they took effect. Fund must be evaluated 18 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

The evaluation is to analyse the extent to which the objectives of economic stabilisation of relevant enterprises of the real economy and of reducing liquidity shortages and the danger of insolvency of these enterprises have been achieved. The respective criteria and indicators comprise the nature, rate and duration of the stabilisation measures used by the businesses as well as their turnover rate and earnings figures over the course of time, or measures taken by them to stabilise production chains. Business reports and balance sheets of the relevant enterprises as well as data generated by the financial agency, the KfW Development Bank or third parties commissioned by the Federal Government for the implementation of the measures are used as an evidence base.

In addition, the Federal Government decided upon a number of measures and programmes without adopting statutory regulations. They include, for example, immediate-assistance programmes but also KfW loan programmes for small and medium-sized enterprises. As “measures below statute level”, they were not subject to examination by the NKR and did not have to be adopted by the Parliament. The NKR analysed these procedures at the level of the Federation and the Federal States with a view to bureaucracy nevertheless.

1.1.2 Immediate Assistance and Interim Aid Procedures of the Federal Government and the Federal States

In order to mitigate the economic consequences of the COVID-19 pandemic, the Federal Government made available financial means amounting to 50 billion Euros in the form of grants to small companies, one-man businesses, freelancers and farmers. After the Federal Cabinet’s decision on 23 March 2020 on the key elements of the immediate assistance programmes, the latter were adopted by the German Bundesrat on 27 March. The Fed- eral States are responsible for processing the applications and paying out immediate assistance. From 30 March, they were able to access the funds provided by the Federal Government.

Postal Correspondence or The Federal States have each established their own procedure for pay- Digital Information Transfer – ing out the federal funds with the spectrum ranging from completely pa- Depending on Federal State per-based procedures to fully digitised processes. Consequently, waits of several weeks were reported, but payments after just a few days as well. Besides the higher efficiency of digital procedures, the different waiting times result from the organisation of the individual application procedures. 1. Legislation and Administrative Practices During the COVID-19 Pandemic 19

With a view to the verification of the entitlement to immediate assistance or the question whether an applying enterprise does exist at all, the examination level differed significantly across the Federal States. According to information of the Federal Ministry for Economic Affairs and Energy, a total of 1.9 million applications was approved and more than 14 billion Eu- ros were paid out (as of September 2020), a large part of which had been paid out already in April and May. As a result, immediate assistance was also paid out to applicants who were not entitled to it. On the one hand, applications were made, due to a lack of clear communication, in ignorance of the precise entitlement to immediate assistance, but on the other hand, they were made with intent to defraud. Some Federal States have launched investigations. It will take some time for us to determine the whole extent of the fraud.

The problems with the application for and the payment of immediate assis- Cases of Fraud: tance are self-inflicted: They result from a long-neglected digital transfor- Long-Neglected Modernisation mation in the public administration. That is why the administration faced Comes Back to Bite the dilemma of offering slow procedures with a considerable examination level or faster procedures with the risk of errors and abuse. In this respect, speed and accuracy would not have been contradictory if the Federal Gov- ernment had done its homework in the field of digital transformation. What we need is a company account containing verified identity information about businesses. It would have been possible to cross-check the data against the registries using an unmistakable corporate identity, i. e. a common business identification number, in order to verify the turnover, staff numbers and other data, where necessary. It should be noted that cases of fraud of a scope as could be seen in the past months would not have been We Need Company Accounts possible using company accounts and interlinked registries. Similarly, pay- and Interlinked Registries ing out immediate assistance could have been more efficient and, in many cases, much faster.

The Federal Government has chosen a different route for the interim aid, the follow-up programme to immediate assistance: Applications can be submitted only through tax consultants, auditors or sworn certified ac- countants. They examine the companies’ entitlement to interim aid – drop in sales and fixed costs in the period June to August 2020 – and then submit the application on behalf of the companies using the nationwide application platform launched on 8 July. This will probably result in fewer cases of fraud, but will imply a time-consuming and expensive procedure and dependence on an improvised intermediate body. 20 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

All in all, the lessons learned from the application for and the payment of financial aid to companies show that there is a dramatic necessity to catch up with a view to digitising the administration and modernising the registries (cf. Chapter 2.1, p. 29 et. seq.).

1.1.3 (Temporary) Bureaucracy Reduction

Vital Flexibilisations And Following the contact restrictions, requirements for physical attendance Simplifications Were Adopted could hardly be met. For this reason, the Federal Government has taken a number of measures to enable enterprises to achieve a high level of flexibility:

• For example, virtual shareholders’ or members’ meetings were made possible – temporary until the end of 2021 – by amendments to the company law (Adverse Consequences of the COVID-19 Pandemic under Civil, Insolvency and Criminal Procedures Mitigation Act).

• A guidance to formulating a motion for amendment regarding the Act on the Promotion of Further Education in Times of Structural Change and the Further Development of Training Assistance – implemented at short notice – made an important amendment to the Works Council Consti- Contact Restrictions Led Drive tution Act possible: As it was mandatory to involve the works councils Towards Digital Transformation in many anti-crisis matters and their effective implementation (such as the introduction of short-time work), the ongoing corona pandemic increased the pressure for action in the field of co-determination. There- fore, a temporary legal basis was established for passing resolutions by video and telephone conference and ensuring the works councils’ quo- rum and capability for action.

• In order to address difficulties in the execution of planning and licensing procedures with public participation, the Federal Government has ac- cepted the publication pf plans on the Internet by means of the draft Act to Ensure Proper Planning and Licensing Procedures During the COV- ID-19 Pandemic. As a matter of principle, documents or decisions to be laid out to public inspection may now be published on the Internet. Fur- thermore, hearings can be replaced by online consultation. These measures are initially time-limited until the end of March 2021. 1. Legislation and Administrative Practices During the COVID-19 Pandemic 21

The NKR judges that synchronising the temporary limitations as much as Critical Question Today: possible would have made sense. However, the relief and flexibility meas- Which Simplifications Can ures granted are an important starting point for cutting bureaucracy and for Remain in Force Permanently? accelerating procedures. Thus, it is important to verify whether temporary measures can remain in force permanently before they expire.

In addition to digital transformation measures, a range of procedural simplification measures were adopted to allow the economy to operate smoothly and to give businesses some flexibility. As to the turnover tax, for example, administrative orders made it possible to transfer back special advance payments in an unbureaucratic fashion, thus providing more liquidity for businesses.

Moreover, the possibilities of granting tax deferrals or reducing advance payments were widely used by the public administration. The latter was also instructed not to impose fines in the event that enterprises cannot meet their obligations, e. g. to make statistical declarations, owing to the crisis.

The NKR has pointed out for many years that the positive effects of burden relief and flexibility measures with regard to businesses' statutory obligations and public service processes for businesses are underestimated. The Cutting Red Tape – NKR believes that this crisis must be the motivation for a comprehensive an Economic Stimulus Package bureaucracy reduction programme. On the positive side, however, the Fed- at Zero Cost eral Government has now agreed to adopt a new bureaucracy relief package. The NKR will be involved in an advisory capacity. As early as May 2020, the NKR had published some proposals for an “Economic Stimulus Package at Zero Cost”.

1.2 The COVID-19 Pandemic – a New Stress Test: Draw Lessons for Future Crises

The current crisis shows that there is still a huge need for modernisation throughout the public administration. Based on its review and advisory mandate for the modernisation of the legislation and administration, the National Regulatory Control Council comes to the following findings and conclusions: 22 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

1.2.1 Modernise the Reporting Channels Between Authorities

The crisis management of the COVID-19 pandemic is in need of up-to-date and reliable data on the infection status. Decisions that will significantly af- fect the health of the population and the entire business sector are based on that data. With a view to the speedy spread of the virus, each day matters. Therefore, it is curious that the reporting chain between municipal public Germany in 2020: health offices and the Robert Koch Institute is still based on fax equipment Public Health Offices in many cases. Data from the public health offices thus cannot be transmit- Report Data via Fax! ted without media discontinuities or in a machine-readable form. As a result, there are delays and transmission errors. Furthermore, this is a burden on staff members who are needed more urgently elsewhere. A nationwide digital reporting system should have been available ages ago. Necessary modernisation measures were initiated years ago, but their implementation has been delayed again and again – not least due to coordination problems in the federal context. Originally, the nationwide introduction of the Ger- man electronic reporting and information system for infection protection (DEMIS) was planned for the end of 2020. In the meantime, the completion of the system has been announced for 2022.

Simultaneously, the Federal Government is promoting the “IMIS” (Infe- ktionsmelde- und Informationssystem – infectious disease reporting and information system) which has been established in the framework of the hackathon “WirVsVirus”. In addition to that, the Helmholtz Centre for In- fection Research has developed the “SORMAS” (Surveillance, Outbreak Response Management and Analysis System) software which provides functions for a structured outbreak response management. Although this system has been made available free of charge, it is used only by a few local governments. In the eyes of the NKR, these projects, which complement each other in many ways, must be linked and completed rapidly. Right now, arrangements between the Federal Government, the Federal States and the local governments should be made on how to roll out, provide IT support for, update and further develop the solutions throughout Germany.

It can be said in general that this is – following the refugee crisis during which there were similar difficulties in collecting and exchanging data – another example of poor information exchange between all state levels during an emergency. The COVID-19 pandemic will not be the last crisis in Germany. However, efficient cooperation between many authorities is necessary in each crisis situation. 1. Legislation and Administrative Practices During the COVID-19 Pandemic 23

In order to be prepared for the next crisis, the data exchange between authorities must be systematically examined. We have to find out, for example, in which procedure fax equipment or first-class mail is still used or even prescribed by law. In a second step, all analogue transmission channels be- Bold Modernisation of tween authorities must be adapted to digital, machine-readable procedures. Interagency Reporting After years of inaction, the consequences have taken many forms. In this Channels Is Necessary! respect, due attention must be paid to the modernisation of public services in order to be ready for the next crisis.

1.2.2 Crisis Management in a Federal System

The German federal system was a challenge to the crisis management during the COVID-19 pandemic: The containment of the corona virus is the responsibility of the Federal States. This is why the allocation of coronavirus immediate assistance was organised in different ways by the Federal States; general measures to contain the pandemic were sometimes quite different.

With a view to purely local pandemics, this can definitely be appropriate – in that case, the relevant regional or Federal State level concerned is the right place to arrange for the appropriate measures to be taken. The advan- tage of taking local decisions is that actors elected for a certain region or a Federal State do not wait for their “head office”, but take political responsibility for their own actions and are genuinely interested in good decisions.

All in all, the federal crisis management is based on voluntary self-coordination. However, according to accounts received clarity, practicability and consistency of the regulations issued by the Federal States – and their joint interaction – did not always exist. In this respect, complying with different distance and hygiene rules was a challenge to enterprises operating Corona Regulations Issued in several Federal States. Companies based in regions bordering on other by the Federal States: Partly Federal States could hardly understand why they had to close their busi- Insufficiently Harmonised… nesses whilst their competitors a few kilometres from there were allowed to remain open. More consistency would have been helpful to manage this situation .

In addition, the speedy adoption or amendment of regulations for the containment of the pandemic was a challenge to public order offices and public health offices when it came to their implementation. Even in normal times, repeated legislative changes involve considerable effort – in times of …or Difficult to Implement crisis, this problem is even more compelling. Due to Quick Changes 24 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

The NKR considers it therefore necessary – following the crisis – to systematically verify the existing crisis management structures by means of scenar- ios. They must include the responsibilities of the Federal Government in a crisis situation, but also harmonised and compatible crisis and management Critical Review of structures at the Federal, Federal State and municipality levels. The eval- Federal Crisis Management uation of crisis management should take into account both the changed Structures expectations on transparent communication when dealing with the public and new means of communication and new channels for obtaining information through social media. Both present challenges to managerial staff in times of crisis.

Furthermore, it turned out that the public health service must be assessed in order to prepare it for other crisis situations. This does not only concern insufficient funding/equipment, but also staffing: While medical expertise is indispensable for the routine operation of a public health office, it must be supplemented by organisational and leadership competencies in a crisis situation.

Equally, it should be examined how the Federal Office of Civil Protection and Disaster Assistance (BBK) can be involved even more than before in the operational processes of general crisis management in addition to its current tasks. The well-funded/-equipped Federal Office of Civil Protection and Disaster Assistance has had no operational role during the COVID-19 pandemic.

1.2.3 Ensure That the Public Administration Can Do Its Job

The working capacity of parts of the German public administration was very limited as a result of the negative impact of the pandemic: It was not possible to grant building permits, continue planning procedures and register motor vehicles. The judicial sector as well could provide only a small proportion of its capacity, which led to delays in judicial procedures and negotiations.

There are two reasons for this: Making judicial procedures work digitally is still almost impossible. On-site appointments are mandatory which, in turn, were not always possible as a result of the contact restrictions. At the same time, not all of the tasks which could have been performed in home Insufficient Home Office office could be carried out due to the lack of sufficient technological -re Capacity in the Public Sector sources (among other things, end devices, video and telephone conference 1. Legislation and Administrative Practices During the COVID-19 Pandemic 25

systems and cryptographically protected VPN tunnels). For example, only a fraction of the administrative personnel in Berlin was fully operational in parallel in home office. But elsewhere, too, public infrastructures were not prepared for the region-wide use of home offices.

Therefore, the COVID-19 pandemic illustrates the necessity for the public administration and the judicial sector to migrate, even more than before, to digital – and where appropriate – automated procedures. The procure- On its Own, Technology ment of mobile end devices alone is not sufficient; what we also need are Is Insufficient – managers who are capable of “managing at a distance” and who recognise Mainstreaming Work via Home the necessary change in culture as a task to shape the future. This has to be Office Needs New Leadership ensured as soon as possible with further education in all relevant areas of Qualities the administration. In this respect, increased home office capacities serve not only to withstand crises of the public administration. Study results show that large numbers of businesses are planning to increase the home office capacity for their own personnel after the COVID-19 pandemic. For this reason, the public administration must establish itself as an attractive employer and take into account changed expectations on modern working methods for (future) personnel. With a view to the imminent “wave of re- tirements” in the public service, these issues will become much more important.

In spite of justified criticism, there are also examples of successful flexibility in terms of personnel and technology to ensure the operational capability of authorities: For instance, staff members of the Federal Office for Mi- gration and Refugees (BAMF) have provided assistance to the Federal Em- Exemplary Cooperation Between ployment Agency (BA) in processing the large numbers of applications for the Federal Employment Agency short-time working allowance. This was possible by means of the existing and the Federal Office For compatible IT infrastructure even without physically changing the place of Migration and Refugees work. Similar arrangements and technical provisions should also be made in other areas in order to handle sudden increases in applications. 26 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

1.3 Sustainable Modernisation Requires a Sparring Partner: “Modern Administration” Initiative

The COVID-19 pandemic clearly shows that a well-defined policy and an efficient, modern administration are indispensible for the proper functioning The State and Public Services of the state, the economy and society. At the same time, challenges regard- Are Facing Mounting ing organisational structures become evident which must be addressed by Challenges systematic and ongoing reform efforts beyond acute crisis management:

• Resilience and capability for action in times of crisis: In a networked world, crises quickly have global consequences. The COVID-19 pandemic is the fourth large-scale emergency situation of the past decade following the financial, Euro and refugee crises. It will not be the last crisis, and Germany will continue to be challenged in particular since its prosperity is primarily based on exports and its important role in Eu- rope and worldwide which is founded on openness and networking. For- ward-looking and fact-based governing as well as an efficient, stable and digital administration are required for an effective crisis management. This is fundamental for the state’s capability for action and the well-being of its citizens.

• Efficient governing and a good administration are site factors and ensure our prosperity: Germany will not be able to maintain its prosperity in global competition without a well-equipped administration. An efficient and digital administration avoids unnecessary burdens on the citizens and enterprises and is an essential contribution to bureaucracy reduction. It presents a site factor.

• Good legislation and citizen-friendly implementation are the hall- marks of the state: The public administration is a direct point of contact between the citizens and businesses and the state. A poor performance of the administration results in lower satisfaction values and less acceptance of the entire political system. Therefore, effective and practical laws and a modern, well-functioning administration make it much more difficult for populists and protect the liberal-democratic basic order of our state.

• Modernisation of the administration and digital transformation go hand in hand: Digital tools make it possible for the administration to shape its structures, processes and offers in an entirely different way. At 1. Legislation and Administrative Practices During the COVID-19 Pandemic 27

the same time, digital transformation can achieve its full potential only if the legal and organisational bases are reviewed and made suitable for digital transformation. The aim must be to foster digital transformation rather than simply “electrifying” it.

• Turn the crisis into an opportunity: In order to ensure long-term success in crisis situations, the global competition between different systems and in routine political business, policy makers will have to pay more attention to the “strenuous structural issues”. They will not always be able to deal themselves with these issues, but the administration cannot be left on its own to carry out these functions. They must find a way for an effective, institutional establishment of these important cross-cutting Lobbyist for the Modern State: issues – because the modernisation of the state and the administration Set Up an Independent Panel must have a permanent lobby. of Experts

We should, therefore, use the momentum from the crisis and the resulting opportunity for modernisation, to launch a “Modern State – Modern Administration Initiative”, at the core of which could be an advisory expert panel exercising its review mandate. It could deal with the structural issues of the modernisation of the state and the administration, irrespective of the day-to-day business and the intrinsic logic of the administration.

This panel – as the generator of creative ideas – should support the Fed- eral Government in drawing conclusions from the COVID-19 pandemic. It should be a critical supporter and the driving force for the resulting modernisation efforts. Thus, it should be provided with a general mandate in order to drive the continuous and ambitious modernisation process. For example, ambitious objectives and blueprints for the year 2030 should also be established as soon as possible in order to take the proper steps with a view to developing organisational structures and staff. Concrete information should be provided by a system consisting of audits and stress tests of the relevant authorities. The efficiency of the public administration would thus be checked on a regular basis and compared with the target standard of a modern, digital administration. In doing so, the panel could directly communicate with the administration – aiming at proposing improvements to existing strengths of public services and to address the main weaknesses in the system which the crisis has laid bare. The aim is to remedy them before the next crisis hits, or before festering everyday problems and deficiencies at the Federal, Federal State and municipality levels will lead to a crisis. 2. Better Regulation and Bureaucracy Reduction 2. Better Regulation and Bureaucracy Reduction 29

2. Better Regulation and Bureaucracy Reduction

Given its legal mandate, the NKR advises the Federal Government on cutting red tape and on the digitital transformation of the state and public services.

2.1 Status of Digital Transformation in Government and Public Administration

From the “WirVsVirus” hackathon through the “Corona-Warn-App” to express digital transformation laboratories for online applications for reimbursement of loss of earnings and new interim aid procedures, there are many encouraging examples of a fast and good digital transformation process throughout Germany when political will meets with convertible structures Crisis as an Opportunity for and digitally savvy staff. In this respect, this crisis is both a warning and an the Digital Transformation in opportunity. The implementation of the Online Access Act (German acronym: Public Administration OZG) and the digital transformation of public administration might receive an additional boost from this crisis. A 3.3 billion Euros stimulus package provides extra leverage to attain the OZG implementation and the modernisation of registries. This is a reason to be hopeful that Germany will be able to turn itself around and drive its digital transformation. First signs of a more positive trend are indicated by the EU's current Digital Economy and Society Index (DESI) showing – compared with the sobering 2019 statistics – an increase of 6 per cent in Germany. If Germany is willing to sustain this trend, it will have to do much more at the second stage of the OZG implementation. Above A Strategy Above and Beyond all, however, it must come up with a digital transformation strategy above 2022 Is Essential and beyond the confines of the “current emergency situation” created by the OZG implementation deadline, which 1) ensures transparency and gives clear orientation, 2) enables an IT solution landscape which is agile, innovation and competition friendly as well as highly standardised and 3) systematically Digitale Public ensures an enforceable and digitally friendly legislation. The following con- Administration siderations and further details can be found in the “Digital Administration Monitor #4 Monitor” which is regularly published by the NKR. (only in available German)

2.1.1 Mid-Term Review of the Online Access Act

We need transparency about the implementation status of the Online Ac- We Need More Transparency cess Act and we must never lose sight of this goal. The Online Access Act About the State of Implemen- is scheduled to be implemented by the end of the year 2022. It must be tation... 30 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

recognised that Federal Government, Federal States and local governments have shown considerable commitment in the implementation of the Act. It is important to note, however, that results – which go beyond planning and individual local reference implementations – are not yet available at the mid-point of the OZG implementation period. The central OZG information platform, at least, cannot provide the transparency required about which of the approximately 600 public services throughout Germany considered to be relevant have reached the necessary level 3 of maturity (i.e. offering an online procedure which is free of media discontinuities, includes digital certification and a return channel).

…Because Only Transparency Due to the lack of transparency, it is difficult to estimate the overall imple- Helps Local Governments to mentation status of the Online Access Act, and to know whether corrective Locate Critical Information. actions, if any, are required. There is no single point of truth – neither for the responsible branches of the Federal Interior Ministry, the Federal Chan- cellery, and the Ministries of the Federal States nor for the implementing agencies, notably at the municipal level. In addition to the informationsplat- tform.ozg-umsetzung.de platform, there are three other platforms (onlinezugangsgesetz.de, ozg-kommunal.de and kgst.de/kommunect) which local governments can use for information and exchange. As a result, the local governments cannot get their information from a single platform and assess which solutions from the digital transformation express laboratories will be available for online applications, or when and how these might be expected to be available. Local governments need a single news source on how to best prepare themselves to adopt solutions (interface specifications, operating modes, license terms) or where they should develop their own solutions. Thus, the transparency problem has become a problem of orientation and the orientation problem has turned into a problem of implementation.

How to Achieve Nationwide The central problem of the OZG remains unresolved: rapid implementa- Coverage Fast Remains the tion must be ensure throughout the country. The NKR has concerns about Unresolved OZG Puzzle statements by the responsible politicians saying the OZG would not be implemented by the announced date and what mattered was not the number of services as long as the services of importance were online. While this may apply to some services, for the time being, it is not even clear whether priority 1 and 2 services will be online in time throughout Germany. The OZG does not imply any personal legal entitlement to online services, but the Single Digital Gateway Regulation, the EU’s OZG, does. This regulation must be implemented by the end of 2023. Then, at the latest, citizens will be allowed to claim their right to digital public services. 2. Better Regulation and Bureaucracy Reduction 31 11.000 local governments

Chancelleries Federal States Federal Minister Presidents Minister Conferences of Ministers of Conferences Heads of the Federal State the Federal of Heads Federal and State-level CIOs and State-level Federal e.g. Conferences of Interior of Conferences e.g. Local government associations government Local Länder & local governments Länder Ministerial Conference of the of Conference Ministerial Ministers, Economics Ministers Economics Ministers, 294 counties,

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Fig. 5: Authorities in charge of digital transformation in the public sector - will it work? 32 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

2.1.2 Reduce Complexity and Standardise in a Competition-Friendly Manner

Money Is Not the Solution to With a view to the uncertain prospects of success it is not surprising that Every Problem the German government wants to speed up the implementation of the On- line Access Act (OZG). The government provides 3 billion Euros from the coronavirus stimulus relief package and another 300 million Euros for the modernisation of registries. This is an important indication of political will – but more money is not enough to make a success of the OZG. At least, based on the current approach, it is only possible to achieve a moderate acceleration because the resources are limited both at the administrative level and on the manufacturers’ side.

Reduce Complexity – It is much more important to reduce the complexity of the OZG implemen- Standardisation Is the Key tation than to increase the funds. One condition of the coalition decision is therefore that the sum of 3 billion Euros must only be used in areas where a collective or central development of solutions can be achieved (one-fits-all solution). This is coupled with the hope to find a solution for all more quickly than to reinvent the wheel again and again. This approach is a tempting one; however, it involves two challenges:

• On the one hand, solutions can only be used everywhere when they can technically be operated on site or as a (web-based) cloud service and are compatible with the local system landscape or specialised procedures. At the same time, one-fits-all solutions must remain compatible in the long run and be able to adapt to the changing needs on site. While it can be expected that not all individual functional software requirements evolved over the years must be met, it is still difficult to image that one single solution always fits all users and all needs. This is why a “some-fit- many” approach would be more effective.

Avoid Dependence on • On the other hand, and that is the more serious argument in the long one Single IT Service Provider term, the pooling of solutions must not lead to a quasi-monopoly or quasi-oligopoly provider landscape and to long-term dependencies on only one or a few providers. Diversity and competition guarantee that a provider landscape characterised by medium-sized businesses and aug- mented by start-ups can permanently offer cost-effective, innovative IT solutions based on actual requirements. 2. Better Regulation and Bureaucracy Reduction 33

In order to be able to “tolerate” diversity and to ensure the transferability Without Standardisation, and combinability of solutions, we therefore must establish a much more Modularisation and Open In- higher degree of standardisation/modularisation and encourage greater terfaces, (Almost) Everything use of open interfaces. Else Is Useless!

What we need is a standardisation procedure under governmental authority which must be adhered to in each software development on behalf of or by the public sector. Even if a one-fits-all-application turns out to be the best solution for a specific need, replaceable modules should be used and the highest degree of open standardisation be implemented. This is the only way to minimise lock-in effects, to keep the obstacles to market entry low and to maintain competition pressure.

This approach could be further improved by a wider use of open software and the systematic promotion of development communities which collec- tively maintain and develop the open source code.

The recently published service standard for the implementation of the On- line Access Act (OZG) already contains a number of recommendations in this respect. It should be further processed and become the binding framework and quality assurance standard for public software development.

34 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

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Open standards must be used for the implementation and 1 and assessed. They constitute the basis for the conception and 12 operation of the digital services. design, realisation and operation of digital services offered by the public sector. directly involved. The source code from the realisation of digital public services 13 (proprietary development) is made available as Open Source, i.e. in a re-usable form free of charge with options for modication. 2 acceptence from service users. They guide service users to the desired result by providing a clear structure and additional . 14 realising a new component. 3 language wherever possible. TECHNICAL OPER ATION

4 once. Step by step, documentary evidence will be replaced by . 15 operation. There are support concepts for possible incidents and failures. 5 services, security arrangements for their protection will be The interoperability of components is ensured via common authorities will be secured by intermediaries and logged in the 16 standards, dened interfaces and compatible architectures. . The evaluation of the technological modernity of digital 6 17 services becomes an integral part of operational processes. service instead of the paper-based procedure.

IMPACT MO NITORING APPROACH The impact of digital public services will be measured 18 anonymously on the basis of the intensity of use and user 7 centred, simple and efcient digital solution, they will be satisfaction. The results will be published in order to achieve more transparency. They will also be provided in machine- suitability of the regulations. readable form.

provided by the public administration are The evaluation of user satisfaction with the digital public 8 designed, drafted, realised and continuously developed with 19 services is becoming an integral part of operational processes, agile and iterative approaches and with user-centric methods so so as to deduce improvement measures constantly and for as to remain innovative and user-friendly in the long term. future developments.

9 performance descriptions can be found and online services can You can nd more information at: www.onlinezugangsgesetz.de

trust-based, cross-level and interdisciplinary collaboration, also with players outside of public administration, constitutes Supported by: 10 the basis for user-oriented and fully digital services of the public sector, regardless of specic responsibilities.

11 pursued. Support offers for their formation and funding are services.

Fig. 6: Service Standard for the Implementation of the Online Access Act (OZG) 2. Better Regulation and Bureaucracy Reduction 35

In order to reduce complexity and to accelerate any implementation sce- Easier Transfer of IT Solutions nario, technical standardisation and simplification must be accompanied Between Public Authorities Is by similar measures concerning the contracting regulations. The concept Essential of an exchange platform for IT solutions (FIT Store) as acknowledged by the IT Planning Council pursues that approach. This means: There must be a possibility to pass on completed solutions from one authority to other interested authorities. This ought to be an in-house process, that is, without a separate award procedure. In doing this, we are accepting to curb free competition in this specific case.

So far, the concept does not include a technical standardisation. There is Standardisation Enables reason to fear that the FIT Store in its present design runs the risk of en- Diversity & Innovation-Friendly couraging just those closed structures that we are trying to avoid. However, Competition the approach of a solution-distribution and/or procurement-facilitation platform is just right. It is the right means to reduce the complexity of the OZG implementation process and to allow variety and innovation at the same time. Such a platform offers a simple orientation as to which solutions are available in which shapes and under which conditions. It ensures that the solutions meet the given standards and are thus highly compatible.

In addition, it facilitates the procurement and/or reuse of good solutions without curbing free competition by admitting all providers who comply with the technical specifications, the digital service standard and the platform guidelines. Such a platform would make it easier for startups to get better access to contracting authorities. Even if the necessity to implement the OZG in due time has now forced us to find a quick solution for everyone, we should simultaneously make every possible effort to conceive the An App-Store for Public Services FIT Store in such a way that the described platform will be available as soon Can Support Good Solutions as possible.

The same applies to the creation of a standardised, complexity-reducing operating environment, that is, a service and development platform for whose standard interfaces all OZG applications are to be programmed. In order to initiate that development, we need a quick decision which architecture is to be pursued together. Terms like administration cloud or platform federation point to the right direction. With FIT Connect (= digital architecture which allows the fast and simple integration of applications for digital public services from the OZG services catalogue), a first component is being tested. Out of the 3 billion Euros, 500 million Euros should go into the rapid development of the solution marketplace and the service platform. 36 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

2.1.3 Digital Certification Inspection: Make Legislation Easier to Enforce and More Digital-Friendly

Legislation Must Be More Digital transformation starts with draft legislation – we must improve the Digital-Friendly enforceability and digital suitability of our regulations, and check new draft rules methodically by means of a digital certification inspection. It is a well- known truism that digital transformation can achieve its full potential only if digital procedures are not an exact copy of analogue procedures. So far, this potential has been exploited only to a limited extent. It is one of the challenges of the OZG digital transformation laboratories to identify requirements for organisational and legal changes as well.

However, we are following the pragmatic approach of doing without legal changes in order to digitise faster. In the meantime, some 40 requests for legal changes have been gathered. So far, the willingness of the lead ministries in particular to put through legislative measures seems to be rather limited. The amendment of the Registration Act and the Law on Digital Family Benefits are the only regulations which provide for facilitations for digital implementation. However, the introduction of the latter took much longer than planned. The long road from the laboratory to a digital-friendly regulation still seems to be very long indeed even though requirements for useful changes have been identified.

Yet, an exemption made by the Bavarian Ministry of Transport shows very well what should be considered much more frequently: In order to register, de-register or re-register a vehicle more easily during the Corona virus restrictions, it was decided that it was sufficient to enter the name and the Simplified Access to Vehicle password only. So far, the vehicle registration online procedures required Registration Online an electronic ID card and an ID card reader. As a result, the use of the ve- – a Resounding Success hicle registration online procedures in Bavaria has surged nineteen-fold. This exception should become the rule, both for the vehicle registration online procedures (the Federal Ministry of Transport and Digital Infrastruc- ture ought to implement this exemption nation-wide) and with respect to the rapid and wide-ranging implementation of proposals for legal changes from the OZG laboratories.

The same applies to the registry modernisation act which continues to be due. The compromise decision of the Coalition Committee must be rapidly implemented now, otherwise the legislature would end without any result. That would mean another lost four years! 2. Better Regulation and Bureaucracy Reduction 37

Practicability and digital suitability of regulations are important not only for Digital Certification Inspection the OZG implementation. They are marks of quality of any good legislation. – as a Mandatory Scrutiny For this reason, the Digital Certification Inspection that has been proposed Requirement for All Draft several times ought to be introduced still in this legislature. Already in au- Legislation? tumn 2019, the Cabinet Committee for Digital Transformation had awarded a contract for the execution of two pilot projects. So far, none of them has been carried out. In the eyes of the NKR, a Digital Certification Inspec- tion should be introduced even without a pilot project. The Danish model shows how it works and how useful “digital-ready legislation” is.

Political Will/ Binding Nature

Lack of a common vision at Federal, Länder and local governments for E-Government Compact for Germany a modern, digital public service joint & another €3 bn New State Treaty is Digital Service Standard Digital exible from Federal New

ratied, Innovations are Operation/ Security/ IT Service Management released (now Service Funding Government State make it mandatory) limited to FITKO Standard Political Treaty Germany Improve political Leadership from governance & on IT BKAmt & MPK monitoring Attempts at innovation noticeable more professional work, but there is no efcient organisation but stronger leadership of the digital transformation necessary Independent New Quality IT Planning Council Organisation more willingness of Federal to cooperate, Innovation Collaboration but stagnant FITKO launched, Lab Accelerator FITKO but still not sufciently able to act Topic laboratories, Digital Service 4Germany (money/ stafng) and DIT bring Innovation & Acceleration Systematic Digital Transf. Service Platform Federal digital transfor- composite platform mation projects under way, of „Life-Situation“-based for Citizens unravels, user -

Innovation/ Development/ Acceleration Development/ Innovation/ national coverage unclear Public Services and Businesses friendliness at risk

modernisation of registries launched, lack of coor- Federal E-Government Infrastructure dination, success unclear

Standardisation insufcient, architecture issues unresolved, Federal Architecture Management lack of technical platform / app store

Standardisation/ Consolidation

Fig. 7: State of Implementation of the digital transformation in public services compared with the recommendations of the NKR Expert Report “eGovernment in Germany: From Descent to Ascent” 38 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

2.2 Content First, Legal Text Second: Effectiveness and Practicality of Legislation (NKR Expert Report 2019)

The vast majority of legislation adopted by the Bundestag is based on legislative initiatives of the Federal Government, which are prepared by the ministerial administration. Thus, the internal government procedure for preparing new laws has a significant influence on the contents and the quality of future regulations.

In many cases the preparation takes place under conditions which have a negative impact on the effectiveness and practical suitability of the regula- NKR Finds More and More tions: While examining the regulations, the NKR often finds political speci- Shortcomings in the Federal fications that do not take into account the complexity of the subject matter Government’s Legislative Drafts or its practical enforcement. These regulations then become more or less acts of “symbolic legislation”. So in the case of the government draft for the Amendment to the Land Transfer Tax Law the Federal Government was not able to show how and to what extent the envisaged regulations were implementable in practice and effective. Extremely short deadlines lead to drafts that are quickly and sloppily thrown together. This also affected politically important measures such as the implementation of the decisions of the “climate package” in autumn 2019 (for more examples, see Part 3.1.2 as from p. 66).

In addition, there is no culture of cooperation with other knowledge holders, for example, with scientists and experts but, above all, with persons with practical experience. When the Basic Pension was introduced, administrative expertise was obtained but the resulting proposals remained un- exploited (see box on p. ) As a result, there is an increase in the number of regulations which in some cases are without effect, inconsistent or too formal to be practical or suitable for digital transformation.

Poorly drafted legislation that is cumbersome to enforce is a burden on businesses, obstructs the capacity for action and the efficiency of the administration and diminishes the satisfaction of citizens and enterprises with the government. Things that are just frustrating in individual cases, may on the whole have negative effects on Germany as a business location and the acceptance of the political system of the Federal Republic of Germany. 2. Better Regulation and Bureaucracy Reduction 39

Conversely, this means: Good legislation is a decisive prerequisite for efficient governing, social and economic prosperity and the continuing acceptance and stability of our political system. In view of the importance of this issue, in 2019 the NKR submitted an expert report with practice-oriented NKR-Expertise: proposals for the advancement of the legislative procedure at the Federal "Content First, level. Based on the approach “Contents first, Legal Text Second. Designing Legal Text Second" Effective and Practicable Legislation.”, the report describes a new standard procedural model (Cf. Fig 8, p. 40) with the following core ideas:

• Evidence basing and effect models: The political level just ought to give the objective of a regulation (objectives paper) without specifying any concrete measures and instruments, thus giving the ministerial level Set Political Objectives – enough scope to first gain a deeper understanding of the cause-and- Gain Latitude for Practical effect relations before an efficient control and regulation concept can be Implementation developed on that basis.

• Implementation models and digital certification inspection: In order Consider Implementation and to realise the practical and digital implementation of one or several al- Digital Application ternative impact models, an implementation model with process pres- From Day One entations and decision trees ought to be developed, for instance, with the support of the Federal Information Management (FIM) programme, and their digital suitability ought to be verified by means of a digital certification inspection.

• Checks for effectiveness and practicality: Impact and implementation Seek Input From Expert models ought to be discussed with regulatory addressees and imple- Practitioners in Good Time mentation experts at a very early stage. For this purpose, the laboratory formats that have proven useful in the OZG context should be used. Such legislation laboratories enable agile, informal, interdisciplinary and addressee-oriented work based on the principles of design thinking and user orientation.

• Content first, legal text second: As a result of this content-related Discuss Contents Before Legal preparation, an easily understandable draft paper ought to be drafted as Draft an extended key issue paper and be presented to a wider circle of potential addressees before the ministerial draft will be prepared on the basis of an agreed concept. 40 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Modify GGO – Legislation • Institutionalisation of a new standard procedural model: Provided Drafting Procedures Are in with adequate time periods and sufficient binding character by means Need of an Update of modified Joint Rules of Procedure of the Federal Ministries (GGO), the regulation preparation process adapted in this way ought to be subject to a systematic quality control at the end of the procedure and be facil- itated by intuitive tools, in particular eLegislation. This working method could be supported by more diversification in the personnel selection in order to form interdisciplinary teams and by an appropriate personnel development with a training and development campaign for legists.

New Standard Procedural Model NEW new format/tool Fig. 8: ADAPTED rened format/tool New standard procedural model for NEW Handover to Objectives Paper Objectives the ministerial preparation of ministerial Paper regulations (NKR proposal) administration support during the entire process Draft Legislation Trained eLegislation by the Ministry Legist

NEW NEW Norm Legislation Laboratory Effectiveness Test (supported by the “effective government” unit) Addressee solution-oriented Norm Norm exchange Practicality Test, Addressee Enforcer Norm Digital Certication Enforcer NEW

Key Issues Paper Draft Key Issues Paper ADAPTED

Intra- and Interministerial Coordination Norm (Cabinet Adoption) Addressee

Key Issues Norm Paper Agreed Enforcer Editorial Panel Key Issues Paper ADAPTED

First support at the drafting stage Legal Draft First Legal Draft Norm Norm - Intraministerial Clearance Addressee Enforcer

written opinion, Interministerial Clearance minimum of 4 weeks 1

Ministerial Draft Ministerial Draft

checks in the course of the internal legal review Internal Legal Review

Neutral Quality Control Quality Control for all Criteria ADAPTED

Parlamentary Cabinet Adoption Consultation and Adoption Ministerial Draft Government Draft

1 Referral to the associations must continue to be done in accordance with the specications of the GGO. A minimum consultation period for comments must be added. This referral does not ecessarily have to take place in parallel and may only take place after the Ministerial Draft has been prepared. 2. Better Regulation and Bureaucracy Reduction 41

The NKR Expert Report follows the 2018 work programme for Better Leg- islation and the Reduction of Bureaucracy of the Federal Government. With this programme, the Cabinet had tasked the working level in the ministries Test Practicability & explicitly with checking the practical suitability and effectiveness of a regu- Effectiveness Jointly With lation idea first in discussions with the norm addressees “before draft texts Norm Adressees are written in detail and finalised”. The NKR has similarly found that there is need for action. At the same time, the advancement of the legislative process was turned into a permanent innovation task.

The work programme itself and the recommendations in the NKR Expert Report offer the necessary approaches and basic information. Looking at this information in conjunction with the valid regulations of the Joint Rules of Procedure of the Federal Ministries, it becomes apparent quickly that it is not required to "reinvent the wheel". On the contrary, it would suffice to form the approaches that were established in the Joint Rules of Procedure of the Federal Ministries no later than 2011 but were never developed and to apply them in each individual case. For this purpose, the NKR has prepared a working paper for the Federal Ministries (for core messages see Annex 4.1).

There are already some good practical examples. So, for example, before the First Pilot Projects Confirm legal reform of the construction contract law, the Federal Ministry of Jus- NKR Recommendations tice and Consumer Protection had set up a working group with all relevant stakeholders which identified the regulatory requirements and developed solutions. A similar approach proved its worth during the reform of the part- nership law. The NKR itself applied this procedure successfully during the development of the notary platform eNoVA. However, these positive examples are but a few individual cases. The permanence of innovation called for in the work programme must be brought about as soon as possible.

In order to create more impetus in the spirit of “Just do it”, the NKR has proposed a pilot project to the Federal Government in order to systemise the new standard procedural model. For this purpose, the NKR has entered into a cooperation with the Federal Ministry of the Interior in order to test some proposals from the Expert Report in practice. In the framework of the overall project for the advancement of the Central Register of Foreigners, the instruments objectives paper, legislation laboratory, visualisation, effectiveness and practical suitability check, digital certification inspection as well as the extended key issue paper will be tested. The experience with the practical application of the recommended instruments will be evaluated and published by the end of 2020. 42 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

On the occasion of the NKR mid-term stocktaking conference, the NKR turned in the report to Vice Chancellor Scholz on 22 October 2019. During the ensuing panel discussion, the recommendations of the NKR met with a positive response, in particular concerning the increased orientation towards the suitability for implementation and the objectives of a project. In the meantime, the approach of the NKR was particularly appreciated in the Parliament and was mentioned in the chapter “The Learning State – New Legislation” of the book “New State – Politics and the State Must Change” by the Members of Parliament Nadine Schön and Thomas Heilmann.

2.3 Better Regulation and Bureaucracy Reduction Initiatives at the Federal Level

The NKR sees progress in the Federal Government’s efforts to strengthen the orientation towards procedures and methods of better regulation. This applies, above all, to the concept for evaluating material legislation. At the same time, it is encouraging that the Federal Government discusses possibilities of limiting the one-off costs (one-off compliance costs) and improving transparency about the regulatory impacts by presenting not only the costs but also the benefits of a regulatory initiative. The State Secretaries in the responsible committee have taken new decisions on these topics. To- Important Decisions on wards the end of the year, the Ministerial Conference of the Federal States Better Regulation will also deal with additional methodological issues and specific measures for bureaucracy reduction. The NKR has submitted concrete proposals for relieving businesses in the ongoing crisis situation to the Federal Govern- ment (see paragraph 2.3.5 from p. 52).

2.3.1 Further Development of the Evaluation Concept of the Federal Government

Since 2013, a framework for evaluating important regulatory initiatives has been established. This framework was based on a decision of the Committee of State Secretaries for Better Regulation and the Reduction of Bureaucracy. This decision focused rather on the "whether or not” than on the “how” of an evaluation. The agreement on the “how” was largely confined to describ- ing the objective of an evaluation, i.e. to examining the actual effects with regard to the objective and the purpose of a regulation and the associated costs. However, practical experience has meanwhile shown that procedural guidelines are required for the evaluation standards to be observed. 2. Better Regulation and Bureaucracy Reduction 43

After all, a promise of evaluation which cannot be implemented in practical terms is useless because, several years later, it will be seen that the targeted objective is not verifiable and measurable or that the required data were not determined in time.

For a long time, the NKR has therefore endeavoured to ensure that these Evaluation of Legislation: aspects are already considered during the formulation of the evaluation Specify Objectives, Criteria & clause in the respective regulatory initiative. Data Sources in Advance

The Federal Ministry is to consider and state whether • the regulatory initiative has one or several verifiable objectives; • indicators or criteria can be formulated which are well suited for an impact analysis or for assessing the extent to which the objective has been achieved • data for “feeding” the indicators/criteria are already available or have to be collected.

This “three-pronged approach” is not intended to be final since additional aspects worthy of review may come up during the enforcement. This approach rather defines minimum standards for future evaluations and ensures their quality.

Therefore, the NKR vigorously pushed to have this practice incorporated in Milestone: Federal Government an updated decision of the Secretaries of State concerning ex-post evalua- Agrees Evaluation Rules of tions. With the decision of 26 November 2019, this objective was achieved. Procedure In addition to the “triad”, the decision of the Secretaries of State also specifies that the Federal States, the associations and those concerned should State Secretaries' be involved adequately. Internal evaluation reports must be subjected to an Decision on external quality assurance process before they are published. In addition, Evaluations evaluation reports must include conclusions and will generally be pub- (only in available German) lished. Guidance for the Federal Ministries is due to be developed.

After a long and, at times, very tough discussion with the Federal Govern- ment, a genuine breakthrough towards better evaluations was achieved with the adopted standards. These are not an end in themselves but are intended, on the one hand, to provide information on the weaknesses of existing laws to the Federal Government and the Parliament and, on the other hand, to develop ideas as to how existing regulations can be improved – an Apply Evaluations Results important basis for evidence-based legislation. Systematically 44 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Illustration 9: Federal Chancellor Dr Angela Merkel at the mid-term stock-taking event held by the NKR on 22 October 2019

The Federal Chancellor also underlined the importance of evaluations. In her speech on the occasion of the mid-term stocktaking conference of the NKR mandate term in October 2019, she gave a recommendation in favour Federal Chancellor: Ensure of the involvement of external expertise: “Once again, I would ensure that Evaluation is Conducted the methodological basis is as neutral as possible. The originator of a law “As Neutrally as Possible" should not have much to do with its assessment.”

The NKR deems it appropriate to analyse the costs and benefits of an external evaluation on a case-by-case basis. Commissioning this work to external service providers may be useful, in particular for the evaluation of complex measures. Irrespective of this, some kind of quality assurance must always be conducted.

The NKR Scrutinises Since the introduction of the evaluation procedure, the NKR has reviewed Evaluation Clauses and the evaluation clauses in draft legislation. The evaluation reports are also Compliance With the Decisions forwarded to the NKR. Until the end of the reporting period of 2019/2020, the NKR has received evaluation results for a total of 72 regulatory initiatives, including 50 regulatory initiatives whose estimated compliance costs exceeded a threshold of 1 million Euros. In many cases, those concerned were – in accordance with the recommendations of the NKR – again heard for the evaluation. Nearly half of the evaluations were conducted by external organisations – either consulting companies or scientific institutions. 2. Better Regulation and Bureaucracy Reduction 45

The evaluation concept, which was improved in 2019, must now be filled with life: The guideline envisaged by the Federal Government is expected to provide practical assistance to the Federal Ministries. In addition, the staff of the central working units, which will be established as points of contact for evaluations, must be trained adequately. Up to now, the Federal Academy of Public Administration does not offer the required courses in the 2020 annual programme.

Protection or annoyance of investors: evaluation of the EU provisions regarding the trade in securities The NKR highlights that the BMF has made a helpful contribution to an evaluation at EU level: Since 2018, comprehensive new standards have been applicable to the trade in securities owing to the amended EU Markets in Financial Instruments Directive (MiFID II) and the EU European Markets in Financial Instruments Regulation (MiFIR). Many of these standards were aimed at improving investor protection - but the actual benefit was called in question already before the rules came into force in Germany. Instead, the requirements were rapidly suspected of considerably increasing bureaucracy. Thus, for instance, the obligation to make voice recordings during con- sultative talks is equally unpopular among customers and credit institutions. Having received many indications of the high burden on the credit industry, the NKR suggested to conduct a thorough review of the requirements. For this purpose, the BMF consulted with associations in writing and invited them to an oral hearing. The NKR was represented as well. The key requirements for revision resulting from the comments and the hearing were submitted to the European Commission in late August 2019 in the Investment Consulting: BMF shape of two BMF position papers. In response, the European Commission Delivers Important Contribution conducted several discussions at specialist level with EU member states. to EU Evaluation To date, the European Commission has not yet published an evaluation report, which had been scheduled for release in the summer of 2020. As a result of the specialist discussions, however, the first EU proposals for changes regarding the requirements were published in July 2020. They are to be negotiated now under the German Presidency. These proposals include simplifications especially with regard to the MiFID information obligations. That includes, for example, an extensive abolishment of paper-based information and exemptions for professional customers in the framework of cost information. The NKR welcomes these proposals and the previous approach of the BMF, which the NKR regards as a good example for Better Regulation because of the integration of the application practice and cross-level cooperation. 46 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

2.3.2 Federal Government Decisions on the Improvement of Cost-Benefit Transparency and Cost Containment

State Secretaries' Decisions on In November 2019, the Committee of State Secretaries also adopted a con- Benefits, Cost Containment cept for increasing the transparency of the one-off costs to businesses and the effective and appropriate containment of the costs as well as an approach to determining and presenting the benefits in regulatory initiatives of the Federal Government. For a long time, the NKR has actively partici- (only in available German) pated in the discussion of both topics.

Burdens From “One-Off Costs” One-off compliance costs, which are simply referred to as “one-off costs” Are (Too) High by the Federal Government, are frequently regarded as particularly burdensome by businesses. For years, the NKR has been of the opinion that the one-off compliance costs should receive more attention and be restricted to a minimum. For the liquidity requirement caused by high one-off compliance costs is at least as relevant as a high annual burden. Up to now, however, the one-off costs have not been addressed by the existing instruments for curbing the costs: The 'one-in, one-out'-rule only applies to annual compliance costs.

Over the past few years, the NKR has developed a number of ideas as to how the one-off (compliance) costs could be better taken into account and, consequently, be limited more effectively. As enterprises write off the one- off costs caused by retrofit measures and other investments in the balance sheet, the NKR proposed to introduce a procedure for balancing the one- off costs, which would be comparable to the financial depreciation – and thus no novelty for businesses: The one-off costs could be “written off” – i.e. distributed – in a linear manner over a period of 10 years as part of the annual compliance costs.

With the recent decision of the Secretaries of State, the Federal Government follows an indirect path for the time being: The decision provides an over- New Decision Provides view of possible approaches (levers) for limiting the costs, including but not Guidance, but Does Not Set limited to the specification of extended implementation deadlines, which Clear Limits would – for example – enable a better replacement procurement. Beyond addressing the respective documentation responsibilities of the Federal Ministries, however, it does not include any quantitative or other mecha- nisms for effectively curbing one-off costs. The disadvantage is that it will only be examined afterwards whether and how the selected levers specified in the decision of the Secretaries of State have been taken into account. 2. Better Regulation and Bureaucracy Reduction 47

Nevertheless, the decision is a step in the right direction because it makes the Federal Ministries aware of this important subject. In practice, there have already been the first cases of application, e.g. in the environmental law. At the same time, the limits of the levers have become obvious, there is – for instance – little leeway when EU law is implemented. For example, within the framework of the draft of the General Administrative Regulation for the implementation of the Implementing Decision on Industrial Emis- sions, the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety had examined whether one of the measures for curbing the one-off costs could be used in the context of the production of basic organic chemicals, but it came to the conclusion that that was impossible owing to the mandatory EU implementation.

The decision of the Secretaries of State on the benefits is a further development of the subject since the 2014 decision of the Federal Government to develop a set of methods for the quantitative and monetary assessment Two Sides of the Same Coin: of the benefits of regulatory initiatives. Calculate Costs and Benefits

This method toolbox was based on a study on “Quantifying the Benefits of Regulatory Initiatives”, which was commissioned by the NKR and summa- NKR Study on rised the lessons learned by countries having longer practical experience Benefit in this field. It was intended to support the ministries without specifying a Quantification uniform methodology for the analysis of benefits. NKR pilot projects con- (only in available German) ducted with the participation of four Federal Ministries (BMVI, BMWi, BMF and BMU) could demonstrate that an ex-ante estimate of the benefit was generally possible.

The advantages to the Federal Ministries are obvious:

• a more detailed description of the expected costs and benefits of the legislative initiative,

• arguments for internal coordination and the exchange with stakeholders, and

• a clearer communication to Parliament and the public as to what is intended to be achieved by the respective regulatory initiative.

Unfortunately, the practical experience has been restricted to a few initiatives so far. 48 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

With the introduction of the subtitle “B. Solution, Benefit” (B. Lösung; Nutzen), the decision of the Secretaries of State has provided a fixed place To Date, the Disclosure of for the presentation of benefits. The NKR expects that in future much more Benefits in Draft Legislation attention will be paid to this subject during the preparation of legislative Remains Far Too Skimpy projects. To this day, the NKR cannot imagine any plausible reasons as to why the Federal Ministries hesitate to present the benefits of the regulations proposed by themselves.

2.3.3 Improved Involvement, Better Regulation: SME Test and Practicability Tests

In their coalition agreement, CDU/CSU and SPD announced: “We will create a participation platform for all the Federal Government’s legal proposals that have been published in order to further the transparent participation of citizens and associations and on which the government will make comments”. In the 2018 Work Programme for Bureaucracy Reduction and When will the announced Better Regulation, the Federal Government reaffirmed the commitment to participation platform be promote new forms of participation. To date, however, the announced plat- launched? form has not yet been established even though it was meant to be used for publishing evaluation results in future as well. Thus, there is need for action in this field.

Specific forms of participation for small and medium-sized enterprises (SME) are discussed again and again. Up to now, a so-called SME test has Often, Small and Medi- been conducted in the preparatory stage of draft regulations. If new reg- um-Sized Enterprises Are ulatory projects have a particular impact on small and medium-sized en- Particularly Burdened terprises, the SME test obliges the Ministries to find ways to exclude small and medium-sized enterprises from the regulations from the outset or to facilitate the implementation of the requirements.

As the SME test did not achieve visible success, the NKR has – for several Aim: Take Better Account of years – strongly recommended that the Federal Government should take SME Interests... better account of the interests of small and medium-sized enterprises in the legislative process by means of a targeted participation. Last year, the NKR conducted discussions with the Federal Ministry for Economic Affairs and Energy, associations and representatives of enterprises. During a workshop with its British counterpart – the Regulatory Policy Committee – and British government officials, the NKR also learned about the experience gained in Great Britain. With the “Small and Micro Business Assessment“ (SaMBA), Great Britain has introduced a procedure for political measures 2. Better Regulation and Bureaucracy Reduction 49

affecting small and medium-sized enterprises, which is similar to the SME test. During the workshop, the NKR also talked with representatives from the associations and various departments of the British government. The previous experience with the SME test and the impressions from Great Britain show that a better description of the specific burdens imposed on small and medium-sized companies can improve transparency. However, in order to ensure that new regulations will indeed be more addressee- and business-friendly and practicable, it seems to be more effective to involve persons with practical experience at an early stage of the preparation of legislation.

Therefore, the NKR recommends the introduction and systematic execution …and Give Them a Voice at an of practicability tests during the preparation of laws in the ministries. Those Earlier Stage via Practicability practicability tests are to consult those potentially concerned about the Tests suitability of planned regulations for practical application without making a political judgment. Procedures of this type have already been introduced, for example, in the Netherlands and – at the level of the Federal States – in Bavaria, but frequently these procedures are limited to a subsequent analysis for identifying possible simplifications. The NKR appreciates that the Federal Government, in the summer of 2019, drafted key elements for the federal legislative process for introducing practicability tests. This was followed by several coordination meetings with representatives of businesses and the ministries with the involvement of the NKR. However, the Federal Government has not taken any specific steps yet. From the point of view of the NKR, it should particularly be clarified what exactly is to take place during a practical check and how businesses will be involved. The Netherlands have a separate platform for this purpose. The NKR is of the opinion that an oral or virtual hearing at an early stage is more promising than a mere sam- pling of assessments by means of questionnaires. From the point of view of the NKR, a successful practical check requires a substantial exchange of information, during which attention is being paid to the practical expertise.

The associations are still very much interested in an active involvement in Tap into the Expertise of the issues of practical suitability. This momentum should be used. However, this Parties Affected – Welcome requires a clear commitment from the Federal Government that the Federal the Commitment of the Asso- Ministries will actually conduct such practicability tests. Therefore, the NKR ciations recommends the execution of practicability tests. After successful tests, the procedure could then be used as a standard in the next legislature. During the preparation of a Supply Chain Act, representatives of businesses wanted to set a good example and question their members proactively on issues 50 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

regarding the costs and practical suitability of possible regulations. This project, which is based on the National Action Plan for Human Rights, is intended to specify binding regulations for ensuring the compliance with human rights – in spite of the potentially high burden imposed on businesses.

The NKR can only speculate as to why the Federal Government obviously did not welcome the commitment of the associations in case of this politically sensitive project. From the point of view of the NKR, practicability tests with the aim of developing an evidence-based, practical and enforceable law should be conducted even if the presumable result could call into question the concept of the Federal Government.

At the same time, new regulations should not be considered in an isolated manner. Political measures should take into account that certain sectors Consider the Number of are particularly burdened by bureaucracy. The NKR supports projects which Regulations From an aim at providing a realistic perspective of the total burden imposed on a Entrepreneurial Perspective sector from the point of view of an individual enterprise.

DIHK Study on bureaucratic burdens in the catering and hotel industry DIHK Study The NKR participated as an advisory board member in a project conduct- (only available ed by the German Chambers of Industry and Commerce (DIHK) which in German) aimed at determining the costs arising from all obligations for a typical medium-sized enterprise of the catering and hotel industry. The study was prepared in cooperation with Sira Consulting. In interviews, the en- trepreneurs were at first asked which legal obligations imposed - in their subjective opinion - the greatest burden. Afterwards, a total of 125 obligations to be fulfilled by the enterprises were identified. The analysis showed that the “perceived” bureaucratic burden did not depend exclusively on the cost volume, but was regarded as particularly burdensome Businesses Regard if the implementation of the requirements was connected with great "Sensible" Requirements as uncertainties or if the spirit and purpose of the regulation were not ob- Less Burdensome vious to the enterprises. Thus, considerable discontent was caused, for example, by the regulation on the maximum number of working hours which leaves little leeway for deviations from the usual working times in exceptional situations (e.g. for catering of guests during celebrations). All in all, the results indicated that the burdens stemming from legal re- Bureaucratic Burdens Range quirements range from 1.2 to 6 per cent of the turnover in the catering From 1.2 to 6 Per cent and hotel industry. Thus, the total annual bureaucratic burden imposed of Turnover on a typical medium-sized enterprise of the catering and hotel industry amounts to approximately 12,000 - 60,000 Euros per annum. 2. Better Regulation and Bureaucracy Reduction 51

This does not include the costs of obligations which must be fulfilled by businesses anyway (the regular operating costs or the so-called business-as-usual costs). The study was presented at a final congress on 20 February 2020. The congress appealed to the Federal Government to implement as many relief recommendations as possible. From the point of view of the NKR, a relief of the sector is needed more than ever after the restrictions caused by the pandemic.

2.3.4 Federal Government and Federal States Develop New Package of Measures (Ministerial Conference of the Federal States)

With the decision taken on 5 December 2019, the Federal Chancellor and the Heads of the Federal States seek to develop a programme of measures intended to contribute to removing obstacles to a lean, citizen-focused implementation of Federal law and to strengthening the practical orientation of the cooperation between the Federal Government and the Federal States in the legislative process. Bureaucracy reduction is a joint task.

A programme of measures, which is ready to be voted on, is to be developed until the meeting between the Federal Chancellor and the Heads of By December 2020: the Federal States on 3 December 2020. In accordance with the decision Bureaucracy Reduction & of December 2019, the programme is intended to focus on the following Better Regulation Package measures:

• simplification of Federal law; • increased focus of the practical enforcement by the authorities of the Federal States and the local governments already during the preparation of Federal regulations; • increased use of a citizen-friendly administrative language as well as easily understandable forms and dialogues for online procedures; and • six projects for the identification of examples for good practice in the administrative execution by the Federal Statistical Office.

The NKR perceives this decision as an important signal that the Federal Government and the Federal States regard Bureaucracy Reduction and Better Regulation as joint efforts. The decision is in line with the opinion, repeatedly expressed by the NKR for many years, that the integration of the practical knowledge at the implementation level must be improved in order to make legislation more effective and practicable. 52 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

NKR Proposals for Enhanced Already in 2015/2016, a discussion forum initiated by the NKR and con- Participation of Federal States sisting of representatives of the Federal Government, the Federal States & Local Governments and the local governments submitted concrete proposals for improving the cross-level assessment of the administrative burdens. From the point of view of the NKR, these proposals should also be integrated into the new programme of measures. This also applies to the recommendations of the NKR Expert Report “Content First, Legal Text Second. Designing Effective and Practicable Legislation.” (see Chapter 2.2).

In addition to this key subject, which is geared towards general methods and legislative processes, the package of measures should also include specific and ambitious proposals for the simplification of Federal law. Some of these proposals could be developed based on the simplification measures which were initially issued on a temporary basis during the Corona crisis. Another part could be derived from the NKR’s proposals for an “Economic Stimulus Package at Zero Cost”.

2.3.5 Burden Relief Proposals of the NKR: Economic Stimulus Package at Zero Cost

The NKR continuously collects simplification proposals and communicates them regularly to the Federal Government. The present crisis caused by the COVID-19 pandemic has prompted the NKR to conduct a specific collection of proposals. While the Federal Government discussed – and in some NKR Proposals for Less cases adopted – important measures of an economic recovery plan which Bureaucracy & More Liquidity will entail additional expenditure or revenue shortfalls of several billions of Euros, the NKR prepared a paper with “Proposals for Less Bureaucracy, More Liquidity as well as Faster Planning and Approval Procedures”. In this context, the title “Economic Stimulus Package at Zero Cost” is meant to be taken literally: It is possible to achieve more liquidity and less bureaucracy without asking the Federal Government, the Federal States or the taxpayer to pay up.

For example, businesses had more liquidity if they could pay turnover tax after the customer has paid the invoice and not after the invoice has been issued – with the customer’s payment still due. Thus, the present turnover threshold of 600,000 Euros, up to which businesses may use the so-called actual taxation, should be raised to 800,000 Euros. The limit for immediate write-offs of low-value assets and the limit for a pooled depreciation should be increased to 1,000 Euros or even 1,500 Euros. This would reduce the bureaucratic bur- 2. Better Regulation and Bureaucracy Reduction 53

dens on businesses noticeably and provide a considerable additional liquidity. Case in Point: Retention Periods The reduction of the retention periods under tax law is an “evergreen top- for Business Records – ic” among relief proposals: Every year, businesses have to pay billions of Reduce Tax Bureaucracy Euros because they are obliged to store documentation related to taxation and commercial issues for ten years: In addition, there is a lack of planning security because tax assessments are only provisional until the expiry of the specified periods. In the area of responsibility of the Federal Minis- try of Finance, there is still considerable potential for relieving businesses: Amongst other things, the NKR proposed the following tax measures:

• Increase the taxation limit for the liability to pay corporate tax and business tax to a uniform amount of 50,000 Euros for small non-profit associations: Non-profit associations could distribute the corporate and business tax limits/allowances, which they have not used in one year, over the following three calendar years in addition to the annual amounts.

• Increase the turnover threshold for the obligation to keep accounts under commercial and tax law and the threshold for the preparation of notes and a management report from 600,000 Euros to 800,000 Euros for corporations. Increase the profit threshold for commercial enterprises as well as agricultural and forestry enterprises from Euros 60,000 to 80,000 Euros. Similarly, the thresholds for micro-entities and small corporations which have to prepare notes or a management report should be increased considerably.

• Increase the Threshold for the Obligation to Submit an Advance Turnover Tax Return: The thresholds for the obligation to submit an advance turnover tax return should be raised from 1,000 to 1,500 Euros for the quarterly advance turnover tax return and from 7,500 to 9,000 Euros for the monthly advance turnover tax return. This would mean that mostly small companies would have to submit advance turnover tax returns less often or not at all.

At the same time, new burdens should be avoided by all means. Therefore, New Burdens Must Be Avoided the NKR recommends a moratorium in order to increase the pressure of by All Means having to justify the introduction of new information obligations. The introduction of additional efforts should only be permitted in justified cases. In addition, the NKR recommends to review and to better coordinate the large number of company commissioners and their tasks – particularly from the perspective of the considerable burden imposed on small and medium-sized businesses. 54 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Speed Up Planning & Approval The recommendations on speeding up planning and approval procedures Procedures Effectively as well as subsequent court proceedings are essential elements of the NKR proposals for an “Economic Stimulus Package at Zero Cost”. In this context, the NKR calls not only for the permanent implementation of the “Act NKR Expert on Planning Security”, but also for the implementation of two proposals Report for speeding up proceedings, which were specified in the 2019 Expert Re- 2019 port. The NKR hopes that the introduction of a mandatory early first date in first-instance proceedings before Higher Administrative Courts, Supreme Administrative Courts and the Federal Administrative Court will speed up these proceedings significantly. Thus, it could be achieved that – instead of exchanging pleadings over a period of months – the Judge-Rappor- teurs will discuss the proceedings with those concerned at an early stage and the focus would be put on the essential issues relevant for the decision. The relevance of this proposal will probably increase proportionally to the extension of the catalogue of first-instance responsibilities of the above-mentioned courts.

Rapid Digital Transformation In addition, the NKR also proposes a rapid digital transformation of the of the Judicial System Would judicial system, which would enable a quicker and parallel processing by Speed Up Proceedings several involved parties. However, this also requires a parallel digital transformation of the registration procedure and of the files in the registration offices. Valuable time would be lost if the administration and the courts waited for each other. For the fact that the Online Access Act has been delayed in many areas shows that pressure from many sources is necessary in order to ensure that services for citizens and registration procedures will be digitised completely and speedily.

Due to the decision made by the Coalition Committee on 8 March 2020, the Federal Government was tasked with preparing an “Investment Accelera- tion Act” with the aim of improving speed and effectiveness of investments in the area of infrastructure. The NKR, however, concluded that the draft of Investment Acceleration Act the Investment Acceleration Act, which was only submitted in June 2020, fell short of expectations did not reveal any ambitious approach. Therefore, the NKR recommended additional changes with the aim of further speeding up procedures. At the same time, the NKR has pointed out that the acceleration potential which the NKR indicated in its Expert Report on proceedings before administrative courts were almost completely ignored. 2. Better Regulation and Bureaucracy Reduction 55

On that occation, the Investment Acceleration Act was supplemented, e.g. with regard to court proceedings. The NKR believes that there is still un- used potential for speeding up the urgently required modernisation of the infrastructure in Germany. Therefore, the NKR has again compiled proposals referring to administrative procedures and court proceedings in a 10- point recommendations package.

Implementation status of the Federal Government’s work programme “Better Regulation and Bureaucracy Reduction” as of December 2018 Federal Government 2018 Also, the Federal Government’s bureaucracy reduction programme as of Work Programme: Much December 2018 has not been fully completed so far. The programme in- Remains to Be Done cluded three key aspects with a total of 52 individual projects for better regulation and the reduction of bureaucracy: With regard to the simplification measures, successful simplification examples - like the reform of the social compensation law and the reduction of bureaucracy in the field of child supplements - show that new regulations of this type can be drafted after a careful and detail-oriented examination in coordination with practitioners and that technically sound alternative courses of action can be developed. The Third Bureaucracy Relief Act, which was adopted in late 2019, is one of the projects of the work programme. The NKR regarded this as a positive step but had expected additional cross-sectoral relief measures. Several proposals which would have relieved businesses on a broad basis were not implemented. Already in October 2019, the Committee for Economic Affairs and Energy of the German Bundestag had called for a Fourth Bureaucracy Relief Act. The implementation of follow-up measures resulting from the life situation interviews has largely begun and has been partly realised in some cases (see the “Social Security for Employers“ information portal). Up to now, the life situation interviews have been the ultimate instrument for receiving a feedback on how satisfied enterprises and citizens are with the work of the authorities, which will indicate where the administrative practices are perceived as particularly burdensome. In the workshops organised in the year 2018 after the second round of interviews, numerous concrete ideas were developed, for example, on the simplification of business tax collection. The NKR appeals to the Federal Government to consistently implement the measures resulting from the life situation interviews and the work programme in the remaining months of the legislature. 56 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

2.4 Better Regulation at EU Level and International Cooperation

During the 2019/20 reporting period, the international work of the NKR was strongly defined by the cooperation with other independent councils. In terms of content, the EU currently considers implementing a 'one-in, one-out'-rule at EU level.

2.4.1 Cooperation of Independent Councils in the RegWatchEurope Network: NKR Chairmanship

In 2020, the NKR chairs RegWatchEurope because the chairmanship of this network is meant to match - wherever possible - the EU Council Presidency.

What is the RegWatchEurope Network? The NKR is a member of the RegWatchEurope network, which presently comprises eight control/advisory bodies from other European countries. These bodies are tasked by their governments or their parliaments with reviewing impact assessments and/or with providing hints and recommendations for Better Regulation.

In addition to the NKR, the following bodies are members of Reg- WatchEurope: • the Adviescollege Toetsing Regeldruk (ATR) from the Netherlands, • the Finish Council of Regulatory Impact Analysis (FCRIA), • the Swedish Better Regulation Council (SBRC), • the Norwegian Better Regulation Council (NBRC), • the Regulatory Impact Assessment Board (RIAB) from the Czech Republic, • the Regulatory Policy Committee (RPC) from the United Kingdom • and – since June 2020 – the Danish Business Regulation Forum (DBRF).

Denmark Joins the As the eighth new member, the DBRF enriches the network with its RegWatchEurope Network marked focus on digital transformation and innovation – important aspects for modern laws and bureaucracy reduction.

The purpose of the network is to exchange experience and examples of best practice in the context of better regulation and bureaucracy reduction. The network represents common interests at the EU level and in an international context, e.g. in the responsible committee of the OECD. The chair of the network changes annually. 2. Better Regulation and Bureaucracy Reduction 57

In cooperation with the RegWatchEurope members, the NKR has – for this year – committed to engaging intensively with EU institutions and, in particular, of promoting the introduction of a 'one-in, one-out'-rule at the EU level.

2.4.2 Planned Introduction of ‘One-In, One-Out’-Rule at EU Level

In January 2020, representatives of the RegWatchEurope network met the new responsible Vice-President of the EU Commission for a first talk after his assumption of office. The focus was on the possible development of a 'one-in, one-out'-rule (OIOO) at the EU level, the introduction of which was announced by the President of the EU Commission in her inaugural speech on 10 September 2019.

RegWatchEurope believes that the rule must be refined in such a way that The EU's OIOO-Rule Must business burdens will be reduced as effectively as possible. The members Bring the Most Effective Burden of RegWatchEurope made the Vice-President of the EU Commission an Relief Possible for Businesses offer to present their practical experience gained in the application of the OIOO and other bureaucracy reduction measures in a workshop in order to support a practical and successful implementation at the EU level. At the invitation of the EU Commission, this workshop was conducted virtually on 30 March 2020 with representatives of RegWatchEurope and several other EU member states.

In this workshop, the NKR advocated the idea that an effective and impactful OIOO-rule had to include the all compliance costs – and not just administrative costs (i.e. reporting and documentation requirements) in the strict sense – without reducing the political capacity for action. The German OIOO, which entered into force in January 2015, proves that these requirements go very well together. The following concept applies in Germany:

One In (€ per annum) One Out (€ per annum)

Legislation I Legislation II „IN“ § „OUT“ §

Applies to: Does not apply to:

All regulatory initiatives for Costs caused by taxes, fees, subsidies, submission to the Federal Cabinet loss of prots, etc. Norm addressee: Businesses Preventing exceptional risk Additional annual burden or Compliance costs caused by the one-to-one transposition of EU law, Fig. 10: ‚One-in, one-out'-concept in relief arising from compliance international agreements, implementation of court rulings costs (less than one year) (e.g. European Court of Justice, Federal Constitutional Court) Germany 58 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

A OIOO-Rule for the EU: The EU Commission will present details of the OIOO rule in its notification Indispensible for Effective on better regulation whose publication was postponed from the second to Curbs on Bureaucracy the fourth quarter of 2020. However, against the backdrop of the economic recession triggered by the fight against the pandemic throughout the EU, it has become even more important not to impose more burdens than necessary on businesses weakened by this crisis.

This also includes developing necessary EU regulations with consideration of the resulting compliance costs. For this purpose, the OIOO rule suggests itself as a useful tool. The Regulatory Scrutiny Board (RSB), the review body of the EU Commission, should check compliance with the OIOO rule at the EU level in future. Not least of all for this reason, the issue of a European OIOO rule is also relevant for the cooperation with the RSB.

2.4.3 Additional Better Regulation Measures by the EU Commission

For the future, the EU Commission has tasked the RSB with reviewing also More Scrutiny Tasks for the RSB: whether the impact assessments include adequate comments on strategic Strategic Forecast, Digital forecast, on ecological consequences as defined in the “Green Deal” over- Transformation, Environment all strategy, on digital transformation and on the relevance for economic recovery. The NKR and the RegWatchEurope network will also exchange expertise on these topics with the RSB.

The new strategy for small and medium-sized enterprises (SME) which was SME Strategy presented by the EU Commission in March 2020 under the title “Exploiting of the the full potential of SMEs” could also contribute to economic recovery. This EU Commission strategy is based on three pillars:

SME-Strategy for a Sustainable and digital Europe

Capacity-Building Reducing and Support Regulatory Improving for the Transition Burden & Access to to Sustainability Improving Financing & Digitalisation Market Access

Fig 11: Three pillars of the SME strategy of the EU Commission, March 2020 2. Better Regulation and Bureaucracy Reduction 59

With regard to instruments, the EU Commission largely resorts to already existing instruments which are intended to be enhanced or adapted in this context as, for example, to the introduction of a “Fit for future Platform“ (F4F Platform), which will replace the previous REFIT (Regulatory fitness and performance) platform. The REFIT platform included 28 representatives of the member states and 28 representatives of the associations. It submitted recommendations for simplifications to the EU Commission. The information required was given by the associations or taken from the “Have your say“ online platform where everyone could make proposals. The F4F Platform also is intended to generate simplification and relief proposals, e.g. by means of digital transformation. In accordance with its task, the F4F F4F Platform: Improved Platform is designed to operate in a more structured and more focussed Structure & Focus for manner than the REFIT Platform. The NKR and the RegWatchEurope net- Developing Simplification work will support the implementation of the SME strategy and the opera- Measures tion of the F4F Platform.

2.4.4 Cooperation With the Council of the European Union and the European Parliament

During the second half of 2020, Germany holds the EU Council Presidency. In this context, the Federal Ministry for Economic Affairs and Energy offers the independent councils of the RegWatchEurope network the opportunity to describe the advantages of independent review bodies for the reduction of regulatory burdens and to present ideas for a more effective and more independent control of the impact assessments at the EU level to More Effective & Independent the Council. For this purpose, the RegWatchEurope network has prepared Control of EU Impact a discussion paper which will be presented in the Council working group. Assessments

The efforts to reduce compliance costs imposed by EU legislation needs support in the European Parliament. The introduction of an OIOO rule at EU level also offers the opportunity to make the members of the EU Parlia- ment more sensitive to bureaucracy and regulatory burdens.

In the first quarter of 2020, the NKR therefore established contact with the European Parliament – albeit contact remained subdued given the restrictions of the Coronavirus. In view of the current strategic challenges facing the EU, the parliamentarians should – like the Council Presidency – delib- erately opt for regulations entailing few cost burdens in order to give an economic and sustainable recovery some backing from the EU. 3. Impacts of New Legislation 3. Impacts of New Legislation 61

3. Impacts of New Legislation

Since 2006, the Federal Government has submitted all draft legislation to the NKR for review in accordance with the statutory mandate of the NKR as specified in the Act on the Establishment of a National Regulatory Control Council (cf. box on p. 14).

The NKR ensures that the predefined quality standards are observed in the draft regulations and, in particular, that impact assessments are conducted in accordance with the principles of Better Regulation. At the same time, the review of the resulting compliance costs allows the development of compliance costs to be tracked for the reporting period and for the entire period since the commencement of balancing in the year 2011.

3.1 Quality of Impact Assessments for Legislative Initiatives of the Federal Government

The review activities of the NKR revealed some progress with respect to the quality of the impact assessments and the rationale for regulations and laws prepared by the Federal Ministries. On the other hand, the failure to comply with procedural rules, caused by much too stringent deadlines for coordination and participation, was problematic in the previous reporting period.

3.1.1 Scrutiny Findings in Opinions of the National Regulatory Con- trol Council

In the reporting period from 1 July 2019 to 30 June 2020 (2019/2020), the This Reporting Period, the NKR NKR reviewed 433 regulatory initiatives, which was the largest number for Has Scrutinised 433 Legislative one year in its history (the total number of reviews conducted by the NKR Initiatives – a New Record since the start of the 19th legislature amounts to 945).

The NKR issued a written opinion on 140 of these regulatory initiatives. Another important part of the work done by the NKR normally consists in supporting the responsible ministries already during the finalisation of a new draft with a view to a realistic presentation of the regulatory impacts. 62 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Implementation requirements in the field of “hate crime” and "corporate criminal law" In the case of two important draft statutes which are generally discussed There Are Still Gaps in the under the keywords “hate crime” and "corporate criminal law", only the in- Presentation of tervention of the NKR provided a realistic image which included not only Compliance Costs the compliance costs but also the implementation requirements: It is obvious that the intensified fight against “hate crime” in the Internet will confront public prosecutor’s offices and courts with an increased number of cases. Nevertheless, the first edition of the draft law did not include any assessment of these case numbers and the resulting requirements for implementation resources. Instead, it stated that additional costs expected to the judicial system were going to be negligible or non-existent. This statement deviated significantly from an assessment which the NKR obtained from the German Association of Judges. During clarifying talks with both parties, it finally became apparent that 150,000 new criminal proceedings are to be expected additionally per year. Based on this knowledge, the final edition of the draft law came much closer to a realistic image: The initiative of the NKR clarified that the law enforcement authorities will require at least 265 (additional) judges and prosecutors, leading to additional costs amounting to 24 million Euros in the judicial system. Also the draft "Corporate Criminal Law", which was a result of the so-called diesel emission scandal, included no presentation of the additional staffing and material requirements of the judicial system and only an incomplete presentation of the additional staffing and material requirements of businesses. The renewed intervention of the NKR provided indications that - also in the case of this law - an implementation will be only possible if the personnel strength of the public prosecutor’s offices is increased considerably. According to an estimate shared by the Association of Judges and a large Federal State, which the NKR explicitly pointed out to the Federal Government, 250 additional prosecutors will be required for the implementation. The Federal Government has informed the NKR that it will deal with the completion of the impact assessment during the discussions in the Bundesrat. 3. Impacts of New Legislation 63

In its opinions, the NKR considers not only the compliance costs (see Chap- ter 3.2) but also the following aspects of regulatory initiatives:

• presentation of the objective and the necessity of the regulation, • considerations relating to other possible solutions (alternatives), The Review by the NKR • time limits and evaluation, Comprises Far More Than • legislative and administrative simplification, and Just the Costs • transposition of EU law.

In the reporting period, the reviews most frequently dealt with the aspects of time limits and evaluations, which is due to the active role which the NKR plays in the implementation of concepts for evaluating new regulatory initiatives of the Federal Government.

In its opinions, the NKR also addressed the transposition of EU law and the explanations concerning objective and necessity relatively frequently.

150

120

124 50177 68 33 441 23 0 Temporary Transposition Objective, Legislative and Alternatives Measure, of EU Legislation Imperative Administrative Evaluation Necessity Simplication

Fig. 12: Additional aspects scrutinised in the opinions of the National Regulatory Control Council (number in the reporting period)

Aspects of administrative simplification also played a role in several procedures. If a regulatory initiative provides starting points for a possible administrative simplification, the NKR examines whether the simplification potential is exploited and, if possible, a digital administrative procedure is used for the implementation. 64 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Example: Administrative Simplification of the “Digital Transformation Act for Administrative Procedures for Granting Family Benefits” The draft law aimed at simplifying the application for family benefits whilst combining the application for the naming of a child with the application for child and parental benefits. The statutory basis for an electronic exchange of the data required between the authorities, which ensures that the applicant no longer has to submit the certificates for each application, was provided. On the whole, this regulatory initiative aimed at legislative and administrative simplification but it could not achieve all the simplifications originally intended and proposed, e.g. by the local governments. In particular, the originally planned integration of the family allowance was postponed. Therefore, the draft regulation submitted is a first step in the right direc- Promote the Use of tion, but it should quickly be complemented by additional simplification Digital Procedures With measures in order to double the rate of use of digital procedures, which is More Ambition! estimated by the ministry and the Federal States to amount to 40 per cent, to a value of 80 per cent, which is quite achievable. In its opinion, the NKR highlighted further simplification options. Thus, the income certificate should also be simplified for self-employed persons, civil servants and foreign applicants who were entitled. In order to provide electronic support to the income assessment for child benefit, the respective definition of income should be reviewed and adapted in such a way that the existing digital reporting procedures can also be used for this purpose - with small adjustments, if required. The NKR remarked critically that it should be questioned whether it was necessary to ensure application for all conceivable constellations and whether the variety could not be limited to the necessary minimum. A maximum variety cannot be reconciled with user friendliness because it could lead to a lack of clarity and complicate the filing of applications. In addition, the processes for the receipt and processing of applications would become more complex for public authorities.

Moreover, the NKR scrutinised the presentation of expected regulatory benefits in 15 cases. In the previous year, seven regulatory initiatives had been examined. This development shows that the benefit was more frequently determined and presented – possibly due to the decision made by The Benefit of Regulations Is the Secretaries of State on this topic. However, the number of the respec- Still Hardly Ever Presented tive regulatory initiatives remained relatively small. Therefore, the decision of the Secretaries of State must be implemented consistently and developed further (see para 2.3.2 from p. 46). 3. Impacts of New Legislation 65

In case of regulations to be implemented by the Federal States and local governments, the NKR will ensure that the competent ministry will involve the Federal States and local governments adequately and consult them on the estimate of the compliance costs.

Example: Involvement of Federal States and local governments during the amendment of the Freedom of Movement Act In order to implement the Withdrawal Agreement with Great Britain, the “Draft Law to Adapt the Freedom of Movement Act and other Regulations to Union Law” includes various provisions concerning the residence status of British citizens already living in Germany. Among other things, new residence documents, which have to be applied for, must be issued to them. According to the estimate of the compliance costs, the ministry worked on the assumption that two personal contacts with authorities will normally be necessary in order to collect and compare the data of the persons concerned, to arrange for the issuing of new documents and to personally deliver them to the persons concerned on a separate date. When the NKR asked questions regarding practical simplification possi- Participation by Federal bilities, the ministry turned to the Federal States and local governments. States and Local Governments The local governments submitted simplification proposals. For example, Provides Valuable Practical applications could be processed and personal data and conditions of enti- Insights tlement be checked without the applicant having to go to the responsible office. Application data and certificates could be transmitted by email, by mail or - in a structured manner - by an online application procedure. In addition, the processing of the contents could be accelerated by a speciali- sation of the back office staff. The Federal Ministry of the Interior has listed practical proposals made by the local governments for information in the explanatory statement section of the draft law. However, it decided against including binding and unifying requirements in the draft law. Even though it is a matter of course - and required under the Joint Rules of Procedure of the Federal Ministries (GGO) - that the head associations of local authorities will be interviewed by the ministries, this is frequently not common practice. But the above-mentioned example was remarkable because of the selected form and the inclusion of the respective proposals in the draft law. In the opinion of the NKR, the Federal Government and the Federal States could have examined the proposals in a more serious way and specified and/or enabled a mandatory and nationwide implementation. 66 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Frequent Points of Criticism: On the whole, the NKR expressed its concern regarding one or several as- Incomplete Presentation of pects in 22 of 140 opinions (i.e. in 16 per cent of relevant opinions). Most Compliance Costs & Overly frequently (13 cases), the NKR raised objections with regard to the par- Tight Deadlines for Scrutiny, ticipation deadlines. The NKR addressed the incomplete presentation of Stakeholder Participation the compliance costs to businesses and the public authorities almost as frequently.

Deadlines 13 Compliance Costs - Businesses 12 Compliance Costs - Public Administration 11 Alternatives 5 Participation of Länder & Local Governments 4 Compliance Costs - Citizens 4 Evaluation 3 Legal/ Administrative Simplication 2 Transposition of EU Legislation 2 Benets 2 Objective/ Imperative Necessity 2 ‚One-in, one-out‘ 2 SME Test 1 0 2 4 6 8 10 12 14

Fig. 13: Frequency of points of criticism in opinions of the National Regulatory Control Council (number in the reporting period)

In the previous year, ten of the 98 issued opinions (10 per cent) included objections of the NKR. In the 2018/2019 period, the main problem had been the presentation of the compliance costs to public authorities (six cases). In this reporting period (2019/20), the number of critical opinions has slightly increased. To some extent, this development has been a result of deadlines that were too short for participation, which was criticised by the NKR.

3.1.2 Deadlines and Procedures

GGO rule for participation of There are rules for the participation within the Federal Government and the Federal States, the Fed- for the participation of Federal States, head associations of local author- eral Ministries and the NKR: ities, experts and associations. These are derived from the Joint Rules of 4-week deadline! Procedure of the Federal Ministries (GGO). According to these rules, the lead Federal Ministry is obliged to initiate the participation of the Federal States and the associations “as early as possible” (Section 47 Para 1 GGO). For the participation within the Federal Government, the specifications are even more unambiguous: Within the scope of its legal responsibilities, the Federal Ministry leading “shall involve the Federal Ministries affected by the 3. Impacts of New Legislation 67

draft law and the National Regulatory Control Council in the preparation and elaboration of the draft at an early stage. [...] When the ministerial draft bills are submitted, it must be ensured that the parties involved have enough time to review and discuss issues arising in their area of responsibility. The responsible Federal Ministry shall ensure that all parties concerned are fully involved in time. (Section 47 Para 1 and Para 4 GGO).” Section 50 GGO specifies"a period of four weeks" until the final review of the draft by the Federal Ministries concerned and the NKR.

The NKR highlights that the above-mentioned rules must be observed unless compelling reasons for an abbreviated procedure are evident. Howev- er, during the reporting period of 2019/2020, regular legislative drafting Last year, shortened deadlines procedures were the exception rather than the rule. The NKR has found have become the rule that this has considerably hampered the cooperation between Federal Min- istries. At the same time, the ability of the NKR to exercise its statutory scrutiny mandate was adversely affected by the proliferation of expedited procedures because the impact assessments could only be reviewed in a cursory manner due to the short deadline. In more than 40 cases, legislation was submitted to the NKR for scrutiny with a deadline of less than three working days. 17 of the 40 initiatives were broadly caused by the fight against the pandemic and its consequences, but the majority of cases did not reveal a special reason for the urgency. This also – and particularly – affected politically important measures such as the draft regulations on the following subjects:

• Abolition of the solidarity surcharge • Structural Reinforcement Act for Mining Regions • Third Bureaucracy Relief Act • Disclosure Requirements for the Cross-Border Tax Arrangements Intro- duction Act Expedited Procedures Were Also • Various draft regulations, which were prepared in the autumn of 2019 Applied When Significant within the framework of the Climate Protection Programme 2030 Legislation Were Due for • Act on the Additional Acceleration of Planning and Approvals Procedures Cabinet Approval – in the Transport Sector Even if Unrelated to Any Anti- • Introduction of the Basic Pension Crisis Measures • Coal Phase-out Act • Combating Right-Wing Extremism and Hate Crime Act

The short-notice procedures also made the work of the associations more difficult because they had only a few days to comment on the initiatives. 68 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Procedural shortcomings during the introduction of disclosure requirements for cross-border tax arrangements The Act Introducing Disclosure Requirements for Cross-Border Tax Ar- rangements implemented an EU directive which was based on the recommendations of the OECD/G20 project against Base Erosion and Profit Shifting (BEPS) of multinational enterprises. This act causes considerable efforts and legal uncertainties, especially for tax consultants and banks. As the so-called intermediaries, they are obliged to report the tax arrangements, which they market, develop for third parties, organise or provide for use or the implementation of which they have managed by third parties, to the Federal Central Tax Office. Until the implementation of the directive, the Federal Government would have had enough time to consult the parties involved and to appraise the legal consequences. Since January 2019, the first draft versions have circulated - but for months only within the Fed- eral Government. In spite of several requests by the NKR, a comprehensive estimate of the compliance costs was not conducted initially. It was only in late September that the associations were consulted on the draft law with Associations Were a deadline of three working days - less than two weeks before the Cabinet Not Adequately Involved decision. The NKR doubts that it was still possible - at that point in time - to fully honour the comments of the associations and to review the draft law for the resulting need for changes. Only then did the Federal Ministry of Finance - under the pressure of the NKR - try to estimate the compliance costs. However, this first estimate failed to meet the methodological requirements. Based on its talks with representatives of enterprises, the NKR raised doubts about its plausibility. Only when the draft was debated in the Finance Committee of the German Bundestag did the Federal Ministry of Finance submit an estimate of the Federal Statistical Office, according to which the annual compliance costs to businesses would exceed 32 million Euros. This estimate should have been made several months earlier in order to enable the associations to make their comments. Consequently, the approach taken by Federal Ministry of Finance during this initiative was inadequate in several points - particularly since factual reasons for the brief deadlines were not evident. The reference to a directive issued by the political leadership is not sufficient to justify such a serious failure to comply with the requirements specified in the GGO.

With regard to an evidence-based, objective-oriented and practice-oriented shaping of political measures, the use of the available expertise is a central component of Better Regulation. 3. Impacts of New Legislation 69

As early as in 2018, the OECD identified deficiencies in the legislative pro- OECD-Outlook cess in Germany, which concerned the involvement of (potentially) affected Regulatory Policy parties. In numerous letters and face-to-face meetings, the NKR vigorously 2018 appealed to the Federal Government to return to ordinary procedural rules unless exceptional circumstances justified expedited procedures. The NKR The Federal Government Must expects from the Federal Government that it will take its own procedural Return to the Rules, Otherwise rules seriously again and respect them. The National Regulatory Control the Quality of the Legislation Council will continue to monitor these developments. Will Suffer

3.2 Development of Compliance and Bureaucracy Costs

Since the amendment of the National Regulatory Control Council Estab- lishment Act in 2011, the NKR has scrutinised not only the transparent and plausible presentation of bureaucracy costs stemming from information obligations, but also the identification and presentation of all compliance costs resulting from regulatory initiatives of the Federal Government. As a “price tag” on legislation, compliance costs refer to the total measurable time and the costs incurred by citizens, businesses and public administration as a result of a new provision. In order to allow burdens on citizens to be monetised, the NKR assumes a value of Euros 25 per hour for the time investment of citizens. The labour costs to businesses and the public authorities are taken from the "Guidelines on the Identification and Presentation of Compliance Costs in Legislative Proposals" by the Federal Government.

3.2.1 Transparency in Compliance Costs

Of the 433 regulatory initiatives examined in the 2019/2020 reporting Half of All Regulations Have period, 197 had an impact on the ongoing or one-off compliance costs. a Significant Impact on the 236 regulatory initiatives led to no or only to marginal changes in the Compliance Costs compliance costs.

In the 2019/2020 reporting period, the compliance costs have – on balance – decreased by a total of 828.4 million Euros or 13 per cent as compared to the previous year because many initiatives involved a relief. As in the Dcerease in Annual Compliance previous year, the largest share of annual compliance costs was borne by Costs to Citizens & Businesses the public authorities in the 2019/2020 reporting period. During this re- – Increase in Compliance Costs porting period, the ongoing compliance costs to the public authorities have to Public Authorities increased by 589.8 million Euros. 70 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

On the other hand, the citizens and businesses were relieved from burdens. The compliance costs to the citizens have decreased by 776.4 million Euros, whilst compliance costs to businesses fell by 641.9 million Euros. These reductions were mainly generated by the Third Bureaucracy Relief Act.

However, a closer look at the overall development of annual compliance costs since records began in 2011 shows that these burdens amount to 5.7 billion Euros across all norm adressees:

Reporting Period 8.0 8.0 in billion Euros First Insurance 7.0 7.0 Bureaucracy Distribution All Areas Rent Protection Act Relief Act Directive 6.0 5.7 billion Euros 6.0 E-Procurement 5.0 5.0 Businesses Minimum Wage Act Second Bureaucracy Relief Act 4.2 billion Euros 4.0 4.0 German Regulation on the Award of Public Third Bureaucracy 3.0 Supply & Service Contracts below EU Thresholds 3.0 Upstream Emissions Relief Act Public Administration Energy Savings Reduction Regulation 2.1 billion Euros 2.0 2.0 Ordinance 1.0 Illegal Labour Act 1.0

0 Citizens 0 Statutory Health Insurance -0.6 billion Euros -1.0 Burden Relief Act -1.0 July 2011 July 2012 July 2013 July 2014 July 2015 July 2016 July 2017 July 2018 July 2019

Fig. 14: Compliance Costs Monitor (as of July 01, 2020)

Since July 2011, the burden imposed on businesses by annual compliance costs has increased by a total of 4.2 billion Euros. For the public authorities, annual compliance costs have increased by 2.1 billion Euros since 2011. For the First Time Since Records During this reporting period, the annual compliance costs to the citizens Began in 2011, the Level of have for the first time been reduced to a value below the initial level of Burdens on Citizens Fell 2011. On the whole, the citizens have been relieved by annual compliance Considerably Below the Baseline costs amounting to 554.4 million Euros since July 2011. 3. Impacts of New Legislation 71

Review of regulatory initiatives by regulatory control councils at the Fe- deral State level At the Federal State level, there are two Regulatory Control Councils: The Regulatory Control Council in Baden-Württemberg and the Saxon Reg- ulatory Control Council. In contrast to the National Regulatory Control Council (NKR), which has a permanent legal mandate, the mandates of the Regulatory Control Councils at the Federal State level are valid only for a limited period of time. In Saxony, the term was set to expire on 30 Bureaucracy Reduction Can June 2020. Last year, an evaluation was conducted on behalf of the State Only Succeed if It Is Conducted Government, the recommendations of which were intended to lead to a Across All Governmental Levels: revision of the Act on the Establishment of a Saxon Regulatory Control State-Level NKRs Make a Council. The conclusions from this evaluation recommend a considerably Major Contribution weakened mandate of the Saxon Regulatory Control Council. Up to now, the State Government has not yet been able to reach an agreement on the future design of the mandate. Therefore, the mandate of the present Saxon Regulatory Control Council has been extended to the next summer and the validity of the corresponding law to the end of 2020. By then, a revision of the law will have to be agreed. The National Regulatory Control Council is working to strengthen the mandate - against the recommendation of the evaluation. Thus, the work of the Saxon Regulatory Control Council can become more impactful. This approach aims at intensifying efforts across all governmental levels to achieve Better Regulation and Bureaucracy Re- duction in order to ensure that burden relief can become tangible. Even now, the Regulatory Control Council Baden-Württemberg has a far-reaching mandate. Last year, it initiated several projects for identifying bureaucratic burdens in special fields and for improving regulation. In this context, the NKR is in regular contact with its colleagues from Baden- Württemberg.

Even though the annual compliance costs have decreased in the 2019/2020 reporting period, one-off compliance costs amounting to a total of 4 billion One-Off Costs Considerably Euros – over 1.3 billion Euros more than last year – were imposed on the Higher Than Last Year three norm addressees (citizens, businesses, public administration).

At 2.6 billion Euros (i.e. 64 per cent of all one-off compliance costs), businesses were most affected by this increase. During the same period, one- off compliance costs amounting to 1.3 billion Euros (32 per cent) were imposed on the public authorities. At 147.3 million Euros (4 per cent), citizens had to bear the smallest increase. 72 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Citizens 5,000 rounded values, Public Administration in million Euros

Businesses 147 4,000 1,101

1,275 3,000 1,052 240

2,000

1,908 414 1,000

229 1,039 2,349 67 519 2,583 0 175 2015/16 2016/17 2017/18 2018/19 2019/20

Fig. 15: One-off compliance costs by norm addressee affected and by reporting period

One-off compliance costs include not only one-off costs but also costs generated by requirements which must be fulfilled only once and requirements that only apply for limited time. In the present reporting period, requirements limited in time were particularly important because many regulations which were introduced for coping with the Corona crisis included a time limit. Some of these regulations had a time limit of three months, others will expire at the end of the year 2020 or 2021 and will, as a rule, not impose any burden afterwards.

3.2.2 Compliance Costs to Citizens

Since 2011, annual compliance costs to citizens have never changed as much as in the years 2019/2020. With -776.4 million Euros in burden relief, citizens were the first group of norm addressees whose annual compliance costs have been reduced significantly and sustainably below the level of 2011 when records began.

According to estimates, on the whole the citizens must spend -25.1 mil- The Third Bureaucracy Relief lion hours per year less on legal requirements than in the previous year. In Act Also Cuts Burdens on addition, material costs amounting to a total of 148 million Euros are not Citizens Considerably incurred. The relief is mainly due to Third Bureaucracy Relief Act (BEG III, -589.5 million Euros) and to the 7th Amendment Act the German Social Code Volume IV and other laws ( -112.4 million Euros). 3. Impacts of New Legislation 73

-72 million Euros (8%) other legislative -589 Third Bureaucracy Relief Act (BMWi) 102 initiatives

-112 7 th SGB IV Amendment Act (BMAS) 77 Passports and Identity Cards Security -803 mill. Euros -55 Improvement Act (BMI) (92%)

69 Ordinance Amending the Chimney Top 5 measures containing -25 and Inspection Ordinance (BMWi) the larguest annual relief for Citizens Second Amendment Act of the Federal rounded values, -21 in million Euros Registration Act, other Regulations (BMI) -600 -500 -400 -300 -200 -100 0

Fig. 16: Initiatives generating the greatest relief to citizens during the reporting period 2019/20

The relief generated by the BEG III is mainly due to the fact that employees are no longer obliged to submit a certificate of incapacity to the employer. Shifting Away From Paper It is also no longer necessary to send the certificate to the health insurance Based to Digital Certificates in company. Nevertheless, the employees still receive a paper-based certif- the BEG III… icate from their attending physician in order to prove their incapacity for work in case of labour law disputes. Consequently, the time effort is reduced and postage is no longer required. Moreover, an additional measure specified in the BEG III generates a relieving effect for the citizens: As the circle of persons subject to income tax who may use the assistance of In- come Tax Help Associations has been extended, the citizens can save costs as compared to the employment of a tax consultant.

The relief resulting from the 7th Amendment Act to the German Social …as well as in the Code is due to the introduction of electronic procedures; in view of high 7th Amendment Act to the case numbers amounting to approximately 12 million cases, the time need- German Social Code ed and the postage are thus reduced considerably because membership confirmations from health insurance companies may be transmitted electronically to the employer in case of a change of the health insurance company or a change of employer.

During this period, the main additional annual burden on the citizens resulted from the restrictions regarding the installation of oil heating systems, which are provided for in the Act to Harmonise the Energy Saving Law for Buildings (27.6 million Euros). The additional master craftsman qualifications in combination with the reintroduction of the certification qualification for individual skilled trades, which are provided for in the Act Amending the Handicraft Order and other Handicraft Regulations, led to annual compliance costs amounting to 22.5 million Euros. 74 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Harmonisation Act for Energy-Savings Legislation for Buildings (BMWi) 28 other measures Fourth Amendment Act of the German 19 mill. Euros Skilled Crafts and Trade Code (BMWi) 23 (19%)

80 million Euros (81%) Basic Pension Act (BMAS) 10 Top 5 measures containing the largest annual burdens Adoption Assistance Act (BMFSFJ) 10 for citizens

Ordinance for Extending 10 rounded values, Simplied Benet Access (BMAS) in million Euros 0 10 20 30

Fig. 17: Initiatives imposing the greatest additional burdens on the citizens during the reporting period 2019/20

Among Other Things, Citizens In the 2019/2020 period, additional one-off compliance costs amounting Incurred One-Off Compliance approximately to 147.3 million Euros were imposed on the citizens. This Costs When Investing in burden was mainly due to the costs for the establishment of charging points Electromobility and Applying within the framework of the requirements specified in the Building Elec- for Social Benefits tromobility Infrastructure Act (65.2 million Euros) and to the costs for the application for social benefits in accordance with the German Social Code Volume II (SGB II) as specified in the Draft Law for the Simplified Access to Social Security Benefits ('Social Protection Package, 63.5 million Euros). In view of the crisis, this initiative enabled the citizens concerned to use a simplified procedure for the application for social benefits. In this context, 1.2 million additional benefit communities in accordance with German Social Security Code Volume II and a duration of 120 minutes for the first application for allowances to assure the livelihood of the applicant were expected. In this respect, the calculated costs are caused by a voluntary application procedure which is favourable for the citizens concerned.

3.2.3 Compliance Costs to Businesses and Impact of the ‘One-In, One-Out’-Rule

In the 2019/2020 period, the annual compliance costs to businesses have The ‘One-In, One-Out’ decreased by 641.9 million Euros. According to estimates, the annual com- Performance Remains pliance costs to businesses at the end of this reporting period are thus at Comfortably in Burden the lowest level since March 2014. This is a positive development even if Reduction Territory the costs generated by directly applicable EU and international law are not included. As in the case of the citizens, the relief is mainly due to Third Bu- reaucracy Relief Act (-1.2 billion Euros). 3. Impacts of New Legislation 75

-1,168 Third Bureaucracy Relief Act (BMWi) -27 million Euros (2%) from other measures

-139 7 th SGB IV Amendment Act (BMAS)

Housing Property -19 Modernisation Act (BMJV) -1,356 mill. Euros (98%) Law For Transferring Oversight Over -17 Top 5 measures containing Financial Investment Brokers (BMF) the largest annual relief for businesses rounded values, -13 First Ordinance Amending the Professional in million Euros Truck Driver Qualication Ordinance (BMVI) -1,200 -1,000 -800 -600 -400 -200 0

Fig. 18: Initiatives generating the greatest burden relief for businesses during the reporting period 2019/20

Burden reduction generated by the Third Bureaucracy Relief Act (BEG III) In September 2019, the Cabinet adopted the Third Bureaucracy Relief Act, The BEG III Cuts Burdens on which has remained the largest relief package to date. It is still too ear- Businessess, But: More Would ly to make a final assessment on the impact of this relief package which Have Been Feasible! had an estimated value of 1.2 billion Euros, particularly because important components such as the digitisation of the incapacity certificate for health insurance companies and employers are still being implemented. In cases of illness, electronic incapacity certificates of incapacity is meant to finally make the sending of paper-based certificates by post obsolete.

The catering and hotel industry was relieved by the possibility of an electronic notification obligation for hotels because it was no longer necessary to complete a paper-based notification form during the check-in ( -52 million Euros). Not only did the introduction of digital notification procedures reduce bureaucracy - the Corona crisis highlighted the urgency of this measure.

Nevertheless, many businesses were disappointed by this relief package: Several of their relief proposals were not taken up. Above all, this refers to the retention periods under tax law, which finally ought to be reduced. In October, the Committee for Economic Affairs and Energy of the German Bundestag demanded a Fourth Bureaucracy Relief Act. In light of the present crisis, the Federal Government has meanwhile come to an agreement to reduce the costs to businesses by a new Bureaucracy Relief Act. There is no lack of proposals. 76 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

In the period of 2019/2020, bureaucracy costs to businesses have also decreased (-518.7 million Euros). In accordance with the concept of the Federal Government, the bureaucracy costs stemming from information obligations are a subset of the annual compliance costs to businesses. Bu- reaucracy costs result from the businesses' obligations to procure or keep available for, or transfer to, authorities or third parties data and other information. The Third Bureaucracy Relief Act (BEG III) largely contributed to this development, since half of its estimated burden relief resulted from cutting information obligations (-631.4 million Euros).

High Annual Compliance However, some regulatory initiatives led to considerably higher annual Costs Caused by Individual compliance costs to businesses, e.g. the Animal Welfare Labelling Act, the Legislative Proposals Patient Data Protection Act and the Regulation Amending the Fertiliser Or- dinance.

Animal Welfare Labelling Act (BMEL) 169 other measures Patient Data Protection Act (BMG) 118

245 mill. Euros 496 mill. Euros (33%) (67%) Amendment Ordinance to the Fertiliser Ordinance (BMEL) 84 Top 5 measures containing the largest 18th Amendment Ordinance of the annual burden for Medicinal Prescription Ordinance (BMG) 65 businesses

2nd Amendment of the Financial 61 rounded values, Investment Intermediary Regulation in million Euros (BMWi) 0 50 100 150 200

Fig. 19: Initiatives imposing the greatest annual burdens on businesses during the reporting period 2019/20

Initiatives Incurring High The Animal Welfare Labelling Act introduces an official animal welfare Annual Compliance Costs label for pork products. However, businesses concerned are free in their Mainly Affected Agriculture decision as to whether they want to apply this label or not. Thus, the recur- and the Health Sector rent compliance costs, which are estimated at a total of Euros 169 million based on a government draft, will only arise in enterprises using the label. The label is intended to inform the consumer which products comply with standards exceeding the statutory standards. The major portion of the additional compliance costs to businesses is due to the fact that businesses have to adapt the conditions in which animals are kept, transported and slaughtered to the standards of the seal as required. However, there could be additional and/or better marketing opportunities for enterprises using the label. 3. Impacts of New Legislation 77

The Patient Data Protection Act leads to additional current expenditures amounting to 118 million Euros for businesses. This is mainly due to the requirement that service providers and pharmacists participating in statutory health care will have to store specified data of the insured persons in the electronic patient record in future. An additional cost driver of this initiative is the obligation of service providers and pharmacists participating in statutory health care and of hospitals to inform the insured persons about the fact that their treatment data may be incorporated in the electronic patient record.

With the Draft Regulation Amending the Fertiliser Ordinance (Verord- nungsentwurf zur Änderung der Düngeverordnung) (additional compliance costs for businesses: approx. Euros 84 million), the Federal Government aims at reducing the nitrate content in the ground water, particularly in highly polluted areas. The high nitrate concentration in waters is mainly caused by nitrogen fertilisers, e.g. liquid manure or slurry. On the one hand, a major portion of the additional compliance costs is due to the fact that some farmers will have to plant catch crops, like forage maize, in the future. This is intended to reduce the time during which the fields lie fallow and there is no use for the so-called commercial fertilisers, which are produced anyway in stock breeding. The planting of catch crops ensures that an increased amount of fertilisers can be used on the field without excess nitrate getting into the groundwater. On the other hand, a considerable portion of the compliance costs is due to the fact that the farmers have to transport excess liquid manure or slurry to more distant areas.

Additional bureaucracy costs (a subset of the compliance costs, see above) Compliance Costs from Infor- were caused, for example, by the 18th Regulation Amending the Medicinal mation Oblications: Prescription Ordinance (64.7 million Euros) and the 2nd Regulation Amend- A Narrower Definition of ing the Financial Investment Intermediary Regulation (60,7 million Euros). Bureaucracy Costs

The additional bureaucracy costs caused by the Medicinal Prescription Or- dinance are due to the fact that physicians and dentists will have to note the dosage of the prescribed drug on the prescription. The amended Finan- cial Investment Intermediary Regulation specifies extended obligations to record and store information on the advisory services provided by financial investment brokers. 78 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

th 18 Amendment Ordinance of the 65 other Medicinal Prescription Ordinance (BMG) measures nd 38 mill. Euros 2 Amendment of the Financial Investment 61 (15%) 215 mill. Euros Intermediary Regulation (BMWi) (85%) Law Introducing an Obligation to 32 Top 5 measures containing Communicate Tax Arrangements (BMF) the largest information oblications for businesses Fuel Emissions Trading Act (BMU) 31

rounded values, Patient Data Protection Act (BMG) 27 in million Euros 0 20 40 60 80

Fig. 20: Initiatives imposing the greatest additional bureaucracy costs to businesses in the reporting period 2019/20

Since the year 2012, the annual bureaucracy costs have decreased by a total of 1.6 billion Euros. The Federal Government’s objective of keeping the bureaucracy costs below the reference value of 2012 (=100) is monitored by Since 2012, Bureaucracy Costs means of the index of bureaucracy costs (Bürokratiekostenindex – BKI). In Have Remained 25 Per Cent the period of 2019/2020, the index of bureaucracy costs has decreased to Below the Initial Measurement 98.7. On a positive note, it should be noted that the 25 per cent reduction from 2006 of bureaucracy costs, which was agreed upon in 2006, has been consistently maintained until today.

Development of the Bureaucracy Cost Index since Reference Measurement January 2012 = 100 Last updated: 1 July 2020

100.6

100.4

100.2

100.0 Simpli cation of Reporting Procedures Real Property 99.8 in Social Security, etc. Tax Reform

99.6 Documentation obligations of the Minimum Wage Act (Ex-Post Measurement) 99.4 Noti cations on the use of medicines &on the animal stock (Ex-Post Measurement) 99.2

99.0 First Bureaucracy Relief Act 98.8

98.6 Second Bureaucracy Relief Act Third Bureaucracy Relief Act 2012 2013 2014 2015 2016 2017 2018 2019

Fig. 21: Development of the index of bureaucracy costs since the baseline measurement 3. Impacts of New Legislation 79

In addition to the compliance costs, so-called “other costs” – e.g. in the form of fees and levies – have frequently been imposed on businesses.

High other costs caused by fees: Supervision of financial investment brokers and fee-based financial investment advisers The draft act transferring the supervision of financial investment brokers and Unclear Reform of Oversight fee-based financial investment advisers to the Federal Financial Superviso- Over Financial Investment ry Authority (BaFin) adopted by the Federal Government will impose very Brokers – With Significant considerable costs on the financial investment brokers concerned. Invest- Cost Implications ment consulting is subject to specific regulatory requirements. Depending on the place of business of the respective financial investment brokers and fee-based financial investment advisers, supervision is presently exercised by the trade offices (in seven Federal States) or by the Chambers of Industry and Commerce (in nine Federal States). The Federal Government thinks that there is a need for improvement with regard to the supervision arrangements. From the Federal Government’s point of view, the organisational fragmen- tation of the supervision may be detrimental to consistency, quality and the protection of investors. This position contrasts with assessments made by the BaFin during previous legislative terms. Therefore, the NKR has raised objections: The BMF neither presented the purpose of the regulation in a comprehensible manner, nor did it discuss possible alternatives adequately. In view of the resulting financial consequences for the parties concerned, this is far beyond comprehension: The administrative effort of the BaFin, which will comprise annual costs of around 36.4 million Euros and one-off costs of 5.2 million Euros, must be financed by those to be supervised in the form of levies, fees and special reimbursement procedures. The NKR has found this cost estimate to be incomplete. In addition, the BMF has not made the other costs to be borne by the individual financial investment brokers at all transparent. One of many practical problems: The NKR found that it was unclear whether the BaFin will be able to meet its requirement for 400 staff with adequate qualifications in time. The Federal Government plans to put the Act into effect by January 2021.

While the recurrent compliance costs to businesses have decreased in the Growing One-Off Compliance present reporting period, businesses had to face one-off compliance costs Costs Are Very Burdensome amounting to Euros 2.6 billion. Thus, the one-off compliance costs to busi- for Businesses nesses were greater than in the two previous reporting periods (compliance cost burden in the period from 07/2017 to 06/2019: around 700 million Euros, see Figure 15 on p. 72). 80 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

7th Amendment to the Animal Welfare - 1,116 Keeping of Farm Animals Ordinance (BMEL) other measures Building Electromobility Infrastructure Act (BMWi) 622 0.4 bn Euros 2.2 bn Euros (15%) (85%) Second Coronavirus Tax Relief Act (BMF) 247 Top 5 measures containing the largest one-off compliance costs ITS Drug Stockpiling Ordinance (BMG) 115 for businesses

Animal Welfare Labelling Act (BMEL) 99 rounded values, in million Euros 0 200 400 600 800 1,000 1,200

Fig. 22: Initiatives imposing the greatest one-off compliance costs to businesses during the reporting period 2019/20

This one-off burden, which was estimated at 1.1 billion Euros based on the government draft, is particularly due to the 7th Order Amending the Order on the Protection of Animals and the Keeping of Production Animals. The amendments aim at improving animal welfare for breeding sows living in stall housings by providing more room than before per breeding animal. The additional costs are incurred through the necessary reconstruction or construction measures in stables, which must be implemented in the com- ing (up to 12) years. In the course of the legislative procedure, the Bundes- rat initiated several amendments to the draft order.

The equally high one-off costs resulting from the Building Electromobility Infrastructure Act (621.7 million Euros) are incurred through the installation of charging points. In terms of figures, the one-off costs caused by conversions required by the Second Coronavirus Tax Relief Act ranked third place. These costs are mainly due to the temporary VAT reduction.

In light of the most recent examples of regulatory initiatives proposed by Curbing One-Off Costs the Federal Government, the NKR cannot recognise an adequate willing- Effectively Continues to Be ness to really limit the one-off costs to the necessary minimum. This con- an Imperative flicts not only with the principles of Better Regulation but also with the decisions made by the Federal Government itself. 3. Impacts of New Legislation 81

Second Coronavirus Tax Relief Act: High costs due to VAT Reduction

In June 2020, the Federal Government agreed on a temporary VAT reduction as part of the economic recovery plan. The Second Coronavirus Tax Relief Act provided the legal basis. In its opinion on the draft law, the NKR has raised objections because the cost impacts were neither identified nor presented. Due to the criticism on the part of the NKR, the compliance costs were recorded subsequently with the assistance of the Federal Statistical Office. In this context, the one-off costs to businesses High Burdens Resulting From were estimated at approximately 247 million Euros. This is due to the fact the Temporary VAT Rate Cut that, among other things, businesses are expected to perform the following activities in connection with the turnover tax reduction:

• adapting the tax codes and the corresponding accounts for turnover tax, input tax, cash discounts and turnover tax on imports; • adapting the orders existing in the system to the new tax rates in order to ensure that the tax posting will be conducted automatically when the incoming invoice is posted; • adapting the advance turnover tax return to the possibly adapted form of the financial authorities; and • processing incoming invoices with different tax rates.

The estimates of the Federal Statistical Office provide transparency about the compliance cost impacts, but various studies suggest that the costs might be significantly higher. An accurate picture of the compliance costs is important because it will enable the decision makers in the Federal Government and in Parliament to conduct a cost-benefit-analysis for the measure. The NKR has concluded that there is mounting evidence that the hoped-for economic effects were bought at a high price which must be paid by businesses themselves. In addition, the NKR criticises that the BMF did not forward the agreed government draft to the NKR before the day of the cabinet decision. This is in contrast to the principles of Better Regulation and to the principles of constructive cooperation.

Based on estimates reviewed by the NKR, the compliance costs to businesses are balanced in accordance with the one-in, one-out rule. Since 2015, the OIOO Results Show a Positive Federal Government has tried to limit the costs of new regulations to busi- Performance nesses by employing the one-in, one-out rule. For the annual compliance costs of each new initiative (in), a relief (out) of the same amount must be 82 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

generated by the end of a legislative term at the latest – either within the draft regulation itself or otherwise. In this context, Third Bureaucracy Relief Act also led to cost reductions. On balance, an additional out of 936.2 million Euros was achieved for businesses in the 2019/2020 reporting period: During this period, the 'in' (i.e. the burden) of 432.4 million Euros was set off by the out (i.e. a relief) of approximately 1.4 billion Euros. Thus, the total 'out', which has been achieved since the introduction of the one-in, one-out rule in the year 2015, meanwhile amounts to almost 2.9 billion Euros. From the point of view of the NKR, this balance is encouraging and demonstrates the effectiveness of this instrument.

TThe OIOO Balance Does Not However, the burden arising from the implementation of European regu- Reflect the Full Picture – lations, which amounts to approximately 294 million Euros on balance, has EU Law Is Invisible not yet been taken into account. The NKR thinks that there is a “transparency gap” between the actual burden imposed on businesses and the 'one- in, one-out'-balance (see shaded areas in the figure). This difference was greater in this reporting period than the difference in the previous reporting period of 2018/2019 (170 million Euros). Since 2015, it has amounted to a The OIOO Balance Remains total of approximately 837 million Euros. But: Even if the burdens arising Positive Even if from the implementation of EU regulations were fully included in the bal- Compliance Costs Incurred by ance, the compliance costs to businesses would have shown a significant EU Regulations Are Included decrease since the introduction of the 'one-in, one-out'-rule (2015):

Fig. 23: 'One-in, one-out'-balance – development since 2015 3. Impacts of New Legislation 83

In discussions with the NKR, representatives of associations, businesses The Burdens Perceived by and academia have frequently painted a different picture. The view that the Businesses Contains Far More burdens imposed by regulations have increased significantly in spite of the Than “Only” Compliance potential of digital transformation is widespread in businesses. This dis- Costs crepancy in impression may have different reasons: Even though legal requirements are the major source of bureaucratic burdens, they are not the only source, which is shown exemplarily by the frequently complex shaping of support programmes or public invitations to tender. In many cases, the persons concerned regard quasi-legal and even private norms and standards as bureaucracy. This also applies to regulations based on international law and/or international “soft law”, which must be observed by the enterprises especially if they are involved in cross-border activities.

Regulatory requirements increasingly result from directly applicable Euro- ‘One-In, One-Out’ at EU Level pean requirements, e.g. ordinances or delegated legislative acts which need – Include Directly Applicable not mandatorily be implemented and are therefore not subject to a direct EU Legislation examination by the NKR. For this reason, it is all the more important to introduce and consistently apply a 'one-in, one-out'-rule also at the Europe- an level – as announced by the European Commission (see Chapter 2.4.2 for more details). This would complement the national instruments for record- ing and limiting compliance costs effectively. At the same time, it remains important to systematically consider the potential compliance costs arising in Germany from the outset of the preparation of EU law.

3.2.4 Compliance Costs to Public Authorities

With total annual compliance costs amounting to 589.8 million Euros, the burden on the public authorities was slightly lower in 2019/2020 than in the year before (850.4 million Euros). On the other hand, that was the second-highest additional burden on the public authorities since 2011. This development shows that the Federal Government continues to submit regulation projects which result in considerable effort for the practical implementation by the public authorities. In addition, it can be assumed that not all estimates include the entire implementation cost at the Federal State and municipality levels, since now as before many states submit the respective figures only very hesitantly.

With annual compliance costs of 207 million Euros to the public authorities, the Basic Pension Act was the most expensive regulation project in that period. 84 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Basic Pension entails high administration expenditures In order to introduce new, system-changing social benefits successfully, you need administrative expertise and adequate implementation deadlines. Unfortunately, the introduction of the Basic Pension is a negative example in that respect. The coalition agreement of 2018 provided for a Basic Pension for “present and future recipients of basic subsistence” who have reached the statutory pension age and have 35 years of contributions The Basic Pension, or child-raising or nursing-care periods. The precondition for receiving a a Bureaucracy Monster: Basic Pension was to be a means test in analogy to basic subsistence. As Government Ignores a result, working groups were set up with administrative experts of the Administrative Expertise Federal German Pension Insurance, the ministries involved and the basic subsistence providers. The aim was to develop a feasibility model for the implementation of that benefit. However, the result of that working group was made obsolete by the coalition decision of 10 November 2019. Instead of a means test in cooperation with the basic subsistence authorities, an automated income assessment in cooperation with the financial authorities was to be introduced. On the basis of those key elements, legislation was drafted without involving any experts and with no regard to the regulatory impacts, in particular the compliance costs. At the same time, the Federal German Pension In- surance said clearly that the draft was going to entail a high burden of bureaucracy and contained legal and technical pitfalls which could jeopardise the timely and successful introduction of the new benefit. Therefore, the NKR invited the President of the Federal German Pension Insurance and the responsible State Secretaries of the BMAS and the BMF to a hearing. At that hearing, the BMAS presented initial estimates that confirmed that the project entailed high administration expenditures and had a very opti- mistic implementation deadline. On that occasion, the NKR discussed options for an implementation of the Basic Pension with less bureaucracy. A fully quantified draft impact assessment was available only three workdays before the bill was scheduled for Cabinet adoption. Since the NKR gained the impression that options for an implementation of the Basic Pension with less bureaucracy were not seriously considered at that final stage, its opinion contained five options that could have contributed to a reduction of the bureaucratic effort. However, neither the Federal Government nor the German Bundestag gave the options serious consideration. That turns out to be fatal, for with estimated annual administrative expenditures of some 207 million Euros and implementation expenditures of 400 million Euros, the Basic Pension introduces a staggering level of bureaucracy, even in comparison with the estimated total pension payment. 3. Impacts of New Legislation 85

The NKR maintains that the expected benefits for citizens resulting from the Basic Pension could have been achieved with less bureaucracy and expenditures and thus more efficiently. It would have been possible to achieve a less bureaucratic and the same time targeted and legally secure option for the appreciation of the achievements of persons with low incomes within the statutory pension system. That would have required an early involvement of persons with practical experience, however. In the meantime, even the Federal Government has found out that the Basic Pension cannot be paid to all recipients as from January 2021 as planned because the respective administrative procedure will not be completely operational by that time. All told, this is a legislative initiative where key principles of better regulation were flatly ignored.

Basic Pension Act (BMAS) 207

other Third Bureaucracy Reduction Act (BMWi) 146 measures

Implementation Act of the EU Waste 256 mill. Euros 544 mill. Euros Disposal Framework Directive (BMU) 65 (32%) (68%)

Posted Workers Top 5 containing the 64 Implementation Act (BMAS) largest annual burdens on the public sector First Wind Energy-on-Sea- 61 rounded values, Amendment Act (BMWi) in million Euros 0 50 100 150 200

Fig. 24: Legislation imposing the largest burden for public authorities during the reporting period 2019/20

A particularly pronounced burden relief for public authorities was generated by the 2019 Annual Tax Law (-92.3 million Euros, see figure 25) and the th7 Amendment Act to the German Social Code IV (-54.7 million Euros). Ow- ing to the Annual Tax Law, changes in the valuation law for the concurrent reform of the land tax collection relieved state-level public authorities, in particular since an electronic transmission of data for the land database was put in place.

One-off compliance costs to public authorities amounted to 1.3 billion Euros Public Authorities: in the current reporting period (see figure 26). So, in analogy to the annually One-Off Compliance Costs of recurrent compliance costs, one-off compliance costs were at their sec- 1.3 Billion Euros ond-highest level since 2011. It was the Basic Pension Act that imposed particularly high one-off compliance costs (415 million Euros, see above), followed by the Passports and Identity Cards Security Improvement Act and the Second Social Protection Package. 86 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

-92 Annual Taxation Act 2019 (BMF) -14 mill. Euros (7%) from other measures -55 7th SGB IV Amendment Act (BMAS)

-196 mill. Euros Law for the further reduction of Residual -25 (93%) debt discharge proceedings (BMJV) Top 5 measures containing the largest annual relief -19 Relatives Liabilities Relief Act (BMAS) for the public sector Digital Access to Family Bene t rounded values, -5 in million Euros Act (BMI) -100 -80 -60 -40 -20 0

Fig. 25: Legislation generating the largest annual burden relief for public authorities in the 2019/20 reporting period

The Passports and Identity Cards Security Improvement Act enabled citizens to have their passport photographs printed directly at the agency at the terminals of the Federal Publishing Office (-55 million Euros). This is supposed to be less expensive for the citizens, however, a portion of the administrative cost will be funded by fees to be paid by the citizens (33 million Euros). As a result, and in view of the declining material costs and simultaneously increasing fees, the relief generated to citizens will amount to a net reduction of -22 million Euros.

Basic Pension Act (BMAS) 415 other measures Passports and Identity Cards Security Improvement Act (BMI) 171 430 mill. Euros 845 mill. Euros (34%) (66%) 2nd Social Protection Package (BMAS) 104 Top 5 measures containing the largest one-off burdens for the 7th SGB IV Amendment Act ((BMAS) 88 public sector Ordinance on Short-Time Working 67 rounded values, Allowances (BMAS) in million euros 0 100 200 300 400 500

Fig. 26: Legislation imposing the largest one-off compliance costs on public authorities in the 2019/20 reporting period

The Second Social Protection Package (104 million Euros) made it possible to conduct oral hearings in court by using audio-visual transmission per video conference. The expenditures resulted from the required purchase of teleconference software for the labour and social welfare courts and from the already mentioned extension of the short-time working allowances and Unemployment Benefits (Hartz IV benefits), which resulted in a considerable increase in the number of requests. 3. Impacts of New Legislation 87

3.3 Ex-ante Scrutiny of Compliance Costs from EU Legislation

Fig. 27: Flow chart of the CION Proposal Council of the and Impact European Union EU ex-ante Procedure Assessment EU Level § § better negotiating € € position thanks to € cost transparency Federal Government

§ NKR NKR Opinion NKR-Stellungnahme an National Level NKR federführendes Draft Proposal of the € Bundesressort § EU Commission

EU Commission Annual Compliance Costs Cost Impact NKR Impact Assessment across the EU Assessment for scrutinises € over €35 million? Cost Impact Federal Government € Assessment Impact Assessment €

Since 2016, the Federal Ministries and the NKR have been scrutinising legislative proposals of the EU Commission specifically with a view to potential financial impacts for Germany. The aim of the review is to identify high or unnecessary compliance costs arising from EU law at an early stage. On the basis of the results gained, the ministries are to speak out in favour of solutions involving as little effort as possible. During the reporting period of 2019/2020, the EU Commission has published no legislative proposals which would lead to significant compliance costs as defined in the EU ex-ante procedure. The EU Commission was almost exclusively concerned with the negotiation of the new multiannual financial framework and the funding programmes based on it. As a result, none of the 34 EU projects published during the reporting period required a German impact assessment with an opinion of the NKR. However, in view of the anti-crisis and economic recovery measures of the EU, it will be more important in future to keep an eye on the compliance costs from EU regulatory initiatives as early as possible.

So far, the EU ex-ante procedure has been organised as a purely internal EU Ex Ante Procedure: government procedure. The reason for this is that businesses have no op- Economy & Bundestag portunity to bring their expertise on potential compliance costs in Germany Remain Excluded to bear, and the German Bundestag is not kept apprised of the results. This is in clear contrast to the importance of EU legislation for citizens and businesses in Germany. 4. Annex 4. Annex 89

4. Annex

4.1 NKR Proposals for Burden Relief in Light of the COVID-19 Pandemic

"Economic stimulus package for free: Proposals for less bureaucracy, more liquidity and faster planning and approval procedures" (end of May 2020):

More Liquidity for Companies

1. Improve depreciation of low-value assets: To this end, the limit for immediate depreciation of low-value assets and the limit for pool depreciation should be raised to 1,000 Euros and 1,500 Euros respectively. This would noticeably re- lieve companies of bureaucracy and provide considerable additional liquidity.

2. extend the option for actual taxation: companies have significantly more liquidity available if they only have to pay the VAT after the customer has paid the invoice and not already when the invoice has been issued but the customer's payment is still outstanding. The current turnover limit of 600,000 Euros, up to which companies can use the so-called actual taxation, should therefore be raised to 800,000 Euros. See also point 6.

Reduction of Bureaucracy

3. Moratorium on additional burdens on companies, i.e. • no new information obligations for companies until the end of 2021 as a result of statutory regulations; any additional burden on companies requires a separate justification if the regulation takes effect before the end of 2021. • Burdens on companies arising from statutory regulations that have already been adopted but have not yet come into force (e.g. introduction of special cash registers) will be reviewed by a Cabinet committee. If possible, burdensome regulations will not take effect before the end of 2021.

4. Raising the tax limit for corporate income and trade tax liability for small associations to a uniform 50,000 Euros: non-profit associations can distribute the corporate income and trade tax exemption thresholds/exemptions not used in 2020 over the next three calendar years in addition to the annual amounts.

5. Shortening of the commercial and tax law retention periods from 10 years to 5 years (in stages: in 2021 down to 8 years, in 2024 down to 6 years, in 2025 down to 5 years): in addition to more office space, this will create additional financial leeway of over 3 billion euros for companies in the longer term.

6. Raising the commercial and tax turnover limit for the obligation to keep accounts and the limit for the preparation of the management report and notes for corporations from 600,000 Euros to 800,000 Euros Increase of the profit limit for commercial enterprises and companies in agriculture and forestry from 60,000 Euro to 80,000 Euro. Similarly, the limits for micro corporations and small corporations, from which an appendix or management report must be prepared, should be raised significantly. See also point 2. 90 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

7. Raising the Limit for Submitting Advance VAT Returns: The limits for submitting advance VAT returns should be raised from 1,000 Euros to 1,500 Euros for quarterly returns and from 7,500 Euros to 9,000 Euros for monthly returns. The adjustment would mean that small companies in particular would not have to submit advance VAT returns, or would have to do so less frequently.

Planning and Approval Procedures

8. Delimitation of the Planning Security Act: The Planning Security Act only applies to planning and approval procedures that are announced by 31.03.2021. In addition to the possibility of publication on the Internet, documents can also be published there instead of being displayed. Furthermore, a physical discussion date can be replaced by an online consultation, not least because of the high costs regularly associated with this. The alternative opened up by the Planning Security Act should be permanent.

9. Digitization of official files in approval procedures:In analogy to the building permit procedures that are already possible in some cases online, official files in approval procedures should be kept in digital form. This leads to parallel and time-independent access for all authorities involved and at the same time enables a constantly updated overview of the status of the procedure. This, too, should help to speed up the procedures.

10. Speed up legal proceedings on infrastructure projects - set an early initial deadline: Setting an early first date after the statement of claim and reply has proven its worth for decades in civil and labor courts as a means of reaching an amicable settlement. The introduction of a mandatory early first hearing date in administrative courts would result in the rapporteur in court discussing a procedural timetable with the parties involved at an early stage. This would direct the further presentation to the issues relevant to the decision. 4. Annex 91

4.2 NKR Expert Report 2019 “Content First, Legal Text Second”: Implementation Recommendations

The Work Programme 2018 for Better Legislation and the Reduction of Bureaucracy gives the preparation of Federal Gover- nment bills a new structure. As a Cabinet decision, the work programme thus updates the chapter Legislation of the Joint Rules of Procedure of the Federal Ministries (GGO).

In future, Federal Ministries - jointly with the addressees of a new piece of legislation - are to • discuss the basic problem and the intended solution, • check the practical suitability and effectiveness of regulatory alternatives,

“before draft texts are written in detail and finalised”. The Cabinet will discuss the draft only after the discussion and test phase has been completed and the regulations have been adapted accordingly.

The NKR Expert Report sets out the innovation task in key recommendations, some of which have already been implemented in the GGO as well as in the 2018 Work Programme.

The following recommendations can be applied immediately:

• the objectives paper, • the effectiveness test, • the practical suitability and enforceability check, • the advanced stakeholder participation.

1. Objectives Paper

As an innovation, the report recommends the preparation of a draft regulation with a so-called objectives paper. The objectives paper transmits a political regulation task from the executive level to the specialist level without specifying any approach to the solution. As the 2018 Work Programme also sets out, the approach to any solution should be developped at a specialist level first, where it can be discussed with stakeholders and tested out before the legal text is being written. In this respect, the objectives paper differs fundamentally from the key issue paper that has been used so far in a few cases.

This innovation dovetails with applicable GGO guidelines: Even today, any draft piece of legislation must contain an expla- nation which individual specifications were derived from a political regulation task (objectives) and are thus required.

2. Effectiveness Check

An effectiveness check on the basis of facts, which is already included in the Work Programme and which is explicitly recommended by the NKR Expertise, makes it possible to see if and how certain measures and/or solution options take effect in practical implementation. 92 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

However, the GGO only contain the respective requirement but no systemised methodology for determining and describ- ing the intended and long-term effects, the unintended side effects and other solution options as well. The check for the expected effectiveness of the intended regulation which can range from simple estimates through statistically strict sim- ulations to experiments under real-life conditions must first ask more precisely which factors and measures will probably influence the effectiveness of a regulation. This is to fill the methodological gap.

3. Practical Suitability and Enforceability Check

Quality criteria of better regulation that have been given absolute priority in the Work Programme 2018 are “the practical aspects of implementation and enforcement”. In this context, the NKR Expertise proposes the introduction of a check for practicality that simulates administrative processes and thus makes impediments to enforcement perceivable. Just like the effectiveness check, the check for practicality fills a methodological gap: Conducted with the involvement of the holders of enforcement knowledge and/or by means of IT support, it conveys any required insights, for example,

• on the organisational or technical aspects of enforcement, • on administrative simplification, possibly by social self-regulation, • on the administrative procedures of the Federal states.

Thus, the practicability check makes it possible to choose an approach which does not only guarantee its effectiveness and user-friendliness, but also ensures that the new rules can be enforced. The cooperation of desk officers, possibly from the co-signing ministries, with norm addressees and representatives of implementing authorities has proven worthwhile. The workshops on OZG projects in so-called legislation laboratories. Thus, options can be tested if they facilitate digital solutions. The idea of practicality checks can even be found in the GGO where they are listed under “catalogue of checks” and related to the individual aspect of governmental vs. social regulation and implementation structures.

4. Stakeholder Participation

The political objective, the solution approaches derived therefrom and the results of the effectiveness check as well as the check for practicality ought to be subject to an early participation of stakeholders from within and outside the government for whose arrangement the NKR Expertise recommends advanced standards.

• Unlike in the past, the official involvement of stakeholders should not start after the competent ministry has already formulated a draft legal text. On the contrary, other public authorities as well as potential norm addressees ought to be given an opportunity to comment already upon their possibly informal involvement in the effectiveness check and the checks for practicality. In this way, their opinion can be taken into account when the draft is prepared.

• The later participation in the draft itself will remain unaffected by the conversion to a two-stage process. However, this conversion ensures a high probability of user friendly and enforceable draft regulations - just as intended by the Work Programme 2018 (“before draft texts are elaborated in detail and formulated”). As shown above under 3. (practical suitability and enforceability check), the stakeholder involvement can be done in time-saving practical workshops. 4. Annex 93

4.3 List of NKR Expert Reports and Joint Publications

Datum Titel 04/2013 Quantifying Benefits of New Legislation. Comparative International Experience. 10/2013 Expert Report on Performing Ex post-Evaluations - Good Practice and Experience from Other Countries 2014 OECD Regulatory Compliance Cost Assessment Guidance 02/2015 Enforcement-Focused Legislation: How Can EU, Federal, State and Local Authorities Reduce and More Accurately Determine the Compliance Costs of Legal Provisions? 11/2015 E-Government in Germany: From Descent to Ascent. 06/2016 E-Government in Deutschland: How Real Progress Can Be Led to Success. A Work Programme. 10/2017 More Performance for Citizens and Businesses: Digital Access to Public Services. Modern Registries. 04/2019 Opportunities for Speeding up Administrative Court Proceedings Pertaining to Projects for the Construction of Infrastructure Facilities and Industrial Installations. 10/2019 NKR Expert Report „Content First, Legal Text Second.“ 94 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

4.4 Evaluation of Regulatory Initiatives 2020-2021

Year Ministry Title of Legislation 2020 BMF Ordinance on the Specification of the Rules of Conduct and Organisational Requirements for Investment Service Companies 2020 BMF Second Financial Market Regulations Amendment Act based on European Law 2020 BMI Processing of Passenger Data Act to Implement Directive (EU) 2016/681 2020 BMVI Ninth Amendment Act to the Railway Regulations 2020 BMU Second Amendment Act to the Closed Substance Cycle Act 2020 BMVI Act to Promote Competition in the Railway Sector 2020 BMU Ordinance on Installations for Handling Substances Hazardous to Water 2020 BMJV Act Introducing a Storage Obligation and a Maximum Storage Period for Traffic Data 2020 BMJV Mortgage Credit Directive Implementation Act 2020 BMI Security of IT-Systems Improvement Act 2020 BMAS Artists‘ Social Insurance Contributions Stabilisation Act 2020 BMWi First Amendment Act on Energy Services and Other Energy Efficiency Measures 2020 BMAS First Ordinance Governing the Product Safety Act 2020 BMF Ordinance on the Audit of the Annual Financial Statements of Credit Institutions and Financial Services Institutions as well as on the Reports to be Prepared as a Result 2020 BMU Reform Act Governing the Sale, Return and Environmentally Sound Disposal of Electrical and Electronic Equipment 2020 BMJV Act to Improve Enforcement of the Law in Social Networks 2020 BMF KfW Ordinance 2020 BMF Act Implementing the Directive on the Comparability of Fees Related to Payment Accounts, Payment Account Switching and Access to Payment Accounts with Basic Features 2020 BMJV Strengthening Victims‘ Rights in Criminal Proceedings Act 2020 BMU Ordinance on the Management of Municipal Commercial Waste and of Certain Construction and Demolition Waste 2020 BMAS Occupational Retirement Provision Strengthening Act and Further Amendments 2021 BMFSFJ Child Day Care Quality Improvement Act 2021 BMJV Act Introducing the Electronic File in Criminal Matters and Further Promoting Electronic Legal Proceedings 2021 BMF Financial Supervision of Insurance Undertakings Modernisation Act 2021 BMVG Ordinance on the Working Time of Soldiers 2021 BMF Act Implementing the 4th Directive for the Prevention of Money-Laundering, Implementing the Regulation on Infor- mation on the Payer Accompanying Transfers of Funds and on the Reorganisation of the Financial Intelligence Unit 2021 BMF Ordinance Amending the Payment Institutions Audit Report Ordinance 2021 BMU Act Amending the Federal Water Resources Act and the Federal Nature Conservation Act in Order to Prohibit or Minimise the Risks of Fracking Technology Procedures 2021 BMWi Law on the Extension of Mining Damage Liability to Borehole Mining and Caverns 4. Annex 95

2021 BMWi Regulation on the Introduction of Environmental Impact Assessment and Mining Act Requirements for the Use of the Fracking Technology 2021 BMFSFJ Prostitution Sector Regulation and Sex Worker Protection Act 2021 BMEL EU Tobacco Products Directive (2014/40/EU) Implementation Act and Ordinance for Implementing the Verordnung EU Tobacco Products Directive regarding Tobacco and Related Products 2021 BMI Data Protection Law Amendment Act to harmonise National Law with the DataProection Directive and EU Directive (EU) 2016/680 Implementation Act 2021 BMWi Implementation Act Directive on Statutory Audits of Annual Accounts and Consolidated Accounts (SAD 2006/43/ EC) as amended by Directive 2014/56/EU as well as Regulation (EU) 537/2014 Specific Requirements Regarding Statutory Audit of Public-Interest Entities 2021 BMAS Law on the Extension of Temporary Employment Promotion Regulations In and Transposition of Directive (EU) 2016/2102 on Barrier-Free Access to the Websites and Mobile Applications of Public Authorities Raising the Limit for Submitting Advance VAT Returns 2021 BMWi Responsibilities for Nuclear Waste Management Reform Act 2021 BMF Combatting Tax Avoidance Act and Amendments to other tax code provisions 2021 BMU Implementation Act for Obligations under the Nagoya Protocol and Regulation (EU) 511/2014 of 16 April 2014 2021 BMI Information Exchange Improvement Act for Combatting International Terrorism 2021 BK Cultural Heritage Law Reform Act 2021 BMAS Integration Act 2021 BMU Ordinance on the Protection of Surface Waters 2021 BMEL Ordinance on the Implementation of Monitoring for the Early Detection of African Swine Fever in Feral Pigs 2021 BMAS Tenth Amendment Act on the German Social Code Volume II Gesetz - Creation of new Employment Participation Opportunities for Long-Term Unemployed Jobseekers at the Regular Labour Market and the Social Labour Market 2021 BMVI Act on the Introduction of an Infrastructure Charge for the Use of the German Federal Trunk Road Network 2021 BK Law on the Foreign Telecommunications Reconnaissance of the Federal Intelligence Service 2021 BMEL Law on the Adoption and Amendment of Market Regulations and on the Amendment of the Income Tax Act 2021 BMEL Ordinance on the Handling of Nutrients on the Farm and Amending Other Regulations 2021 BMWi Revision of the Renewable Energy Sources Act , Combined Heat & Power Generation Act and Further Energy Law Provisions 2021 BMU Federal Climate Protection Act 2021 BMVI First Ordinance Amending the Professional Truck Driver Qualification Ordinance and other traffic law provisions 2021 BMF Economic Stabilisation Fund Act and other related ordinances 96 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

4.5 Key NKR Diary Dates in 2019/20

Date Event NKR Participantes Key Dates from July 2019 02.07.-03.07. Visit of a Delegation from the Austrian Federal Government (Federal Ministry of Constitutional Affairs, Dr Ludewig 2019 Reforms, Deregulation and Justice as well as the Federal Ministry for Arts, Culture, the Civil Service and Sports), Berlin 03.07.2019 Discussion with Wolfram Seitz-Schüle (Managing Director at the Chamber of Skilled Crafts in the Störr-Ritter SouthernUpper Rhine Region) on Better Regulation, Freiburg 05.07.2019 Discussion with Staatsminister Dr Hendrik Hoppenstedt, Berlin Störr-Ritter 05.07.2019 Meeting of the National Regulatory Control Council, Berlin NKR 09.07.2019 Participation at the 2nd Meeting of the Strategic Group Committee for eLegislation, Berlin Prof Dr Kuhlmann 10.07.2019 Discussion with Minister of State Dr Hendrik Hoppenstedt and the Executive Managers of the Um- Dr Ludewig, brella Organisations of the German Economy, Berlin Prof. Dr Kuhlmann, Schleyer 19.07.2019 Meeting of the National Regulatory Control Council, Berlin NKR 07.08.2019 Discussion with Prof Dr Helge Braun (Head of the Federal Chancellery), Berlin Dr Ludewig 29.08.2019 Meeting of the National Regulatory Control Council, Berlin NKR 29.08.2019 Discussion with State Secretary Klaus Vitt (Federal Interior Ministry), Berlin Dr Ludewig 29.08.2019 Discussion with Dr Ruge on Digital Transformation and the Modernisation of Public Services at the Störr-Ritter Association of German Districts, Berlin 06.09.2019 Meeting of the National Regulatory Control Council, Berlin NKR 11.09.2019 Convention of the Economic Advisory Council of the CDU on "Bureaucratic Burdens as a Competi- Dr Ludewig tive Disadvage – What can we expect from the Third Bureaucracy Relief Package?", Berlin 18.09.2019 Meeting of the National Regulatory Control Council, Berlin NKR 18.09.2019 Discussion with Members of Executive Board of the Association of German Districts on getting more Störr-Ritter input from districts for the assessment of compliance costs, Merseburg 20.09.-21.09. Creative Bureaucracy Festival, Berlin Dr Ludewig, 2019 Störr-Ritter, Prof Dr Kuhlmann, Dr Holtschneider 23.09.2019 Exchange on "Cutting Red Tape" with the Bavarian State Ministry for Finance & Home Affairs, Munich Schleyer 24.09.2019 Discussion on the Bureaucratic Burdens on Businesses (particularly SMEs) with Representatives of Schleyer the Executive Management Boards of the Umrella Organisation of the German Chamber of Com- merce, the Federation of German Industries, the Association of German Employers and the German Confederation of Skilled Crafts, Berlin 30.09.2019 Second Advisory Council Meeting on the Project „Bureaucracy Brake in Practice“ of the German Prof Dr Mayer- Chamber of Commerce Umrella Organisation, Berlin Bonde 01.10.2019 Presentation at the Regulatory Policy Conference; Frankfurt School of Finance & Management, Frankfurt Dr Ludewig 09.10.2019 Meeting of the National Regulatory Control Council; Guest: Prof Dr Claudia Buch (Vice President of NKR the German Bundesbank), Berlin 4. Annex 97

09.10.2019 Discussion with Christian Lipicki (Head of Unit, Federal Ministry for Economic Affairs & Energy, Berlin Störr-Ritter 22.10.2019 Mid-Term Stock-Taking Conference and Handover Ceremony of the NKR Annual Report 2019 to NKR Federal Chancellor Dr Angela Merkel at the Federal Chancellery, Berlin 22.10.2019 Informal RegWatchEurope Board Meeting, Berlin Dr Ludewig, Prof Dr Kuhlmann 23.10.2019 Discussion with a Delegation of the Institute for Law-Making of the Usbek Parliament at the Grieser Federal Chancellery, Berlin 23.10.2019 Smart Country Convention, Berlin Dr Holtschneider 24.10.2019 Smart Country Convention, Berlin Störr-Ritter 13.11.2019 Discussion with Deloitte GmbH on Sectoral Regulatory Burdens, Berlin Dr Ludewig 13.11.2019 Interdepartmental Meeting for preparing the next meeting of the Parliamentary Committee on Dr Ludewig Bureaucracy Reduction, Berlin 15.11.2019 Meeting of the National Regulatory Control Council, Berlin NKR 18.11.2019 Second Meeting of the Programme Advisory Council on the 8. Future Convention of the State & Dr Ludewig Public Administration 2020, Berlin 20.11.2019 Discussion with Federal Minister Julia Klöckner (Federal Ministry for Food and Agriculture) Berlin Dr Ludewig, Störr-Ritter 26.11.2019 Discussion with Economic Affairs Working Group of the Parliamentary CDU/CSU, Berlin Dr Ludewig 26.11.2019 Parliamentary Committee on Bureaucracy Reduction, Berlin Dr Ludewig 26.11.2019 Town Hall Talk on How to Accelerate Planning Procedures (Ministry of Transport and the State of Dr Holtschneider North Rhine-Westphalia), Düsseldorf 26.11.2019 Discussion with State Councillor Hans-Henning Lühr, CIO Bremen, Berlin Dr Ludewig 28.11.2019 Discussion with Markus Herbrand, MdB Schleyer 29.11.2019 Discussion with Prof Dr Friederike Welter, President of the Institute for SME Research Bonn, Berlin Dr Ludewig 29.11.2019 Meeting of the National Regulatory Control Council, Berlin NKR 29.11.2019 Discussion with the Council of Experts for Consumer Affairs (Federal Justice Ministry) Berlin Dr Holtschneider 03.12.- RegWatchEurope Board Meeting, Helsinki Dr Ludewig, 04.12.2019 Prof Dr Kuhlmann 05.12.2019 Discussion with Federal Minister Andreas Scheuer, (Federal Transport Ministry), Berlin Dr Ludewig, Grieser 09.12.2019 Participation at a Meeting of the Parliamentary CDU/CSU on the „Digital Public Administration Dr Ludewig Monitor #3“, Berlin 10.12.2019 Presentation of the NKR Study "Opportunities for Speeding up Administrative Court Proceedings Prof. Dr Versteyl Pertaining to Projects for the Construction of Infrastructure Facilities and Industrial Installations" at the Working Group "Justice and Consumer Protection" of the CDU/CSU Parliamenatry Group, Berlin 13.12.2019 Presentation at the SME and Skilled Crafts Working Group of the Parliamentary FDP, Berlin Dr Ludewig 13.12.2019 Discussion with MEP Dr Markus Pieper, Berlin Dr Ludewig 16.12.2019 Discussion with Gundula Rossbach (President of the German Statutory Pension Insurance), Berlin Dr Ludewig, Dr Dückert 17.12.2019 Meeting of the National Regulatory Control Council, Berlin NKR 98 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Date Event NKR Participant Key Dates from January 2020 16.01.2020 Discussion with Ilja Nothnagel (Member of the Executive Management Board, German Chamber of Schleyer Commerce Umrella Organisation) on E-Government, Berlin 17.01.2020 Meeting of the National Regulatory Control Council, Berlin NKR 17.01.2020 Third Advisory Council Meeting on the Project „Bureaucracy Brake in Practice“ of the German Prof Dr Mayer-Bonde Chamber of Commerce Umrella Organisation, Berlin 22.01.2020 Discussion with Margot Selz (Chairperson of the Action Groups) on Better Regulation, and ex- Störr-Ritter change with Prof Dr Dr Lars Feld, Walter Eucken Institute, Freiburg 23.01.2020 Discussion with Dr Thomas Kriedel (National Association of Statutory Health Insurance Physicians), Wicklein Berlin 27.01.2020 Discussion with Minister Dr Thomas Schäfer (Hesse Ministry of Finance), Berlin Dr Ludewig 30.01.2020 Discussion with Dr Carsten Linnemann, MdB, Chair of the SME and Economics Union, Berlin Dr Ludewig 31.01.2020 Discussion between Vice President Maros Šefčovič (European Commission) and RegWatchEurope Dr Ludewig on the occasion of the handover of the rotating RegWatchEurope-chairmanship, Brussels 04.02.2020 Hearing on one-off and annual burdens for the Public Services generated by the Introduction of Dr Ludewig, the Basic Pension and on options for cutting burdens with State Secretary Rolf Schmachtenberg Dr Dückert, (Federal Labour Ministry), Rolf Möhlenbrock (Federal Finance Ministry), Gundula Rossbach Ross- Schleyer bach (President of the German Pension Insurance) at the invitation of the NKR, Berlin 06.02.2020 Discussion with State Secretary Dr Margaretha Sudhof on the platform eNotar (Federal Ministry Dr Holtschneider for Justice and Consumer Protection), Berlin 14.02.2020 Discussion with Federal Minister Hubertus Heil (Federal Ministry for Labour and Social Affairs), Dr Dückert Berlin 14.02.2020 Meeting of the National Regulatory Control Council, Berlin NKR 20.02.2020 DIHK Convention "Less Bureaucracy, More Enterprise" with Panel Discussion, Berlin Prof Dr Mayer-Bonde 24.02-25.02. Presentation "Local Government 2030: Digital Transformation, Organisational Change and Governance" Prof Dr Kuhlmann 2020 at the Bremen Debate on Digital Statesmanship, Bremen 02.03.2020 Discussion with Ulrich Silberbach (Federal Chairman of the German Civil Service Association), Störr-Ritter Berlin 03.03-04.03. Digital State Conference (for the moderation of panel discussions), Berlin Dr Holtschneider, 2020 Störr-Ritter 06.03.2020 Radio Talk-Show on: "Construction Stop Thanks to Bureaucracy – Will Regulation Mania Put our Prof Dr Kuhlmann Germany's Economic Position at Risk?", Berlin 13.03.2020 Discussion with Minister of State Oliver Schenk (CdS Sachsen), Berlin Dr Ludewig 19.03.2020 Kick-Off Event of the Network on Better Regulation and Bureaucracy Reduction (Baden-Wuert- Prof Dr Kuhlmann temberg), by phone

30.03.2020 Workshop on 'One-in, one-out' with European Commission Representatives, via Video Conference Dr Ludewig, Prof Dr Kuhlmann 4. Annex 99

21.04.2020 Symposium of the Regulatory Control Council Baden-Wuerttemberg, Stuttgart, Prof Dr Mayer-Bonde, via Video Conference Störr-Ritter 24.04.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR 04.05.2020 Discussion with Carsten Pillath (General Director at European Council), by phone Dr Ludewig 06.05.2020 Discussion with Paul Mollerup (Chairperson of the Danish Business Regulation Forum), by phone Dr Ludewig 11.05.2020 Discussion with Kirsten Scholl (Director, Federal Ministry for Economic Affairs and Energy), by phone Dr Ludewig 14.05.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR 27.05.2020 Meeting of the Finance Committee of the German Bundestag not open to the public) on the draft Schleyer bill for transferring oversight over financial investment brokers to the BaFin, Berlin 28.05.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR

03.06.2020 RegWatchEurope Board Meeting, via Video Conference Dr Ludewig, Prof Dr Kuhlmann 05.06.2020 Discussion with Federal Minister Horst Seehofer (Federal Ministry of the Interior, Construction and Dr Ludewig Home Affairs), Berlin 07.06.2020 Video Conference with Alfred Bindels (Director, Federal Ministry of Justice and Consumer Protection) Dr Holtschneider on the NKR Expert Report „Contents First, Legal Paragraphs Second“ 08.06.2020 Discussion with State Secretary Dr Markus Richter (Federal Ministry of the Interior, Construction and Dr Ludewig Home Affairs), Berlin

09.06.2020 Meeting with Federal Minister Prof Dr Helge Braun and Minister of State Hendrik Hoppenstedt Dr Ludewig (Federal Chancellery), Berlin 10.06.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR 25.06.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR 03.07.2020 Discussion with Representatives of the Executive Management Boards of the Umrella Organisation Dr Ludewig, of the German Chamber of Commerce, the Federation of German Industries, the Association of Schleyer German Employers and the German Confederation of Skilled Crafts, Berlin 06.07.2020 Panel Diskussion on the NKR Expert Report „Contents First, Legal Paragraphs Second“ with Nadine Dr Holtschneider Schön (MdB and Deputy Chair of the Parliamentary CDU/CSU) and Prof Dr Jörg Müller-Lietzkow (President of the HafenCity-University Hamburg), via Video Conference 10.07.2020 Meeting of the National Regulatory Control Council, via Video Conference NKR 13.07.2020 Discussion with Karin Maag (MdB and Health Policy Spokesperson of the Parliamentary CDU/CSU, Wicklein Berlin 100 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

4.6 Overview of NKR Rapporteurs

Ressort Rapporteur Member of Staff at the NKR-Sekretariat Federal Chancellery Dr Johannes Ludewig Dr Thomas Danken Federal Foreign Office Dr Johannes Ludewig Kathleen Jennrich Federal Interior Ministry of the Interior, Building and Commu- Prof Dr Sabine Kuhlmann Hannes Kühn, nity Dr Thomas Danken Federal Ministry of Justice and Consumer Protection Dr Rainer Holtschneider, Dr Bertil Sander

Federal Ministry of Finance Hanns-Eberhard Schleyer Lisann Bruchmann, Kath- leen Jennrich Federal Ministry for Economic Affairs and Energy Prof Dr Conny Mayer-Bonde Pawel Janowski Federal Ministry of Labour and Social Affairs Dr Thea Dückert Sandra Matk Federal Ministry of Food and Agriculture Dorothea Störr-Ritter Dr Janina Hatt Federal Ministry of Defence Dr Johannes Ludewig Dr Janina Hatt Federal Ministry for Family Affairs, Senior Citizens, Women Dr Thea Dückert Sandra Matk and Youth Federal Ministry of Health Andrea Wicklein Maximilian von Koppenfels Federal Ministry of Transport and DigitalInfrastructure Gudrun Grieser Lutz Engelmann Federal Ministry for the Environment, Nature Conservation, Prof Dr Andrea Versteyl Dr Sabine Karl and Nuclear Safety Federal Ministry of Education and Research Gudrun Grieser Dr Thomas Danken Federal Ministry for Economic Cooperation and Development Hanns-Eberhardt Schleyer Kathleen Jennrich

NKR Commissioner for E-Government Dorothea Störr-Ritter

NKR Secretariat

Head of Team: Florian Spengler

Team: Caroline Bernhardt, Lisann Bruchmann, Dr Thomas Danken, Lutz Engelmann, Manuela Gudat, Dr Janina Hatt, Sandra Hub, Pawel Janowski, Kathleen Jennrich, Thomas Kahl, Petra Kammer, Dr Sabine Karl, Hannes Kühn, Sandra Matk, Dr Bertil Sander, Maximilian von Koppenfels 4. Annex 101

4.7 Overview over NKR-Members from Previous Terms of Office

Members of the National Regulatory Control Council (1st term of office 2006-2011) Dr Ludewig, Johannes (Chairperson) Catenhusen, Wolf-Michael (Deputy Chairperson) Bachmaier, Hermann Dr Barbier, Hans D. (until 02/2010) Prof Dr Färber, Gisela Funke, Rainer (from 02/2010) Kreibohm, Henning Dr Schoser, Franz (from 12/2006) Prof Dr Snower, Dennis J. (until 12/2006) Prof Dr Wittmann, Johann Lechner, Sebastian (following the expansion of the Council to 10 members from 03/2011) Prof Dr Versteyl, Andrea (following the expansion of the Council to 10 members from 03/2011)

Members of the National Regulatory Control Council (2nd term of office 2011-2016) Dr Ludewig, Johannes (Chairperson) Catenhusen, Wolf-Michael (Deputy Chairperson) Dr Dückert, Thea Funke, Rainer (until 09/2016) Grieser, Gudrun Hahlen, Johann (from 03/2013 until 09/2016) Prof Dr Kuhlmann, Sabine Lechner, Sebastian (until 03/2013) Schleyer, Hanns-Eberhard Störr-Ritter, Dorothea Prof Dr Versteyl, Andrea

Members of the National Regulatory Control Council (3rd term of office 2016-2021) Dr Ludewig, Johannes (Chairperson) Prof Dr Kuhlmann, Sabine (Deputy Chairperson) Catenhusen, Wolf-Michael (until 05/2019) Dr Dückert, Thea Grieser, Gudrun Dr Holtschneider, Rainer Schleyer, Hanns-Eberhard Störr-Ritter, Dorothea Prof Dr Versteyl, Andrea Prof Dr Cornelia Mayer-Bonde Andrea Wicklein (from 9/2019) 102 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

Overview of State Secretaries for Cutting Red Tape in the Federal Chancellery since 2005: Minister of State Hildegard Müller, 11/2005 to 09/2008 State Secretary Hans Bernhard Beus, 10/2006 to 12/2007, deputising for Minister of State Hildegard Müller Minister of State Hermann Groehe, 10/2008 to 10/2009 Minister of State Eckardt von Klaeden, 10/2009 to 09/2013 Minister of State Prof Dr Helge Braun, 12/2013 to 03/2018 Minister of State Dr Hendrik Hoppenstedt, since 03/2018 4. Annex 103

4.8 Abbreviations and Acronyms

BA Bundesagentur für Arbeit (Federal Employment Agency) BaFin Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority) BBK Bundesamt für Bevölkerungsschutz und Katastrophenhilfe (Federal Office of Civil Protection and Disaster Assistance) BAMF Bundesamt für Migration und Flüchtlinge (Federal Office for Migration and Refugees) BEG III German Acronym for "Drittes Bürokratieentlastungsgesetz" (Third Bureaucracy Relief Act) BEPS Base Erosion and Profit Shifting BKAmt Acronym for Bundeskanzleramt (Federal Chancellery) BKI Acronym for "Bürokratiekostenindex" (Cost of Bureaucracy Index) AGB Acronym for "Allgemeine Geschäftsbedingungen" (General Terms and Conditions) ATR Adviescollege Toetsing Regeldruk (from the Netherlands) AZR Acronym for "Ausländerzentralregister" (Central Register of Foreigners) BAMF Bundesamt für Migration und Flüchtlinge Federal (Office for Migration and Refugees) BB Brandenburg, Federal State BE Berlin, Federal State BKI Bürokratiekostenindex (bureaucracy cost index) BMAS Acronym for the Federal Ministry of Labour and Social Affairs (Federal Labour Ministry) BMEL Acronym for the Federal Ministry of Food and Agriculture (Federal Agriculture Ministry) BMF cronym for the Federal Ministry of Finance (Federal Finance Ministry) BMFSFJ Acronym for the Federal Ministry of Families, Senior Citizens, Women and Youth (Federal Families Ministry) BMG Acronym for the Federal Ministry for Health (Federal Health Ministry) BMI Acronym for the Federal Ministry of the Interior, Building and Community (Federal Interior Ministry) BMJV Acronym for the Federal Ministry of Justice and Consumer Protection (Federal Justice Ministry) BMU Acronym for the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (Federal Environment Ministry) BMVI Federal Ministry of Transport and Digital Infrastructure (Federal Transport Ministry) BMWi Federal Ministry for Economic Affairs and Energy (Federal Economics Ministry) BW Baden-Württemberg (Baden-Wuerttemberg), Federal State BY Bayern (Bavaria), Federal State BZSt Bundeszentralamt für Steuern (Federal Central Tax Authority) CIO Chief Information Officer CDU Christlich Demokratische Union (Christian Democratic Union) CSU Christlich-Soziale Union (Christian-Social Union) DESI Digital Economy and Society Index DIHK Deutscher Industrie- und Handelskammertag (German Chambers of Industry and Commerce) DSGV Deutscher Sparkassen- und Giroverband (German Savings Bank Association) ERBEX ERfüllungsaufwand Berechnen EX ante (ex ante-calculation of compliance costs) 104 NATIONAL REGULATORY CONTROL COUNCIL ANNUAL REPORT 2020

EU European Union FCRIA Finnish Council of Regulatory Impact Analysis FITKO Föderale IT-Kooperationen (Federal IT Cooperations) FIT-Store Föderaler IT-Store (=exchange platform for IT solutions, Federal App-Store) FKS Finanzkontrolle Schwarzarbeit (special unit for monitoring undeclared work) GG Grundgesetz (Basic Law) GGO Gemeinsame Geschäftsordnung der Bundesministerien (Joint Rules of Procedure of the Federal Ministries) HB Bremen, Federal State HE Hessen (Hesse), Federal State HH Hamburg, Federal State IT Information technology KoSIT Koordinierungsstelle für IT-Standards (Coordinating Agency for IT Standards) MV Mecklenburg-Vorpommern (Mecklenburg-Western Pomerania) NBRC Norwegian Better Regulation Council NI Niedersachsen (Lower Saxony), Federal State NKR Nationaler Normenkontrollrat (National Regulatory Control Council) NKR BW Acronym for "NKR Baden-Württemberg", a State-Level Regulatory Control Council NKRG Acronym for the National Regulatory Control Council Establishment Act NW Nordrhein-Westfalen (North Rhine-Westphalia), Federal State OECD Organisation for Economic Co-operation and Development OIOO ‘one-in, one-out’-rule OZG German Acronym for "Onlinezugangsgesetz" (=Online Access Act) RIAB Regulatory Impact Assessment Board (from the Czech Republic) RP Rheinland-Pfalz (Rhineland-Palatinate), Federal State RPC Regulatory Policy Committee (United Kingdom as well as OECD) RSB Regulatory Scrutiny Board SBRC Swedish Better Regulation Council SH Schleswig-Holstein, Federal State SN Sachsen (Saxony), Federal State SL Saarland, Federal State SORMAS Infektionsforschungs-Software (Surveillance, Outbreak Response Management & Analysis System) SPD Sozialdemokratische Partei Deutschlands (Social Democrats) St-ID Steuer-Identifikationsnummer (Tax identification number) TH Thüringen (Thuringia), Federal State VPN Virtual Private Network 4. Annex 105

4.9 List of Illustrations

Figure Title Page Fig. 1 Development of annual compliance costs in the 2019/2020 reporting period 4 Fig. 2 Compliance cost monitor (as of 1 July 2020) 4 Fig. 3 One in, one out'-Monitor 2015 - 2020 (as of 1 July 2020) 5 Fig. 4 Share of COVID-19-related regulatory initiatives of one-off compliance costs 15 Fig. 5 Authorities in charge of digital transformation in the public sector - will it work? 31 Fig. 6 Service standard for the implementation of the Online Access Act (OZG) 34 Fig. 7 State of Implementation of the digital transformation in public services compared with the recommenda- 37 tions of the NKR Expert Report “eGovernment in Germany: From Descent to Ascent” Fig. 8 New standard procedural model for the ministerial preparation of regulations (NKR proposal) 40 Fig. 9 Federal Chancellor Dr Angela Merkel at the mid-term stock-taking event held by the NKR on 21 October 2019 44 Fig. 10 'One-in, one-out'-concept in Germany 57 Fig. 11 Three pillars of the SME strategy of the EU Commission, March 2020 58 Fig. 12 Additional aspects scrutinised in the opinions of the National Regulatory Control Council (number in the 63 reporting period) Fig. 13 Frequency of points of criticism in opinions of the National Regulatory Control Council (number in the 66 reporting period) Fig. 14 Compliance Costs Monitor (as of July 01, 2020) 70 Fig. 15 One-off compliance costs by norm addressee affected and by reporting period 2019/20 72 Fig. 16 Initiatives generating the greatest relief to the citizens during the reporting period 2019/20 73 Fig. 17 Initiatives imposing the greatest additional burdens on the citizens during the reporting period 2019/20 74 Fig. 18 Initiatives generating the greatest relief for businesses during the reporting period 2019/20 75 Fig. 19 Initiatives imposing the greatest annual burdens on businesses during the reporting period 2019/20 76 Fig. 20 Initiatives imposing the greatest additional bureaucracy costs to businesses in the reporting period 2019/20 78 Fig. 21 Development of the index of bureaucracy costs since the baseline measurement 78 Fig. 22 Initiatives imposing the greatest one-off compliance costs to businesses during the reporting period 2019/20 80 Fig. 23 'One-in, one-out' balance – development since 2015 82 Fig. 24 Legislation imposing the largest burden for public authorities during the reporting period 2019/20 85 Fig. 25 Legislation generating the largest annual burden relief for public authorities in the 2019/20 reporting 86 period Fig. 26 Legislation imposing the largest one-off compliance costs on public authorities in the 2019/20 reporting 86 period Fig. 27 Flow chart of the EU ex-ante Procedure 87 Photos courtesy of Page 4/5 Gabriele Diwald / Unsplash.com Page 10 Guido Bergmann/ Bundesregierung Page 12 Markus Spiske, Fusion Medical Animation / Unsplash.com Page 28 Scott Graham / Unsplash.com Page 44 Guido Bergmann/ Bundesregierung Page 60 Christian Dubovan/ Unsplash.com Page 88 Samuel Zeller / Unsplash.com

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