Small businesses are beginning to see some benefit from a range of measures aimed at reducing unnecessary paperwork and improving cash flow. A year on from the introduction of the Small Business Act, the EurActiv network looks at what governments across Europe have been doing to ease the burden on SMEs.
Elements of the Small Business Act have been embraced to varying degrees across Europe. Additional support services, changes in economic policy and steps to help SMEs compete for public projects are among the measures introduced in the last 12 months.
However, implementation has not been uniform, and the financial crisis has threatened the viability of thousands of SMEs and forced governments to step up their efforts to help companies survive the economic storm.
France
The French government has declared itself to be "100% compatible with the SBA's objectives," easing public procurement procedures and taking action to improve the environment for micro-enterprises.
France's smallest businesses have been exempted from accounting requirements, but a "micro-enterprise" is defined as a firm whose turnover does not exceed €32,000 per year. Firms beyond the threshold cannot benefit from the exemption.
Since the adoption of the Small Business Act, the French government's actions have mainly been focused on facilitating the creation of new SMEs. A website has been created on which individuals who want to launch freelance activity can fill out the necessary requirements.
The government will open a similar website addressed to all types of business by the end of 2009. The creation of these "points of single contact" ('guichets uniques') is, in fact, part of the transposition the Services Directive.
By 2011 all the formalities required by state authorities to set up a firm could be done online. In keeping with the SBA, this will cut down on duplication. By the end of June, the French government intends to present new measures to ensure the fulfilment of this objective.
UK
The British government cut VAT in December as part of a package of measures designed to stimulate consumer demand. Business lobby groups initially welcomed the move, but have since said the impact of the policy has been limited.
However, it is believed to have boosted retail sales in areas of Northern Ireland close to the border with the Republic of Ireland. Consumers from southern Ireland have been travelling north to make the most of the beneficial exchange rate and lower sales taxes.
In October 2008, to emphasise the importance of improving the business environment, British Prime Minister Gordon Brown recalled European Trade Commissioner Peter Mandelson to London. A seasoned but controversial politician, Mandelson was appointed business secretary and, following a recent shake-up of senior ministers, he was also named 'first secretary' – effectively making him the second most powerful member of Brown's cabinet.
He has said the EU must ask itself whether all the regulations coming from Brussels are really necessary and whether small companies could be exempted from them. In addition, the UK business secretary said the European Parliament must "think small first" when amending legislation. In the UK, he said, the government will look at existing legislation and ask whether it is still necessary.
To combat late payments, Mandelson introduced a new Code of Practice to ensure SMEs are paid on time. Announcing the plan in December, he said the prompt payment of bills "is an economic imperative and crucial if we are to protect supply chains from collapse". The UK government now aims to pay its suppliers within ten days.
Mandelson has also established a website which helps SMEs to bid for "lower-value" government contracts – typically below £100,000 – as part of an initiative to improve access to public funds.
Czech Republic
According to Karel Machotka, director of the business department at the Ministry of Industry and Trade, the Czech Republic cut red tape by 8% in 2007 and 2008 and hopes to achieve a 20% reduction by 2010.
Approving far-reaching amendments for micro-enterprises is seen as the biggest success to date, Machotka explained. It facilitates electronic communication with the authorities, and makes getting business licences easier. Removing the administrative burden from businesses was also reflected in amendments of waste, income tax and social insurance laws, among others.
Micro-enterprises have to follow lower accounting requirements than standard companies. Moreover, they are allowed to deduct 50% of their income as expenses, and the rest serves as a base for calculating tax.
Therefore, they do not have to keep receipts when making purchases in order to prove their expenses, as was previously required. Companies can be set up within 24 days by following 10 different administrative procedures.
Italy
More than €5 billion will be saved with the introduction of the 'Red Tape Cutting Decree', the Italian government has announced. The law simplifies the procedures for registering employees with the National Social Security Institute, decreases the number of documents needed to take part in public procurement, and reduces fire prevention obligations.
In addition, the 2009 budget changed the tax system for micro-enterprises without employees and with a net turnover of €30,000 per year, reducing and simplifying the amount of revenue due.
The Italian government has also introduced new procedures to ease the administrative burden on small businesses' activities by promoting e-government and one-stop-shop solutions. One of these procedures is the 'Single Communication', which allows entrepreneurs to register their business activity in the National Record Book in one day through chambers of commerce, and to be legally entitled to run the business.
The second step for business start-ups is the simplification of administrative documents. At the moment, the administrative permits required to establish or change an enterprise are run through an online 'Single Front Office' that connects all the local authorities involved in the procedure.
Unfortunately, not all the municipalities in Italy have embraced the one-stop shop, but the government has created an online service entitled 'Enterprise in One Day', which will be run as a national pilot project.
Starting a business can still be a lengthy process for some. Currently, businesses must wait between 45 and 120 days before being allowed to be active on the market. Firms can register in just one day, but have to wait longer to receive all the administrative documents released by the Single Front Office before starting their activity.
Businesses considered to pose an environmental risk, such as oil companies or waste treatment plants, can wait up to 180 days.
Bulgaria
The Bulgarian government has introduced measures to streamline the registration process for new enterprises. According to the Bulgarian Industrial Association, the government's decision to transform the licence regime into a registration regime is a step forward in supporting all Bulgarian enterprises, including SMEs.
The establishment of the National Registry Agency has dramatically improved the process for setting up a new enterprise, helping entrepreneurs set up new firms in just three days.
However, there are still serious administrative barriers for Bulgarian SMEs. The government is considering decreasing the insurance burden for entrepreneurs in response to the crisis.
Unlike the measures taken in France and Italy, micro-enterprises are not yet exempted from accounting requirements, as is recommended in the Small Business Act. The only exception is IT enterprises. Another perceived problem is the underdeveloped e-government system in most municipalities.
Certain steps have been taken to improve access to finance for SMEs, including the National Guarantee Fund, which has guaranteed bank loans for SMEs of 160 million leva (approximately €90 million). Recently the European Investment Fund guaranteed 400 million leva for Bulgarian SMEs.
Slovakia
Slovakia is working to improve regulations for companies as part of its economic recovery plan. In 2007, the government published a document entitled 'Better regulation in the Slovak Republic: Action programme for reducing administrative burdens in Slovakia 2007–2012'. As a part of its stimulus plan to ease impact of the current economic downturn, the Slovak government made a commitment to fully implement this action plan.
Government bodies have cooperated with entrepreneurs and associations of SMEs to define what they consider to be the biggest administrative burdens in terms of legislation. The ministry is now monitoring 48 laws in 12 areas, including accounting, taxation, commercial law and intellectual property.
The results of measuring red tape and proposed measures will be published at the end of summer 2009.
One of the approved measures is the exemption of micro-enterprises from accounting requirements. Entrepreneurs are granted exemptions from double entry accounting in cases where their business has no other employees and its income does not exceed €170,000. Expenses can be written off according to the principles of 'bookless accounting'.
It is relatively straightforward to set up a new company in Slovakia. Self-employed people can register within five working days for a standard trading license. Limited liability companies, with the suffix 'SRO', can register within 10 days.
The govenrment has launched an ambitious plan to cut red tape by 25% by 2012.
Ireland
Irish government departments now pay all bills within 15 days, as part of a national effort to address the cash flow crisis facing SMEs. Irish Deputy Prime Minister Mary Coughlan also said she would put pressure on state-backed banks to increase lending to small businesses by 10% this year.
At a meeting of enterprise ministers in Brussels last month, she proposed measures to improve access to EU procurement for SMEs, in keeping with the 'Think Small First' principle enshrined in the Small Business Act.
The government has pledged to slash burdensome regulations by 25% and commissioned a report on red tape, due to be published later this year. Coughlan has said businesses will save €20 million this year by easing the administrative requirements on small companies. This will be achieved by cutting down on paperwork and making better use of online services.
The European Union has identified small and medium-sized businesses as a central part of its economy. 99% of companies have fewer than 250 employees and provide around three quarters of all private-sector jobs.
However, small firms have complained of over-regulation, cash-flow problems, and difficulty accessing public procurement funds.
The Small Business Act was introduced in June 2008 with the aim of making the business environment more SME-friendly. Europe's smallest businesses can now be exempted from accounting requirements and efforts are underway to reduce the time it takes to set up a company.
Several measures have already been implemented, and Europe's first SME Week was held in May. Nonetheless, business lobby groups still complain of too much regulation, and delays in payments in the private sector are said to be lengthening.
EU moves to fight late payments to SMEs
