103372 Regional Profile 2016 OECD High Income Doing Business 2016 OECD HIGH INCOME 2 © 2016 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2016 OECD HIGH INCOME 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 34 Registering property .................................................................................................................. 42 Getting credit .............................................................................................................................. 52 Protecting minority investors ................................................................................................... 59 Paying taxes ................................................................................................................................ 65 Trading across borders .............................................................................................................. 76 Enforcing contracts .................................................................................................................... 89 Resolving insolvency .................................................................................................................. 96 Distance to frontier and ease of doing business ranking .................................................... 104 Resources on the Doing Business website ............................................................................ 107 Doing Business 2016 OECD HIGH INCOME 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is globally for each indicator and data for the following for a local entrepreneur to open and run a small to comparator regions: European Union (EU), East Asia and medium-size business when complying with relevant the Pacific (EAP), Europe and Central Asia (ECA), South regulations. It measures and tracks changes in Asia (SA) and Latin America.. The data in this report are regulations affecting 11 areas in the life cycle of a current as of June 1, 2015 (except for the paying taxes business: starting a business, dealing with construction indicators, which cover the period January–December permits, getting electricity, registering property, getting 2014). credit, protecting minority investors, paying taxes, The Doing Business methodology has limitations. Other trading across borders, enforcing contracts, resolving areas important to business—such as an economy’s insolvency and labor market regulation. Doing Business proximity to large markets, the quality of its 2016 presents the data for the labor market regulation infrastructure services (other than those related to indicators in an annex. The report does not present trading across borders and getting electricity), the rankings of economies on labor market regulation security of property from theft and looting, the indicators or include the topic in the aggregate distance transparency of government procurement, to frontier score or ranking on the ease of doing macroeconomic conditions or the underlying strength of business. institutions—are not directly studied by Doing Business. In a series of annual reports Doing Business presents The indicators refer to a specific type of business, quantitative indicators on business regulations and the generally a local limited liability company operating in protection of property rights that can be compared the largest business city. Because standard assumptions across 189 economies, from Afghanistan to Zimbabwe, are used in the data collection, comparisons and over time. The data set covers 47 economies in Sub- benchmarks are valid across economies. The data not Saharan Africa, 32 in Latin America and the Caribbean, 25 only highlight the extent of obstacles to doing business; in East Asia and the Pacific, 25 in Eastern Europe and they also help identify the source of those obstacles, Central Asia, 20 in the Middle East and North Africa and supporting policy makers in designing regulatory reform. 8 in South Asia, as well as 32 OECD high-income More information is available in the full report. Doing economies. The indicators are used to analyze economic Business 2016 presents the indicators, analyzes their outcomes and identify what reforms have worked, where relationship with economic outcomes and recommends and why. regulatory reforms. The data, along with information on This regional profile presents the Doing Business ordering the Doing Business 2016 report, are available on indicators for economies in OECD High Income. It also the Doing Business website at shows the regional average, the best performance http://www.doingbusiness.org. Doing Business 2016 OECD HIGH INCOME 5 THE BUSINESS ENVIRONMENT CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 OECD HIGH INCOME 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s permits, getting electricity, registering property, regulatory environment for business, a good place to getting credit, protecting minority investors, paying start is to find out how it compares with the regulatory taxes, trading across borders, enforcing contracts environment in other economies. Doing Business and resolving insolvency. The labor market provides an aggregate ranking on the ease of doing regulation indicators are not included in this year’s business based on indicator sets that measure and aggregate ease of doing business ranking, but the benchmark regulations applying to domestic small to data are presented in the economy profile. medium-size businesses through their life cycle. The ease of doing business ranking compares Economies are ranked from 1 to 189 by the ease of economies with one another; the distance to frontier doing business ranking. Doing Business presents results score benchmarks economies with respect to for 2 aggregate measures: the distance to frontier score regulatory best practice, showing the absolute and the ease of doing business ranking. The ranking of distance to the best performance on each Doing economies is determined by sorting the aggregate Business indicator. When compared across years, the distance to frontier scores, rounded to two decimals. An distance to frontier score shows how much the economy’s distance to frontier score is indicated on a regulatory environment for local entrepreneurs in an scale from 0 to 100, where 0 represents the worst economy has changed over time in absolute terms, performance and 100 the frontier. (See the chapter on while the ease of doing business ranking can show the distance to frontier and ease of doing business). only how much the regulatory environment has The 10 topics included in the ranking in Doing Business changed relative to that in other economies. 2016: starting a business, dealing with construction Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands in regional average (figure 1.2). Another perspective is the aggregate ranking on the ease of doing business is provided by the regional average rankings on the topics useful. Also useful is to know how it ranks compared with included in the ease of doing business ranking (figure 1.3) other economies in the region and compared with the and the distance to frontier scores (figures 1.4 and 1.5). Figure 1.2 How economies in OECD High Income rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population- weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 8 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - OECD High Income (Scale: Rank 189 center, Rank 1 outer edge) Regional average ranking Source: Doing Business database. Figure 1.4 Distance to frontier scores on Doing Business topics - OECD High Income (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respec t to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 9 Figure 1.5 How far has OECD High Income come in the areas measured by Doing Business? Source: Doing Business database. Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score. Doing Business 2016 OECD HIGH INCOME 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business The absolute values of the indicators tell another part of tells only part of the story, so do changes in that ranking. the story (table 1.1). Policy makers can learn much by Yearly movements in rankings can provide some comparing the indicators for their economy with those indication of changes in an economy’s regulatory for the lowest- and highest-scoring economies in the environment for firms, but they are always relative. An region as well as those for the best performers globally. economy’s ranking might change because of These comparisons may reveal unexpected strengths in developments in other economies. An economy that an area of business regulation—such as a regulatory implemented business regulation reforms may fail to rise process that can be completed with a small number of in the rankings (or may even drop) if it is passed by procedures in a few days and at a low cost. others whose business regulation reforms had a more significant impact as measured by Doing Business. Table 1.1 Summary of Doing Business indicators for OECD High Income Lowest regional Best regional Best global Indicator Regional average performance performance performance Starting a Business 107 (Germany) 1 (New Zealand) 45 1 (New Zealand) (rank) Starting a Business 83.37 (Germany) 99.96 (New Zealand) 91.63 99.96 (New Zealand) (DTF Score) Procedures (number) 9.0 (Germany) 1.0 (New Zealand) 4.7 1.0 (New Zealand*) Time (days) 30.0 (Poland) 0.5 (New Zealand) 8.3 0.5 (New Zealand) Cost (% of income per 14.5 (Korea, Rep.) 0.0 (Slovenia) 3.2 0.0 (Slovenia) capita) Paid-in min. capital (% 47.7 (Hungary) 0.0 (16 Economies*) 9.6 0.0 (105 Economies*) of income per capita) Dealing with Construction Permits 127 (Czech Republic) 3 (New Zealand) 48 1 (Singapore) (rank) Dealing with Construction Permits 62.73 (Czech Republic) 87.92 (New Zealand) 75.49 92.97 (Singapore) (DTF Score) Procedures (number) 23.0 (Hungary) 7.0 (Denmark*) 12.4 7.0 (5 Economies*) Time (days) 286.0 (Slovak Republic) 28.0 (Korea, Rep.) 152.1 26.0 (Singapore) Cost (% of warehouse 6.2 (Ireland) 0.1 (Slovak Republic) 1.7 0.0 (Qatar) value) Building quality control 8.0 (Korea, Rep.) 15.0 (New Zealand) 11.4 15.0 (New Zealand) index (0-15) Getting Electricity 117 (Hungary) 1 (Korea, Rep.) 37 1 (Korea, Rep.) (rank) Doing Business 2016 OECD HIGH INCOME 11 Lowest regional Best regional Best global Indicator Regional average performance performance performance Getting Electricity 60.11 (Hungary) 99.88 (Korea, Rep.) 83.45 99.88 (Korea, Rep.) (DTF Score) Procedures (number) 7.0 (Spain*) 3.0 (4 Economies*) 4.8 3.0 (14 Economies*) Time (days) 252.0 (Hungary) 18.0 (Korea, Rep.) 77.7 18.0 (Korea, Rep.*) Cost (% of income per 225.2 (Spain) 0.0 (Japan) 65.1 0.0 (Japan) capita) Reliability of supply and transparency of 5.0 (Israel) 8.0 (13 Economies*) 7.2 8.0 (18 Economies*) tariff index (0-8) Registering Property 144 (Greece) 1 (New Zealand) 43 1 (New Zealand) (rank) Registering Property 49.62 (Greece) 94.46 (New Zealand) 76.73 94.46 (New Zealand) (DTF Score) Procedures (number) 10.0 (Greece) 1.0 (3 Economies*) 4.7 1.0 (4 Economies*) Time (days) 81.0 (Israel) 1.0 (New Zealand*) 21.8 1.0 (3 Economies*) Cost (% of property 12.7 (Belgium) 0.0 (Slovak Republic) 4.2 0.0 (Saudi Arabia) value) Quality of the land administration index 4.5 (Greece) 28.5 (Netherlands) 22.7 28.5 (3 Economies*) (0-30) Getting Credit (rank) 167 (Luxembourg) 1 (New Zealand) 54 1 (New Zealand) Getting Credit (DTF 15.00 (Luxembourg) 100.00 (New Zealand) 62.19 100.00 (New Zealand) Score) Strength of legal rights 2.0 (Italy*) 12.0 (New Zealand) 6.0 12.0 (3 Economies*) index (0-12) Depth of credit 0.0 (Luxembourg) 8.0 (7 Economies*) 6.5 8.0 (26 Economies*) information index (0-8) Credit registry 1.6 (Germany) 100.0 (Portugal) 11.9 100.0 (Portugal) coverage (% of adults) Credit bureau coverage 7.7 (Denmark) 100.0 (14 Economies*) 66.7 100.0 (22 Economies*) (% of adults) Protecting Minority 122 (Luxembourg) 1 (New Zealand) 42 1 (3 Economies*) Investors (rank) Protecting Minority 45.00 (Luxembourg) 83.33 (New Zealand) 63.90 83.33 (3 Economies*) Investors (DTF Score) Strength of minority investor protection 4.5 (Luxembourg) 8.3 (New Zealand) 6.4 8.3 (3 Economies*) index (0-10) Doing Business 2016 OECD HIGH INCOME 12 Lowest regional Best regional Best global Indicator Regional average performance performance performance Extent of conflict of interest regulation 3.3 (Switzerland) 9.3 (New Zealand) 6.3 9.3 (Singapore*) index (0-10) Extent of shareholder governance index (0- 4.6 (United States) 8.0 (Sweden) 6.4 8.0 (4 Economies*) 10) 1 (United Arab Paying Taxes (rank) 137 (Italy) 6 (Ireland) 52 Emirates*) Paying Taxes (DTF 99.44 (United Arab 62.98 (Italy) 94.97 (Ireland) 81.47 Score) Emirates*) Payments (number per 3.0 (Hong Kong SAR, 33.0 (Israel) 4.0 (Norway) 11.1 year) China*) Time (hours per year) 405.0 (Czech Republic) 55.0 (Luxembourg) 176.6 55.0 (Luxembourg) Total tax rate (% of 64.8 (Italy) 20.1 (Luxembourg) 41.2 25.9 (Ireland) profit) Trading Across 89 (Australia) 1 (14 Economies*) 25 1 (16 Economies*) Borders (rank) Trading Across 70.82 (Australia) 100.00 (14 Economies*) 93.33 100.00 (16 Economies*) Borders (DTF Score) Time to export: Border 62 (Norway) 0 (14 Economies*) 15 0 (15 Economies*) compliance (hours) Cost to export: Border 749 (Australia) 0 (14 Economies*) 160 0 (18 Economies*) compliance (USD) Time to export: Documentary 62 (Norway) 1 (21 Economies*) 5 0 (Jordan) compliance (hours) Cost to export: Documentary 264 (Australia) 0 (16 Economies*) 36 0 (20 Economies*) compliance (USD) Time to import: Border 64 (Israel) 0 (17 Economies*) 9 0 (19 Economies*) compliance (hours) Cost to import: Border 655 (Iceland) 0 (19 Economies*) 123 0 (28 Economies*) compliance (USD) Time to import: Documentary 44 (Israel) 1 (23 Economies*) 4 1 (21 Economies*) compliance (hours) Cost to import: Documentary 163 (Canada) 0 (22 Economies*) 25 0 (30 Economies*) compliance (USD) Doing Business 2016 OECD HIGH INCOME 13 Lowest regional Best regional Best global Indicator Regional average performance performance performance Enforcing Contracts 132 (Greece) 2 (Korea, Rep.) 44 1 (Singapore) (rank) Enforcing Contracts 50.19 (Greece) 84.84 (Korea, Rep.) 67.86 84.91 (Singapore) (DTF Score) Time (days) 1,580.0 (Greece) 216.0 (New Zealand) 538.3 150.0 (Singapore) Cost (% of claim) 43.9 (United Kingdom) 9.0 (Iceland) 21.1 9.0 (Iceland) Quality of judicial 6.0 (Netherlands) 15.5 (Australia) 11.0 15.5 (3 Economies*) processes index (0-18) Resolving Insolvency 80 (Luxembourg) 1 (Finland) 23 1 (Finland) (rank) Resolving Insolvency 45.45 (Luxembourg) 93.81 (Finland) 76.68 93.81 (Finland) (DTF Score) Recovery rate (cents on 31.0 (Chile) 92.9 (Japan) 72.3 92.9 (Japan) the dollar) Time (years) 4.0 (Slovak Republic) 0.4 (Ireland) 1.7 0.4 (Ireland) Cost (% of estate) 23.0 (Israel) 1.0 (Norway) 9.0 1.0 (Norway) Strength of insolvency 7.0 (Luxembourg) 15.0 (United States*) 12.1 15.0 (4 Economies*) framework index (0-16) * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Note: The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 14 STARTING A BUSINESS WHAT THE STARTING A BUSINESS Formal registration of companies has many INDICATORS MEASURE immediate benefits for the companies and for business owners and employees. Legal entities can Procedures to legally start and operate a outlive their founders. Resources are pooled as company (number) several shareholders join forces to start a company. Formally registered companies have access to Preregistration (for example, name services and institutions from courts to banks as well verification or reservation, notarization) as to new markets. And their employees can benefit Registration in the economy’s largest from protections provided by the law. An additional business city 1 benefit comes with limited liability companies. These Postregistration (for example, social security limit the financial liability of company owners to their registration, company seal) investments, so personal assets of the owners are not put at risk. Where governments make registration Time required to complete each procedure easy, more entrepreneurs start businesses in the (calendar days) formal sector, creating more good jobs and Does not include time spent gathering generating more revenue for the government. information What do the indicators cover? Each procedure starts on a separate day (2 procedures cannot start on the same day). Doing Business measures the ease of starting a Procedures that can be fully completed business in an economy by recording all procedures online are recorded as ½ day. officially required or commonly done in practice by an entrepreneur to start up and formally operate an Procedure completed once final document is industrial or commercial business—as well as the received time and cost required to complete these procedures. No prior contact with officials It also records the paid-in minimum capital that Cost required to complete each procedure companies must deposit before registration (or (% of income per capita) within 3 months). The ranking of economies on the ease of starting a business is determined by sorting Official costs only, no bribes their distance to frontier scores for starting a No professional fees unless services required business. These scores are the simple average of the by law distance to frontier scores for each of the component indicators. Paid-in minimum capital (% of income per capita) To make the data comparable across economies, Doing Business uses several assumptions about the Deposited in a bank or with a notary before business and the procedures. It assumes that all registration (or within 3 months) information is readily available to the entrepreneur  Conducts general commercial or industrial and that there has been no prior contact with activities. officials. It also assumes that the entrepreneur will pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per capita.  Is a limited liability company, located in the largest business city , is 100% domestically 1  Has a turnover of at least 100 times income per owned with between 10 and 50 employees. capita.  Does not qualify for any special benefits.  Does not own real estate. For the 11 economies with a population of more than 100 million, data for a second city have been added. 1 Doing Business 2016 OECD HIGH INCOME 15 STARTING A BUSINESS Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in OECD suggest an answer (figure 2.1). The average ranking of High Income to start a business? The global rankings of the region and comparator regions provide a useful these economies on the ease of starting a business benchmark. Figure 2.1 How economies in OECD High Income rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 16 STARTING A BUSINESS The indicators underlying the rankings may be more and the paid-in minimum capital requirement (figure revealing. Data collected by Doing Business show what 2.2). Comparing these indicators across the region and it takes to start a business in each economy in the with averages both for the region and for comparator region: the number of procedures, the time, the cost regions can provide useful insights. Figure 2.2 What it takes to start a business in economies in OECD High Income Procedures (number) Doing Business 2016 OECD HIGH INCOME 17 STARTING A BUSINESS Time (days) Doing Business 2016 OECD HIGH INCOME 18 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2016 OECD HIGH INCOME 19 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 20 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making it often as part of a larger regulatory reform program. easier to start a business—streamlining procedures by Among the benefits have been greater firm satisfaction setting up a one-stop shop, making procedures simpler and savings and more registered businesses, financial or faster by introducing technology, and reducing or resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in OECD High Income (table 2.1)? Table 2.1 How have economies in OECD High Income made starting a business easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Germany made starting a business easier by making the DB2016 Germany process more efficient and less costly. Denmark made starting a business easier by introducing an DB2016 Denmark online platform allowing simultaneous completion of business and tax registration. Estonia made starting a business simpler by allowing DB2016 Estonia minimum capital to be deposited at the time of company registration. Norway made starting a business easier by offering online DB2016 Norway government registration and online bank account registration. The Slovak Republic simplified the process of starting a DB2016 Slovak Republic business by introducing court registration at the one-stop shop. Sweden made starting a business easier by requiring the DB2016 Sweden company registry to register a company in five days. Austria made starting a business easier by reducing the minimum capital requirement, which in turn reduced the DB2015 Austria paid-in minimum capital requirement, and by lowering notary fees. Switzerland made starting a business easier by introducing DB2015 Switzerland online procedures. The Czech Republic made starting a business easier by DB2015 Czech Republic substantially reducing the minimum capital requirement and the paid-in minimum capital requirement. Germany made starting a business more difficult by DB2015 Germany increasing notary fees. Doing Business 2016 OECD HIGH INCOME 21 DB year Economy Reform Denmark made starting a business easier by reducing the DB2015 Denmark paid-in minimum capital requirement. Spain made starting a business easier by introducing an DB2015 Spain electronic system linking several public agencies and thereby simplifying business registration. France made starting a business easier by reducing the time it DB2015 France takes to register a company at the one-stop shop (Centre de Formalités des Entreprises). The United Kingdom made starting a business easier by DB2015 United Kingdom speeding up tax registration. Greece made starting a business easier by lowering DB2015 Greece registration costs. Hungary made starting a business more difficult by increasing DB2015 Hungary the paid-in minimum capital requirement. Iceland made starting a business easier by offering faster DB2015 Iceland online procedures. Italy made starting a business easier by reducing both the minimum capital requirement and the paid-in minimum DB2015 Italy capital requirement and by streamlining registration procedures. Norway made starting a business easier by eliminating the requirement for limited liability companies to have their DB2015 Norway balance sheet examined by an external auditor if the capital is paid in cash. The Slovak Republic made starting a business easier by reducing the time needed to register with the district court DB2015 Slovak Republic and eliminating the need (and therefore the fee) for the verification of signatures by a notary public. In the United States starting a business became easier in New DB2015 United States York City thanks to faster online procedures. Chile made starting a business easier by creating a new online DB2014 Chile system for business registration. Spain made starting a business easier by eliminating the requirement to obtain a municipal license before starting DB2014 Spain operations and by improving the efficiency of the commercial registry. The United Kingdom made starting a business easier by DB2014 United Kingdom providing model articles for use in preparing memorandums and articles of association. Greece made starting a business easier by introducing a DB2014 Greece simpler form of limited liability company and abolishing the minimum capital requirement for such companies. Israel made starting a business easier by reducing the time DB2014 Israel required for registration at the Income Tax Department and Doing Business 2016 OECD HIGH INCOME 22 DB year Economy Reform the National Insurance Institute. The Netherlands made starting a business easier by DB2014 Netherlands abolishing the minimum capital requirement. Poland made starting a business easier by eliminating the DB2014 Poland requirement to register the new company at the National Labor Inspectorate and the National Sanitary Inspectorate. Portugal made starting a business easier by eliminating the DB2014 Portugal requirement to report to the Ministry of Labor. The Slovak Republic made starting a business more difficult DB2014 Slovak Republic by adding a new procedure for establishing a limited liability company. Hungary made starting a business more complex by increasing the registration fees for limited liability companies DB2013 Hungary and adding a new tax registration at the time of incorporation. Ireland made starting a business easier by introducing a new DB2013 Ireland online facility for business registration. The Netherlands made starting a business easier by DB2013 Netherlands eliminating the requirement for a declaration of nonobjection by the Ministry of Justice before incorporation. Norway made starting a business easier by reducing the DB2013 Norway minimum capital requirement for private joint stock companies. The Slovak Republic made starting a business easier by speeding up the processing of applications at the one-stop DB2013 Slovak Republic shop for trading licenses, income tax registration and health insurance registration. Korea made starting a business easier by introducing a new DB2012 Korea, Rep. online one-stop shop, Start-Biz. Chile made business start-up easier by starting to provide an immediate temporary operating license to new companies, eliminating the requirement for an inspection of premises by DB2012 Chile the tax authority before new companies can begin operations and allowing free online publication of the notice of a company’s creation. Greece made starting a business easier by implementing an DB2012 Greece electronic platform that interconnects several government agencies. Portugal made starting a business easier by allowing company founders to choose the amount of minimum capital DB2012 Portugal and make their paid-in capital contribution up to 1 year after the company’s creation, and by eliminating the stamp tax on company’s share capital subscriptions. Doing Business 2016 OECD HIGH INCOME 23 DB year Economy Reform Spain eased the process of starting a business by reducing DB2012 Spain the cost to start a business and decreasing the minimum capital requirement. Sweden cut the minimum capital requirement for limited DB2011 Sweden liability companies by half, making it easier to start a business. Slovenia made starting a business easier through DB2011 Slovenia improvements to its one-stop shop that allowed more online services. Denmark eased business start-up by reducing the minimum capital requirement for limited liability companies from DB2011 Denmark 125,000 Danish kroner ($22,850) to 80,000 Danish kroner ($14,620). Italy made starting a business easier by enhancing an online DB2011 Italy registration system. Germany eased business start-up by increasing the efficiency of communications between the notary and the commercial DB2011 Germany registry and eliminating the need to publish an announcement in a newspaper. Luxembourg eased business start-up by speeding up the DB2011 Luxembourg delivery of the business license. Chile made business start-up easier by introducing an online DB2011 Chile system for registration and for filing the request for publication. Luxembourg made starting a business easier by allowing DB2010 Luxembourg entrepreneurs to reserve a company name online and by eliminating the capital duty. Slovenia made starting a business easier by speeding up company registration, combining tax registration with DB2010 Slovenia company registration through the automated e-Vem system and abolishing the requirement for a company seal. Poland made starting a business easier by reducing the minimum capital requirement and consolidating company DB2010 Poland registration with registration with the tax, social security and statistics authorities. Korea made starting a business easier by reducing costs, allowing online payment of registration taxes, setting time DB2010 Korea, Rep. limits for value added tax registration and eliminating the minimum capital requirement and notarization requirements. Germany made starting a business easier by reducing the DB2010 Germany minimum capital requirement to a symbolic amount. Hungary made starting a business easier by implementing DB2010 Hungary online registration, with registration confirmed 1 hour after application. Doing Business 2016 OECD HIGH INCOME 24 Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 25 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse (number) many builders opt out. They may pay bribes to pass inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water and Doing Business records all procedures required for a sewerage business in the construction industry to build a warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety Does not include time spent gathering mechanisms, liability and insurance regimes, and information professional certification requirements. Each procedure starts on a separate day. The ranking of economies on the ease of dealing with Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final document is received average of the distance to frontier scores for each of the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Assumptions about the construction company Building quality control index (0-15) Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business city. Liability and insurance regimes (0-2)  Is 100% domestically and privately owned Professional certifications (0-4) with five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 OECD HIGH INCOME 26 The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of  Will be a new construction (there was no them nationals with the technical expertise previous construction on the land), with no and professional experience necessary to trees, natural water sources, natural reserves obtain construction permits and approvals. or historical monuments of any kind on the plot.  Has at least one employee who is a licensed architect or engineer and  Will have complete architectural and registered with the local association of technical plans prepared by a licensed architects or engineers. BuildCo is not architect. If preparation of the plans requires assumed to have any other employees who such steps as obtaining further are technical or licensed experts, such as documentation or getting prior approvals geological or topographical experts. from external agencies, these are counted as procedures.  Has paid all taxes and taken out all necessary insurance applicable to its  Will include all technical equipment required general business activity (for example, to be fully operational. accidental insurance for construction  Will take 30 weeks to construct (excluding all workers and third-person liability). delays due to administrative and regulatory  Owns the land on which the warehouse will requirements). be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita. • Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a  The warehouse: borehole will be dug. If there is no sewerage  Will be used for general storage activities, infrastructure, a septic tank in the smallest size such as storage of books or stationery. The available will be installed or built. warehouse will not be used for any goods  Will not require water for fire protection requiring special conditions, such as food, reasons; a fire extinguishing system (dry chemicals or pharmaceuticals. system) will be used instead. If a wet fire  Will have two stories, both above ground, protection system is required by law, it is with a total constructed area of assumed that the water demand specified approximately 1,300.6 square meters below also covers the water needed for fire (14,000 square feet). Each floor will be 3 protection. meters (9 feet, 10 inches) high.  Will have an average water use of 662 liters  Will have road access and be located in the (175 gallons) a day and an average periurban area of the economy’s largest wastewater flow of 568 liters (150 gallons) a business city (that is, on the fringes of the day. Will have a peak water use of 1,325 liters city but still within its official limits). For 11 (350 gallons) a day and a peak wastewater economies the data are also collected for flow of 1,136 liters (300 gallons) a day. the second largest business city.  Will have a constant level of water demand • Will not be located in a special economic and wastewater flow throughout the year. or industrial zone. Will be located on a land  Will be 1 inch in diameter for the water plot of approximately 929 square meters connection and 4 inches in diameter for the (10,000 square feet) that is 100% owned by sewerage connection. BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2016 OECD HIGH INCOME 27 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in OECD construction permits suggest an answer (figure 3.1). The High Income to legally build a warehouse? The global average ranking of the region and comparator regions rankings of these economies on the ease of dealing with provide a useful benchmark. Figure 3.1 How economies in OECD High Income rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 28 DEALING WITH CONSTRUCTION PERMITS The indicators underlying the rankings may be more the time and the cost (figure 3.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to comply with formalities to build a warehouse in the region and for comparator regions can provide each economy in the region: the number of procedures, useful insights. Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in OECD High Income Procedures (number) Doing Business 2016 OECD HIGH INCOME 29 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2016 OECD HIGH INCOME 30 DEALING WITH CONSTRUCTION PERMITS Cost (% of warehouse value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 31 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index (0-15) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Note: The index ranges from 0 to 15, with higher values indicating better quality control and safety mechanisms in the construction permitting system. The indicator is based on the same case study assumptions as the measures of efficiency. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 32 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while compliance costs reasonable, governments around the making compliance easy and accessible to all. Coherent world have worked on consolidating permitting and transparent rules, efficient processes and adequate requirements. What construction permitting reforms has allocation of resources are especially important in sectors Doing Business recorded in OECD High Income (table where safety is at stake. Construction is one of them. In 3.1)? an effort to ensure building safety while keeping Table 3.1 How have economies in OECD High Income made dealing with construction permits easier —or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Denmark made dealing with construction permits more DB2014 Denmark costly by increasing the fee for building permits. Poland made dealing with construction permits easier by DB2014 Poland eliminating the requirement to obtain a description of the geotechnical documentation of the land. Slovenia made dealing with construction permits easier by DB2014 Slovenia eliminating the requirement to obtain project conditions from the water and sewerage provider. Greece reduced the time required to obtain a construction DB2013 Greece permit by introducing strict time limits for processing permit applications at the municipality. The Netherlands made dealing with construction permits DB2013 Netherlands simpler by merging several approvals and implementing an online application system. Norway reduced the time required to obtain a building DB2013 Norway permit by implementing strict time limits for construction project approvals. Portugal made obtaining construction permits easier by DB2013 Portugal implementing strict time limits to process urban projects and simplifying the associated procedures. Japan made dealing with construction permits costlier by DB2012 Japan increasing inspection fees. Portugal made dealing with construction permits easier by DB2012 Portugal streamlining its inspection system. Doing Business 2016 OECD HIGH INCOME 33 DB year Economy Reform The United Kingdom made dealing with construction permits DB2012 United Kingdom easier by increasing efficiency in the issuance of planning permits. Hungary implemented a time limit for the issuance of DB2011 Hungary building permits. Iceland made dealing with construction permits more costly DB2011 Iceland by increasing the fees to obtain the design approval and receive inspections. Estonia made dealing with construction permits more DB2011 Estonia complex by increasing the time for obtaining design criteria from the municipality. Portugal made it easier dealing with construction permits by DB2011 Portugal implementing the 95 day time limit for the approval of project designs. The United Kingdom made dealing with construction permits DB2010 United Kingdom easier and less time consuming through wider use of approved inspectors. Portugal made dealing with construction permits easier by introducing an improved fire safety appraisal system for new DB2010 Portugal construction projects and faster registration of new buildings. New Zealand made dealing with construction permits more DB2010 New Zealand costly by raising fees. The Netherlands improved its construction regulation DB2010 Netherlands process through a new spatial planning law. Australia reduced the time needed for dealing with DB2010 Australia construction permits by streamlining procedures. The Czech Republic streamlined its construction permitting DB2010 Czech Republic process by reducing the internal processing time for registering new plots. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 34 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely on INDICATORS MEASURE self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity connection first step for a customer is always to gain access by (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized Obtaining external installation works and warehouse, as well as the time and cost to complete possibly purchasing material for these works them. These procedures include applications and Concluding any necessary supply contract and contracts with electricity utilities, clearances from obtaining final supply other agencies and the external and final connection works. In addition, this year Doing Business adds Time required to complete each procedure two new measures: the reliability of supply and (calendar days) transparency of tariffs index (included in the Is at least 1 calendar day aggregate distance to frontier score and ranking on Each procedure starts on a separate day the ease of doing business) and the price of electricity (omitted from these aggregate measures). Does not include time spent gathering The ranking of economies on the ease of getting information electricity is determined by sorting their distance to Reflects the time spent in practice, with little frontier scores for getting electricity. These scores follow-up and no prior contact with officials are the simple average of the distance to frontier Cost required to complete each procedure (% scores for each of the component indicators. To of income per capita) make the data comparable across economies, several assumptions are used. Official costs only, no bribes Assumptions about the warehouse Excludes value added tax The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business Duration and frequency of outages city. For 11 economies the data are also collected for the second largest business city. Tools to monitor power outages  Is located in an area where similar warehouses Tools to restore power supply are typically located. In this area a new Regulatory monitoring of utilities’ performance electricity connection is not eligible for a Financial deterrents aimed at limiting outages special investment promotion regime (offering special subsidization or faster service, for Transparency and accessibility of tariffs example), and located in an area with no Price of electricity (cents per kilowatt-hour)* physical constraints. For example, the property Price based on monthly bill for commercial is not near a railway. warehouse in case study  Is a new construction and is being connected *Price of electricity is not included in the calculation of to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 OECD HIGH INCOME 35 The warehouse (continued):  Has two stories, both above ground, with Assumptions about the monthly consumption a total surface area of approximately  It is assumed that the warehouse operates 8 1,300.6 square meters (14,000 square hours a day for 30 days a month, with feet). The plot of land on which it is built equipment utilized at 80% of capacity on is 929 square meters (10,000 square feet). average, and that there are no electricity cuts  Is used for storage of goods. (assumed for simplicity). The subscribed capacity of the warehouse is 140 kVA, with a power factor of 1 (1 kVA = 1 kW). The monthly Assumptions about the electricity connection energy consumption is therefore 26,880 kWh, and the hourly consumption 112 kWh (26,880 The electricity connection: kWh/30 days/8 hours).  Is a permanent one.  If multiple electricity suppliers exist, the  Is a three-phase, four-wire Y, 140-kilovolt- warehouse is served by the cheapest supplier. ampere (kVA) (subscribed capacity) connection (where the voltage is 120/208  Tariffs effective in March of the current year are used for calculation of the price of V, the current would be 400 amperes; electricity for the warehouse. where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 OECD HIGH INCOME 36 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in OECD average ranking of the region and comparator regions High Income to connect a warehouse to electricity? The provide a useful benchmark. global rankings of these economies on the ease of getting electricity suggest an answer (figure 4.1). The Figure 4.1 How economies in OECD High Income rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 37 GETTING ELECTRICITY The indicators underlying the rankings may be more time and the cost (figure 4.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to get a new electricity connection in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 4.2 What it takes to get an electricity connection in economies in OECD High Income Procedures (number) Doing Business 2016 OECD HIGH INCOME 38 GETTING ELECTRICITY Time (days) Doing Business 2016 OECD HIGH INCOME 39 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 40 GETTING ELECTRICITY Reliability of supply and transparency of tariff index (0-8) Source: Doing Business database. Note: The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Doing Business 2016 OECD HIGH INCOME 41 GETTING ELECTRICITY What are the changes over time? Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping a business to conduct its most basic operations. In many connection costs reasonable, governments around the economies the connection process is complicated by the world have worked to consolidate requirements for multiple laws and regulations involved—covering service obtaining an electricity connection. What reforms in quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in OECD practices and internal wiring installations. In an effort to High Income (table 4.1)? Table 4.1 How have economies in OECD High Income made getting electricity easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The utility in New Zealand reduced the time required for getting an electricity connection by improving its payment DB2016 New Zealand monitoring and confirmation process for the connection works. The utility in Poland reduced delays in processing applications for new electricity connections by increasing DB2016 Poland human and capital resources and by enforcing service delivery timelines. Poland made getting electricity less costly by revising the fee DB2015 Poland structure for new connections. Canada made getting an electricity connection easier by DB2013 Canada reducing the time needed for external connection works. Italy made getting electricity easier and less costly by DB2013 Italy improving the efficiency of the utility Acea Distribuzione and reducing connection fees. Korea made getting electricity less costly by introducing a DB2013 Korea, Rep. new connection fee schedule and an installment payment system. Switzerland made getting electricity less costly by revising the DB2012 Switzerland conditions for connections. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 42 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. For the 11 economies with a population of more than 100 million, data for a second city have been added. 2 Doing Business 2016 OECD HIGH INCOME 43 REGISTERING PROPERTY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in OECD suggest an answer (figure 5.1). The average ranking of High Income to transfer property? The global rankings of the region and comparator regions provide a useful these economies on the ease of registering property benchmark. Figure 5.1 How economies in OECD High Income rank on the ease of registering property Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 44 REGISTERING PROPERTY The indicators underlying the rankings may be more time and the cost (figure 5.2). Comparing these revealing. Data collected by Doing Business show what indicators across the region and with averages both for it takes to complete a property transfer in each the region and for comparator regions can provide economy in the region: the number of procedures, the useful insights. Figure 5.2 What it takes to register property in economies in OECD High Income Procedures (number) Doing Business 2016 OECD HIGH INCOME 45 REGISTERING PROPERTY Time (days) Doing Business 2016 OECD HIGH INCOME 46 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 47 REGISTERING PROPERTY Quality of Land Administration Index (0-30) * Indicates a “no practice” mark. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: The index ranges from 0 to 30, with higher values indicating better quality of the land administration system. Doing Business 2016 OECD HIGH INCOME 48 REGISTERING PROPERTY What are the changes over time? Economies worldwide have been making it easier for buyers to use or mortgage their property earlier. What entrepreneurs to register and transfer property—such as property registration reforms has Doing Business by computerizing land registries, introducing time limits recorded in OECD High Income (table 5.1)? for procedures and setting low fixed fees. Many have cut the time required substantially—enabling Table 5.1 How have economies in OECD High Income made registering property easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Belgium made transferring property easier by introducing DB2016 Belgium electronic property registration. Switzerland made transferring property easier by introducing DB2016 Switzerland a national database to check for encumbrances. Germany made it more expensive to register property by DB2015 Germany increasing the property transfer tax. Spain made transferring property easier by reducing the DB2015 Spain property transfer tax rate. Greece made it easier to transfer property by reducing the DB2015 Greece property transfer tax and removing the requirement for the municipal tax clearance certificate. Ireland made transferring property easier by enhancing its DB2015 Ireland computerized system at the land registry and implementing an online system for the registration of title. Iceland made transferring property more costly by increasing DB2015 Iceland the stamp duty rate. The Republic of Korea made transferring property easier by DB2015 Korea, Rep. reducing the time needed to buy housing bonds and to register the property transfer. Poland made transferring property easier by introducing DB2015 Poland online procedures and reducing notary fees. Doing Business 2016 OECD HIGH INCOME 49 DB year Economy Reform Sweden made registering property easier by fully DB2015 Sweden implementing a new system for property registration. The Czech Republic made transferring property more costly DB2014 Czech Republic by increasing the property transfer tax rate. France made transferring property easier by speeding up the DB2014 France registration of the deed of sale at the land registry. The United Kingdom made transferring property easier by DB2014 United Kingdom introducing electronic lodgment for property transfer applications. Italy made transferring property easier by eliminating the DB2014 Italy requirement for an energy performance certificate for commercial buildings with no heating system. The Netherlands made transferring property easier by DB2014 Netherlands increasing the efficiency of the title search process. The Czech Republic made registering property easier by allowing the cadastral office online access to the commercial DB2013 Czech Republic registry’s database and thus eliminating the need to obtain a paper certificate from the registry before applying for registration at the cadastre. Denmark made registering property easier by introducing DB2013 Denmark electronic submission of property transfer applications at the land registry. Ireland made property transfers less costly by introducing a single stamp duty rate for transfers of nonresidential DB2013 Ireland property. It also extended compulsory registration to all property in Ireland. Israel made transferring property easier by tightening time DB2013 Israel limits for tax authorities to process capital gains self- assessments on property transfers. Italy made transferring property easier by digitizing cadastral DB2013 Italy maps of properties and making the maps available to notaries online. Doing Business 2016 OECD HIGH INCOME 50 DB year Economy Reform Poland made property registration faster by introducing a new caseload management system for the land and DB2013 Poland mortgage registries and by continuing to digitize the records of the registries. In Sweden property transfers became more time consuming DB2013 Sweden during implementation of a new information technology system at the land registry. Sweden increased the cost of transferring property between DB2012 Sweden companies. Slovenia made transferring property easier and less costly by DB2012 Slovenia introducing online procedures and reducing fees. Belgium made property registration quicker for entrepreneurs DB2012 Belgium by setting time limits and implementing its “e-notariat” system. The Czech Republic speeded up property registration by DB2012 Czech Republic computerizing its cadastral office, digitizing all its data and introducing electronic communications with notaries. Belgium’s capital city, Brussels, made it more difficult to DB2011 Belgium transfer property by requiring a clean-soil certificate. Computerization of Denmark’s land registry cut the number DB2011 Denmark of procedures required to register property by half. Greece made transferring property more costly by increasing DB2011 Greece the transfer tax from 1% of the property value to 10%. Hungary reduced the property registration fee by 6% of the DB2011 Hungary property value. Poland eased property registration by computerizing its land DB2011 Poland registry. Austria made it easier to transfer property by requiring online DB2011 Austria submission of all applications to register property transfers. DB2011 Sweden Sweden made registering property easier by eliminating the Doing Business 2016 OECD HIGH INCOME 51 DB year Economy Reform requirement to obtain a preemption waiver from the municipality Portugal established a one-stop shop for property DB2011 Portugal registration. Greater computerization in Slovenia’s land registry reduced DB2011 Slovenia delays in property registration by 75%. The United Kingdom speeded up property registration by DB2010 United Kingdom introducing automatic electronic processing of the land transaction return. Belgium made transferring property easier by setting DB2010 Belgium statutory time limits for some procedures. Ireland made registering property easier by reducing the DB2010 Ireland maximum chargeable stamp duty for property transactions. Portugal speeded up property registration through DB2010 Portugal computerization at the registry backed by an amendment to the registry code making the use of notaries optional. Estonia made registering property easier by computerizing DB2010 Estonia property records at the land registry and thereby enabling notaries to carry out the process online. France made transferring property easier and less time consuming by more fully implementing an online system that DB2010 France enables notaries to obtain encumbrance and ownership documents from the land registry electronically. The Czech Republic made registering property easier through DB2010 Czech Republic ongoing reorganization of the registry combined with computerization. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 52 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable The ranking of economies on the ease of getting collateral (for more details on each case, see the Data credit is determined by sorting their distance to Notes section of the Doing Business 2016 report). frontier scores for getting credit. These scores are These scenarios assume that the borrower: the distance to frontier score for the strength of  Is a private limited liability company. legal rights index and the depth of credit Has its headquarters and only base of information index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 OECD HIGH INCOME 53 GETTING CREDIT Where do the region’s economies stand today? How well do the credit information systems and credit suggest an answer (figure 6.1). The average collateral and bankruptcy laws in economies in OECD ranking of the region and comparator regions provide a High Income facilitate access to credit? The global useful benchmark. rankings of these economies on the ease of getting Figure 6.1 How economies in OECD High Income rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 54 GETTING CREDIT Another way to assess how well regulations and the strength of legal rights index for OECD High Income institutions support lending and borrowing in the region and comparators on the strength of legal rights index. is to see where the region stands in the distribution of Figure 6.3 shows the same thing for the depth of credit scores across regions. Figure 6.2 highlights the score on information index. Figure 6.2 How strong are legal rights for borrowers and lenders? Region scores on strength of legal rights index Note: Higher scores indicate that collateral and bankruptcy laws are better designed to facilitate access to credit. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 55 Figure 6.3 How much credit information is shared—and how widely? Region scores on depth of credit information index Note: Higher scores indicate the availability of more credit information, from either a credit registry or a credit bureau, to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 56 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in OECD High Income (table 6.1)? Table 6.1 How have economies in OECD High Income made getting credit easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The Czech Republic improved access to credit by adopting a new legal regime on secured transactions that allows the DB2015 Czech Republic registration of receivables at the collateral registry and permits out-of-court enforcement of collateral. Hungary improved access to credit by adopting a new legal regime on secured transactions that implements a functional DB2015 Hungary approach to secured transactions, extends security interests to the products and proceeds of the original asset and establishes a modern, notice-based collateral registry. Ireland improved its credit information system by passing a DB2015 Ireland new act that provides for the establishment and operation of a credit registry. New Zealand improved access to credit information by DB2015 New Zealand beginning to distribute both positive and negative credit information. The Slovak Republic improved its credit information system DB2015 Slovak Republic by implementing a new law on the protection of personal data. Australia improved its credit information system through the Privacy Amendment (Enhancing Privacy Protection) DB2014 Australia Act 2012, which permits credit bureaus to collect account payment history with improved privacy protection. Korea revised its secured transactions framework by creating DB2014 Korea, Rep. new types of security rights that can be publicized through registration. The Netherlands weakened its secured transactions system DB2014 Netherlands through an amendment to the Collection of State Taxes Act that grants priority outside bankruptcy to tax claims over Doing Business 2016 OECD HIGH INCOME 57 DB year Economy Reform secured creditors’ claims. Australia strengthened its secured transactions system by adopting a new national legal regime governing the DB2013 Australia enforceability of security interests in personal property and implementing a unified collateral registry. Hungary improved access to credit information by passing its DB2013 Hungary first credit bureau law mandating the creation of a database with positive credit information on individuals. New Zealand improved access to credit information by DB2013 New Zealand allowing credit bureaus to collect positive information on individuals. The Slovak Republic improved its credit information system DB2012 Slovak Republic by guaranteeing by law the right of borrowers to inspect their own data. Hungary reduced the amount of credit information available from private credit bureaus by shortening the period for DB2012 Hungary retaining data on defaults and late payments (if repaid) from 5 years to 1 year. Chile strengthened its secured transactions system by DB2012 Chile implementing a unified collateral registry and a new legal framework for nonpossessory security interests. Estonia improved access to credit by amending the Code of DB2011 Estonia Enforcement Procedure and allowing out-of-court enforcement of collateral by secured creditors. Greece’s private credit bureau, Tiresias, expanded the amount DB2010 Greece of information it distributes in credit reports, improving access to credit information. Sweden strengthened its secured transactions system through changes to the Rights of Priority Act that give DB2010 Sweden secured creditors’ claims priority in cases of debtor default outside bankruptcy. Poland strengthened its secured transactions system by allowing all legal persons, including foreign entities, to hold a DB2010 Poland security interest in the form of a pledge and improved access to credit information by starting to collect and distribute information on firms. Doing Business 2016 OECD HIGH INCOME 58 Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 59 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of WHAT THE PROTECTING MINORITY INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. Effective regulations define related-party transactions precisely, promote clear and efficient disclosure requirements, require Extent of disclosure index (0–10) shareholder participation in major decisions of the Review and approval requirements for related-party company and set detailed standards of accountability transactions ; Disclosure requirements for related-party for company insiders. transactions What do the indicators cover? Extent of director liability index (0–10) Doing Business measures the protection of minority Ability of minority shareholders to sue and hold interested investors from conflicts of interest through one set of directors liable for prejudicial related-party transactions; indicators and shareholders’ rights in corporate Available legal remedies (damages, disgorgement of profits, governance through another. The ranking of economies fines, imprisonment, rescission of the transaction) on the strength of minority investor protections is determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the Extent of conflict of interest regulation index extent of shareholder governance index. To make the (0–10) data comparable across economies, a case study uses Simple average of the extent of disclosure, extent of director several assumptions about the business and the liability and ease of shareholder indices transaction. Extent of shareholder rights index (0-10) The business (Buyer): Shareholders’ rights and role in major corporate decisions  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of ownership and control index (0-10) (or at least a large private company with Governance safeguards protecting shareholders from undue multiple shareholders). board control and entrenchment  Has a board of directors and a chief executive Extent of corporate transparency index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Corporate transparency on ownership stakes, compensation, specifically required by law. audits and financial prospects The transaction involves the following details: Extent of shareholder governance index (0–  Mr. James, a director and the majority 10) shareholder of the company, proposes that Simple average of the extent of shareholders rights, extent the company purchase used trucks from of ownership and control and extent of corporate another company he owns. transparency indices  The price is higher than the going price for Strength of investor protection index (0–10) used trucks, but the transaction goes forward. Simple average of the extent of conflict of interest  All required approvals are obtained, and all regulation and extent of shareholder governance indices required disclosures made, though the transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2016 OECD HIGH INCOME 60 PROTECTING MINORITY INVESTORS Where do the region’s economies stand today? How strong are investor protections against self-dealing protection of minority investors, a higher ranking does in economies in OECD High Income? The global rankings indicate that an economy’s regulations offer stronger of these economies on the strength of investor investor protections against self-dealing in the areas protection index suggest an answer (figure 7.1). While measured. the indicator does not measure all aspects related to the Figure 7.1 How economies in OECD High Income rank on the strength of investor protection index Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 61 PROTECTING MINORITY INVESTORS The strength of minority investor protection index is the highlight the scores on the various minority investor average of the extent of conflict of interest regulation protection indices for OECD High Income. Comparing index and the extent of shareholder governance index. the scores across the region and with averages both for The index ranges from 0 to 10, rounded to the nearest the region and for comparator regions can provide decimal place, with higher values indicating stronger useful insights. minority investor protections. Figures 7.2 and 7.3 Figure 7.2 How extensive are conflict of interest regulations? Extent of conflict of interest regulation index (0-10) Note: Higher values indicate stronger regulation of conflicts of interest. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 62 Figure 7.3 How extensive is shareholder governance? Extent of shareholder governance index (0-10) Note: Higher scores indicate stronger rights of shareholders in corporate governance. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 63 PROTECTING MINORITY INVESTORS What are the changes over time? Economies with the strongest protections of minority reforms to strengthen minority investor protections may investors from self-dealing require detailed disclosure move ahead on different fronts—such as through new or and define clear duties for directors. They also have well- amended company laws, securities regulations or functioning courts and up-to-date procedural rules that revisions to court procedures. What minority investor give minority shareholders the means to prove their case protection reforms has Doing Business recorded in OECD and obtain a judgment within a reasonable time. So High Income (table 7.1)? Table 7.1 How have economies in OECD High Income strengthened minority investor protections—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Spain strengthened minority investor protections by requiring that major sales of company assets be subject to shareholder DB2016 Spain approval. Ireland strengthened minority investor protections by DB2016 Ireland introducing provisions stipulating that directors can be held liable for breach of their fiduciary duties. Switzerland strengthened minority investor protections by DB2015 Switzerland increasing the level of transparency required from publicly traded companies. The Republic of Korea strengthened minority investor DB2015 Korea, Rep. protections by increasing the level of transparency expected from companies on managerial compensation. Greece strengthened investor protections by introducing a DB2014 Greece requirement for director approval of related-party transactions. Korea strengthened investor protections by making it easier DB2013 Korea, Rep. to sue directors in cases of prejudicial related-party transactions. The Netherlands strengthened investor protections through a DB2013 Netherlands new law regulating the approval of related-party transactions. Doing Business 2016 OECD HIGH INCOME 64 DB year Economy Reform Slovenia strengthened investor protections through a new DB2013 Slovenia law regulating the approval of related-party transactions. Greece strengthened investor protections by requiring DB2013 Greece greater immediate and annual disclosure of material related- party transactions. Iceland strengthened investor protections by introducing new DB2012 Iceland requirements relating to the approval of transactions between interested parties. Sweden strengthened investor protections by requiring DB2011 Sweden greater corporate disclosure and regulating the approval of transactions between interested parties. An amendment to Chile’s securities law strengthened investor protections by requiring greater corporate disclosure and DB2011 Chile regulating the approval of transactions between interested parties. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 65 WHAT THE PAYING TAXES INDICATORS PAYING TAXES Taxes are essential. The level of tax rates needs to MEASURE be carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank Tax payments for a manufacturing company better on the ease of paying taxes in the Doing in 2014 (number per year adjusted for Business study tend to perceive both tax rates and electronic and joint filing and payment) tax administration as less of an obstacle to Total number of taxes and contributions paid, business according to the World Bank Enterprise including consumption taxes (value added tax, Survey research. sales tax or goods and service tax) Method and frequency of filing and payment What do the indicators cover? Time required to comply with 3 major taxes Using a case scenario, Doing Business records the (hours per year) taxes and mandatory contributions that a medium- size company must pay in a given year as well as Collecting information and computing the tax measures of the administrative burden of paying payable taxes and contributions. This case scenario uses a set Completing tax return forms, filing with of financial statements and assumptions about proper agencies transactions made over the year. Information is also Arranging payment or withholding compiled on the frequency of filing and payments as well as time taken to comply with tax laws. The Preparing separate tax accounting books, if ranking of economies on the ease of paying taxes is required determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores Profit or corporate income tax for each of the component indicators, with a Social contributions and labor taxes paid by threshold and a nonlinear transformation applied to the employer one of the component indicators, the total tax rate . 3 Property and property transfer taxes The financial statement variables have been updated to be proportional to 2012 income per capita; Dividend, capital gains and financial previously they were proportional to 2005 income transactions taxes per capita. To make the data comparable across Waste collection, vehicle, road and other taxes economies, several assumptions are used.  Taxes and mandatory contributions are  TaxpayerCo is a medium-size business that measured at all levels of government. started operations on January 1, 2013.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paid by the and mandatory contributions paid during company. the second year of operation are recorded.  A range of standard deductions and exemptions are also recorded. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 OECD HIGH INCOME 66 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with information for assessing the tax compliance burden for taxes in economies in OECD High Income—and how businesses (figure 8.1). The average ranking of the region much do firms pay in taxes? The global rankings of these provides a useful benchmark. economies on the ease of paying taxes offer useful Figure 8.1 How economies in OECD High Income rank on the ease of paying taxes Note: All economies with a total tax rate below the threshold of 26.1% applied in DB2015, receive the same distance to frontier score for the total tax rate (a distance to frontier score of 100 for the total tax rate) for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 67 PAYING TAXES The indicators underlying the rankings may be more major taxes (corporate income tax, VAT or sales tax and revealing. Data collected by Doing Business show what it labor taxes and mandatory contributions)—as well as the takes to comply with tax regulations in each economy in total tax rate (figure 8.2). Comparing these indicators the region—the number of payments per year and the across the region and with averages both for the region time required to prepare, and file and pay taxes the 3 and for comparator regions can provide useful insights. Figure 8.2 How easy is it to pay taxes in economies in OECD High Income—and what are the total tax rates? Payments (number per year) Doing Business 2016 OECD HIGH INCOME 68 PAYING TAXES Time (hours per year) Doing Business 2016 OECD HIGH INCOME 69 PAYING TAXES Total tax rate (% of profit) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 70 PAYING TAXES What are the changes over time? Economies around the world have made paying taxes concrete results. Some economies simplifying faster and easier for businesses—such as by compliance with tax obligations and reducing rates have consolidating filings, reducing the frequency of seen tax revenue rise. What tax reforms has Doing payments or offering electronic filing and payment. Business recorded in OECD High Income (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How have economies in OECD High Income made paying taxes easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Chile made paying taxes more costly for companies by DB2016 Chile increasing the corporate income tax rate. Spain made paying taxes less costly for companies by reducing rates for corporate income, capital gains and environment taxes—and made it easier by introducing the DB2016 Spain online Cl@ve system for filing VAT returns. At the same time, Spain reduced the amount allowable for depreciation of fixed assets and raised the ceiling for social security contributions. Finland made paying taxes less costly for companies by reducing the corporate income tax rate—though it also DB2016 Finland increased the total rate for social security contributions paid by employers and reduced the allowed deductible amount for owners’ expenses. France made paying taxes less costly for companies by DB2016 France introducing a credit against corporate income tax and reducing labor tax rates paid by employers. The United Kingdom made paying taxes less costly for companies by reducing the corporate income tax rate and increasing the wage amount per employee that is exempted DB2016 United Kingdom from social security contributions paid by employers. On the other hand, the United Kingdom increased municipal tax rates and environment taxes. Greece made paying taxes less costly for companies by DB2016 Greece reducing the rates for social security contributions paid by employers, making insurance premiums fully tax deductible Doing Business 2016 OECD HIGH INCOME 71 DB year Economy Reform and lowering property tax rates. At the same time, it defined entertainment expenses as nondeductible, reduced the depreciation rates for some types of fixed assets and increased the tax on interest income. Ireland made paying taxes more costly and complicated for companies by increasing landfill levies and by requiring DB2016 Ireland additional financial statements to be submitted with the income tax return. Israel made paying taxes more costly for companies by increasing the corporate income tax rate, the rate for social DB2016 Israel security contributions paid by employers for the upper wage bracket and municipal taxes. The Republic of Korea made paying taxes more complicated and costly for companies by requiring separate filing and DB2016 Korea, Rep. payment of the local income tax and by increasing the rates for unemployment insurance and national health insurance paid by employers. The Netherlands made paying taxes more costly for DB2016 Netherlands companies by increasing employer-paid labor contributions as well as road taxes, property taxes and polder board taxes. Norway made paying taxes less costly for companies by DB2016 Norway reducing the corporate income tax rate. Poland made paying taxes easier for companies by introducing an electronic system for filing and paying VAT DB2016 Poland and transport tax—though it also made paying taxes more costly by increasing transport tax rates and contributions to the National Disabled Fund paid by employers. Portugal made paying taxes less costly for companies by reducing the corporate income tax rate and increasing the DB2016 Portugal allowable amount of the loss carried forward. At the same time, Portugal slightly increased the vehicle tax. The Slovak Republic made paying taxes easier for companies DB2016 Slovak Republic by introducing an electronic filing and payment system for VAT—and made paying taxes less costly by reducing the corporate income tax rate and making medical health Doing Business 2016 OECD HIGH INCOME 72 DB year Economy Reform insurance tax deductible. At the same time, the Slovak Republic reduced the limit on losses carried forward. Spain made paying taxes less costly for companies by DB2015 Spain reducing the statutory corporate income tax rate. The United Kingdom made paying taxes less costly for DB2015 United Kingdom companies by reducing the corporate income tax rate. On the other hand, it increased the landfill tax. Hungary made paying taxes easier and less costly for companies by abolishing the special tax that had been DB2015 Hungary temporarily introduced in 2010 and by reducing the vehicle tax rate. Israel made paying taxes more costly for companies by DB2015 Israel increasing the profit tax rate. Portugal made paying taxes less costly for companies by reducing the corporate income tax rate and introducing a DB2015 Portugal reduced corporate tax rate for a portion of the taxable profits of qualifying small and medium-size enterprises. Greece made paying taxes more costly for companies by increasing the corporate income tax rate—though it also DB2014 Greece reduced the employers’ contribution rate to the social security fund. Iceland made paying taxes easier for companies by reducing employers’ social security contribution rate and abolishing DB2014 Iceland the weight distance tax—though it also introduced a new rehabilitation fund contribution. The Slovak Republic made paying taxes more costly for DB2014 Slovak Republic companies by increasing the corporate income tax rate and by adjusting land appraisal values. Sweden made paying taxes less costly for companies by DB2014 Sweden reducing the corporate income tax rate. The Czech Republic made paying taxes faster for companies DB2013 Czech Republic by promoting the use of electronic facilities. Doing Business 2016 OECD HIGH INCOME 73 DB year Economy Reform Germany made paying taxes more convenient for companies DB2013 Germany by canceling ELENA procedures and implementing electronic filing and payment system for most taxes. Hungary made paying taxes easier for companies by abolishing the community tax. At the same time, Hungary DB2013 Hungary increased health insurance contributions paid by the employer. DB2013 Iceland Iceland increased the corporate income tax rate. Japan made paying taxes less costly for companies by DB2013 Japan reducing the corporate income tax rate—though it also introduced a restoration surtax for a 3-year period. Korea made paying taxes less costly for companies by DB2013 Korea, Rep. reducing the profit tax rate. Poland made paying taxes easier for companies by promoting the use of electronic filing and payment systems —though it DB2013 Poland also made paying taxes more costly by increasing social security contributions. The Slovak Republic made paying taxes easier for companies DB2013 Slovak Republic by implementing electronic filing and payment of social security and health insurance contributions. Slovenia made paying taxes easier and less costly for companies by implementing electronic filing and payment of DB2013 Slovenia social security contributions and by reducing the corporate income tax rate. The United Kingdom made paying taxes less costly for DB2013 United Kingdom companies by reducing the corporate income tax rate. New Zealand reduced its corporate income tax rate and DB2012 New Zealand fringe benefit tax rate. Iceland made paying taxes easier and less costly for firms by DB2012 Iceland abolishing a tax. Korea eased the administrative burden of paying taxes for DB2012 Korea, Rep. firms by merging several taxes, allowing 4 labor taxes and contributions to be paid jointly and continuing to increase the Doing Business 2016 OECD HIGH INCOME 74 DB year Economy Reform use of the online tax payment system. Hungary made paying taxes costlier for firms by introducing a DB2012 Hungary sector-specific surtax DB2012 Greece Greece reduced its corporate income tax rate. The Czech Republic revised its tax legislation to simplify DB2012 Czech Republic provisions relating to administrative procedures and relationships between tax authorities and taxpayers. Finland simplified reporting and payment for the value added DB2012 Finland tax and labor tax. In Estonia a municipal sales tax introduced in Tallinn made DB2012 Estonia paying taxes costlier for firms, though a later parliamentary measure abolished local sales taxes effective January 1, 2012. Canada made paying taxes easier and less costly for DB2012 Canada companies by reducing profit tax rates, eliminating the Ontario capital tax and harmonizing sales taxes. Canada harmonized the Ontario and federal tax returns and DB2011 Canada reduced the corporate and employee tax rates. The Czech Republic simplified its labor tax processes and DB2011 Czech Republic reduced employer contribution rates for social security. Estonia increased the unemployment insurance contribution DB2011 Estonia rate. DB2011 Hungary Hungary simplified taxes and tax bases. Iceland increased the corporate income tax rate from 15% to DB2011 Iceland 18% and raised social security and pension contribution rates. The Netherlands reduced the frequency of filing and paying value added taxes from monthly to quarterly and allowed DB2011 Netherlands small entities to use their annual accounts as the basis for computing their corporate income tax. Portugal introduced a new social security code and lowered DB2011 Portugal corporate tax rates. Doing Business 2016 OECD HIGH INCOME 75 DB year Economy Reform Slovenia abolished its payroll tax and reduced its corporate DB2011 Slovenia income tax rate. In the United States the introduction of a new tax on payroll DB2011 United States increased taxes on companies operating within the New York City metropolitan commuter transportation district. DB2011 Sweden Sweden reduced profit and payroll tax rates Spain made paying taxes easier and less costly for companies DB2010 Spain by improving efficiency in the electronic filing and payment system and reducing the corporate income tax rate. Poland made paying taxes easier and less costly for DB2010 Poland companies by simplifying its value added tax law and reducing employers’ social security contribution rates. Korea accelerated its corporate income tax reduction DB2010 Korea, Rep. program, shortening it from 5 years to 3. Israel made paying taxes less costly for companies by DB2010 Israel reducing the corporate income tax rate. Iceland made paying taxes less costly for companies by DB2010 Iceland reducing the corporate income tax rate. Finland made paying taxes easier and less costly for DB2010 Finland companies by extending electronic filing and reducing employers’ social security contribution rates. The Czech Republic made paying taxes easier for companies DB2010 Czech Republic by making electronic filing mandatory for all taxes and introducing a single tax institution and unified filing. Australia made paying taxes easier for companies by DB2010 Australia abolishing the stamp duty on contracts. Belgium made paying taxes easier for companies by making DB2010 Belgium electronic filing mandatory for medium-size businesses. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 76 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port Documentary compliance – cost (US$) & time operations and inadequate infrastructure all lead to (hours) extra costs and delays for exporters and importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting and -Required by origin, transit and destination economies importing goods. Under the new methodology introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with three Border compliance – cost (US$) & time sets of procedures—documentary compliance, (hours) border compliance and domestic transport—within the overall process of exporting or importing a Customs clearance and inspections shipment of goods. The ranking of economies on the Inspections by other agencies ease of trading across borders is determined by Port or border handling sorting their distance to frontier scores for trading across borders. These scores are the simple average Obtaining, preparing and submitting of the distance to frontier scores for the time and documents during clearance, inspections and port or border handling cost for documentary compliance and border compliance to export and import. Domestic transport* Loading and unloading of shipment To make the data comparable across economies, a few assumptions are made about the traded goods Transport between warehouse and terminal/port and the transactions: Transport between terminal/port and border Time Obtaining, preparing and submitting  Time is measured in hours, and 1 day is 24 documents during domestic transport hours (for example, 22 days are recorded Traffic delays and road police checks while as 22 × 24 = 528 hours). If customs shipment is en route clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose that * Although Doing Business collects and publishes data on documents are submitted to a customs the time and cost for domestic transport, it does not use agency at 8:00 a.m., are processed these data in calculating the distance to frontier score for overnight and can be picked up at 8:00 trading across borders or the ranking on the ease of trading a.m. the next day. In this case the time for across borders. customs clearance would be recorded as Cost 24 hours because the actual procedure  Insurance cost and informal payments for took 24 hours. which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 OECD HIGH INCOME 77 Assumptions of the case study  For each of the 189 economies covered by  Shipping cost based on weight is assumed to Doing Business, it is assumed that a shipment be greater than shipping cost based on travels from a warehouse in the largest business volume. city of the exporting economy to a warehouse  If government fees are determined by the in the largest business city of the importing value of the shipment, the value is assumed economy. For 11 economies the data are also to be $50,000. collected, under the same case study assumptions, for the second largest business  The product is new, not secondhand or used city. merchandise.  The import and export case studies assume  The exporting firm is responsible for hiring different traded products. It is assumed that and paying for a freight forwarder or customs each economy imports a standardized shipment broker (or both) and pays for all costs related of 15 metric tons of containerized auto parts to international shipping, domestic transport, (HS 8708) from its natural import partner—the clearance and mandatory inspections by economy from which it imports the largest value customs and other government agencies, port (price times quantity) of auto parts. It is or border handling, documentary compliance assumed that each economy exports the fees and the like for exports. The importing product of its comparative advantage (defined firm is responsible for the above costs for by the largest export value) to its natural export imports. partner—the economy that is the largest  The mode of transport is the one most widely purchaser of this product. Precious metal and used for the chosen export or import product gems, live animals and pharmaceuticals are and the trading partner, as is the seaport, excluded from the list of possible export airport or land border crossing. products, however, and the second largest product category is considered as needed.  All electronic submissions of information requested by any government agency in  To identify the trading partners and export connection with the shipment are considered product for each economy, Doing Business to be documents obtained, prepared and collected data on trade flows for the most submitted during the export or import recent four-year period from international process. databases such as the United Nations Commodity Trade Statistics Database (UN  A port or border is defined as a place Comtrade). For economies for which trade flow (seaport, airport or land border crossing) data were not available, data from ancillary where merchandise can enter or leave an government sources (various ministries and economy. departments) and World Bank Group country  Government agencies considered relevant offices were used to identify the export product are agencies such as customs, port and natural trading partners. authorities, road police, border guards,  A shipment is a unit of trade. Export shipments standardization agencies, ministries or do not necessarily need to be containerized, departments of agriculture or industry, while import shipments of auto parts are national security agencies and any other assumed to be containerized. government authorities. Doing Business 2016 OECD HIGH INCOME 78 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in OECD High borders suggest an answer (figure 9.1). The average Income to export and import goods? The global rankings ranking of the region and comparator regions provide a of these economies on the ease of trading across useful benchmark. Figure 9.1 How economies in OECD High Income rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 79 TRADING ACROSS BORDERS The indicators reported here are for trading a shipment and import is collected from local freight forwarders, of goods by the most widely used mode of transport customs brokers and traders. Comparing these indicators (whether sea, land, air or some combination of these). across the region and with averages both for the region The information on the time and cost to complete export and for comparator regions can provide useful insights. Figure 9.2 What it takes to trade across borders in economies in OECD High Income Time to export: Border compliance (hours) Doing Business 2016 OECD HIGH INCOME 80 TRADING ACROSS BORDERS Cost to export: Border compliance (USD) Doing Business 2016 OECD HIGH INCOME 81 TRADING ACROSS BORDERS Time to export: Documentary compliance (hours) Doing Business 2016 OECD HIGH INCOME 82 TRADING ACROSS BORDERS Cost to export: Documentary compliance (USD) Doing Business 2016 OECD HIGH INCOME 83 TRADING ACROSS BORDERS Time to import: Border compliance (hours) Doing Business 2016 OECD HIGH INCOME 84 TRADING ACROSS BORDERS Cost to import: Border compliance (USD) Doing Business 2016 OECD HIGH INCOME 85 TRADING ACROSS BORDERS Time to import: Documentary compliance (hours) Doing Business 2016 OECD HIGH INCOME 86 TRADING ACROSS BORDERS Cost to import: Documentary compliance (USD) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 87 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve their trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business tools to facilitate trade—including single windows, risk- recorded in OECD High Income (table 9.1)? based inspections and electronic data interchange Table 9.1 How have economies in OECD High Income made trading across borders easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Poland made trading across borders easier by implementing DB2015 Poland a new terminal operating system at the port of Gdansk. Greece made trading across borders easier by implementing DB2014 Greece a system allowing electronic submission of customs declarations for exports. The Czech Republic reduced the time to export and import by DB2013 Czech Republic allowing electronic submission of customs declarations and other documents. Hungary reduced the time to export and import by allowing DB2013 Hungary electronic submission of customs declarations and other documents. The Netherlands made importing easier by introducing a new DB2013 Netherlands web-based system for cargo release at the port terminals in Rotterdam. Portugal made trading across borders easier by implementing DB2013 Portugal an electronic single window for port procedures. Spain reduced the time to import by further expanding the use of electronic submission of customs declarations and DB2013 Spain improving the sharing of information among customs and other agencies. Israel made trading across borders easier by changing the DB2012 Israel method used to calculate port fees. Doing Business 2016 OECD HIGH INCOME 88 DB year Economy Reform Slovenia made trading across borders faster by introducing DB2012 Slovenia online submission of customs declaration forms. Poland made trading across borders faster by implementing DB2012 Poland electronic preparation and submission of customs documents. Belgium made trading across borders faster by improving its DB2012 Belgium risk-based profiling system for imports. Chile made trading across borders faster by implementing an DB2012 Chile online electronic data interchange system for customs operations. Israel is expanding its electronic data interchange system and developing a single-window framework, allowing easier DB2011 Israel assembly of documents required by different authorities and reducing the time to trade. Spain streamlined the documentation for imports by DB2011 Spain including tax-related information on its single administrative document. The Slovak Republic reduced the time for trading across DB2010 Slovak Republic borders by introducing more electronic systems for customs administration. Portugal reduced the time required for customs clearance DB2010 Portugal through staff training and improvements in customs procedures. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 89 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators The dispute in the case study involves the breach of a  The value of the dispute is 200% of the sales contract between 2 domestic businesses. The income per capita or the equivalent in local case study assumes that the court hears an expert on currency of USD 5,000, whichever is greater. the quality of the goods in dispute. This distinguishes  The seller sues the buyer before the court the case from simple debt enforcement. To make the with jurisdiction over commercial cases worth data comparable across economies, Doing Business 200% of income per capita or $5,000. uses several assumptions about the case:  The seller requests a pretrial attachment to  The dispute concerns a lawful transaction secure the claim. between two businesses (Seller and Buyer), both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest  The judge decides in favor of the seller; there business city. is no appeal.  The buyer orders custom-made goods,  The seller enforces the judgment through a then fails to pay. public sale of the buyer’s movable assets. Doing Business 2016 OECD HIGH INCOME 90 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial ease of enforcing contracts suggest an answer (figure dispute through the courts in economies in OECD High 10.1). The average ranking of the region and comparator Income? The global rankings of these economies on the regions provide a useful benchmark. Figure 10.1 How economies in OECD High Income rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 91 ENFORCING CONTRACTS The indicators underlying the rankings may also be judicial processes index (figure 10.2). Comparing these revealing. Data collected by Doing Business show what it indicators across the region and with averages both for takes to enforce a contract through the courts in each the region and for comparator regions can provide economy in the region: the time, the cost and quality of useful insights. Figure 10.2 What it takes to enforce a contract through the courts in economies in OECD High Income Time (days) Doing Business 2016 OECD HIGH INCOME 92 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 93 ENFORCING CONTRACTS Quality of Judicial Processes Index (0-18) Source: Doing Business database. Note: Higher values indicate more efficient judicial processes. Doing Business 2016 OECD HIGH INCOME 94 ENFORCING CONTRACTS What are the changes over time? Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in OECD High Income (table 10.1)? Table 10.1 How have economies in OECD High Income made enforcing contracts easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform The United Kingdom made enforcing contracts more costly DB2016 United Kingdom by increasing the court fees for filing a claim. Italy made enforcing contracts easier by introducing a mandatory electronic filing system for court users, simplifying DB2016 Italy the rules for electronic service of process and automating the enforcement process. The Czech Republic made enforcing contracts easier by DB2015 Czech Republic amending its civil procedure code and modifying the monetary jurisdictions of its courts. Greece made enforcing contracts easier by introducing an electronic filing system for court users. DB2015 Greece Ireland made enforcing contracts easier by modifying the DB2015 Ireland monetary jurisdictions of its courts. Portugal made enforcing contracts easier by adopting a new code of civil procedure designed to reduce case backlogs, DB2015 Portugal streamline court procedures, enhance the role of judges and speed up the resolution of standard civil and commercial disputes. The Czech Republic made enforcing contracts easier by DB2014 Czech Republic simplifying and speeding up the proceedings for the execution and enforcement of judgments. Estonia made enforcing contracts easier by lowering court DB2014 Estonia fees. Italy made enforcing contracts easier by regulating attorneys’ DB2014 Italy fees and streamlining some court proceedings. Doing Business 2016 OECD HIGH INCOME 95 DB year Economy Reform New Zealand made enforcing contracts easier by improving DB2014 New Zealand its case management system to ensure a speedier and less costly adjudication of cases. Poland made enforcing contracts easier by amending the civil DB2013 Poland procedure code and appointing more judges to commercial courts. The Slovak Republic made enforcing contracts easier by adopting several amendments to the code of civil procedure DB2013 Slovak Republic intended to simplify and speed up proceedings as well as to limit obstructive tactics by the parties to a case. Korea made filing a commercial case easier by introducing an DB2012 Korea, Rep. electronic case filing system. New Zealand enacted new district court rules that make the DB2011 New Zealand process for enforcing contracts user friendly. The United Kingdom improved the process for enforcing DB2011 United Kingdom contracts by modernizing civil procedures in the commercial court. Canada increased the efficiency of the courts by expanding DB2011 Canada electronic document submission and streamlining procedures. Sweden made contract enforcement faster through new legislation introducing more stringent timelines for civil cases. It also improved the process by reinforcing the role of the DB2010 Sweden judge in actively managing cases, amending evidence rules, requiring permission to appeal courts’ decisions and reviewing statutory fees for enforcing judgments. Norway speeded up contract enforcement through the DB2010 Norway introduction and monitoring of tighter deadlines in court procedures. Portugal reduced the time and improved the procedures for contract enforcement by allowing electronic filing for the DB2010 Portugal initiation of a suit and by reducing the need for intervention by the judge in the enforcement of a judgment. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 96 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to Time required to recover debt (years) creditors. By clarifying the expectations of creditors Measured in calendar years and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable businesses and sustainably grow the economy. Cost required to recover debt (% of debtor’s estate) What do the indicators cover? Doing Business studies the time, cost and outcome of Measured as percentage of estate value insolvency proceedings involving domestic legal Court fees entities. These variables are used to calculate the Fees of insolvency administrators recovery rate, which is recorded as cents on the dollar recovered by secured creditors through Lawyers’ fees reorganization, liquidation or debt enforcement Assessors’ and auctioneers’ fees (foreclosure or receivership) proceedings. To Other related fees determine the present value of the amount recovered by creditors, Doing Business uses the Outcome lending rates from the International Monetary Fund, Whether business continues operating as a supplemented with data from central banks and the going concern or business assets are sold Economist Intelligence Unit. piecemeal In addition, Doing Business evaluates the adequacy Recovery rate for creditors and integrity of the existing legal framework applicable to liquidation and reorganization Measures the cents on the dollar recovered by proceedings through the strength of insolvency secured creditors framework index. The index tests whether economies Outcome for the business (survival or not) adopted internationally accepted good practices in determines the maximum value that can be four areas: commencement of proceedings, recovered management of debtor’s assets, reorganization Official costs of the insolvency proceedings are proceedings and creditor participation. deducted The ranking of economies on the ease of resolving Depreciation of furniture is taken into account insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores Present value of debt recovered are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicator does not measure insolvency proceedings of individuals and financial institutions. Commencement of proceedings index (0-3) The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through a study of laws and regulations as well as public Reorganization proceedings index (0-3) information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 OECD HIGH INCOME 97 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies in region and comparator regions provide a useful OECD High Income? The global rankings of these benchmark for assessing the efficiency of insolvency economies on the ease of resolving insolvency suggest proceedings. Speed, low costs and continuation of viable an answer (figure 11.1). The average ranking of the businesses characterize the top-performing economies. Figure 11.1 How economies in OECD High Income rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 98 RESOLVING INSOLVENCY The indicators underlying the rankings may be more these indicators across the region and with averages revealing. Data collected by Doing Business show the both for the region and for comparator regions can average recovery rate and the average strength of provide useful insights. insolvency framework index (figure 11.2). Comparing Figure 11.2 How efficient is the insolvency process in economies in OECD High Income Recovery Rate (0–100) Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 99 Total Strength of Insolvency Framework index (0-16) Source: Doing Business database. * Indicates a “no practice” mark. See the data notes for details. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. Source: Doing Business database. Note: Higher values indicate insolvency legislation that is better designed for rehabilitating viable firms and liquidating nonviable ones. Doing Business 2016 OECD HIGH INCOME 100 RESOLVING INSOLVENCY What are the changes over time? A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in OECD High Income (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How have economies in OECD High Income made resolving insolvency easier—or not? By Doing Business report year DB2011 to DB2016 DB year Economy Reform Chile made resolving insolvency easier by clarifying and simplifying provisions on liquidation and reorganization, introducing provisions to facilitate the continuation of the DB2016 Chile debtor’s business during insolvency, establishing a public office responsible for the general administration of insolvency proceedings and creating specialized insolvency courts. Belgium made resolving insolvency more difficult by establishing additional requirements for commencing DB2015 Belgium reorganization proceedings, including the submission of documents verified by external parties. Switzerland made resolving insolvency easier by introducing a moratorium period while the debtor is preparing a composition (reorganization) agreement, allowing creditors DB2015 Switzerland greater participation in the composition (reorganization) procedure and clarifying claw-back provisions applicable to voidable transactions. Spain made resolving insolvency easier by introducing new rules for out-of-court restructuring, introducing provisions DB2015 Spain applicable to prepackaged reorganizations and making insolvency proceedings more public. Slovenia made resolving insolvency easier by introducing a simplified reorganization procedure for small companies and a preventive restructuring procedure for medium-size and DB2015 Slovenia large ones, by allowing creditors greater participation in the management of the debtor and by establishing provisions for an increase in share capital through debt-equity swaps. Israel made resolving insolvency easier through an amendment to its company law allowing the assumption DB2014 Israel or rejection of executory contracts, granting maximum priority to postcommencement credit, extending the maximum period of moratorium during restructuring Doing Business 2016 OECD HIGH INCOME 101 DB year Economy Reform proceedings and allowing the sale of secured assets when necessary to ensure a successful restructuring. Italy made resolving insolvency easier through an amendment to its bankruptcy code that introduces a stay period for enforcement actions while the debtor is preparing a restructuring plan, makes it easier to convert from one type DB2014 Italy of restructuring proceeding to another, facilitates continued operation by the debtor during restructuring and imposes stricter requirements on auditors evaluating a restructuring plan. Germany strengthened its insolvency process by adopting a DB2013 Germany new insolvency law that facilitates in-court restructurings of distressed companies and increases participation by creditors. Greece enhanced its insolvency process by abolishing the DB2013 Greece conciliation procedure and introducing a new rehabilitation proceeding. Poland strengthened its insolvency process by updating guidelines on the information and documents that need to be DB2013 Poland included in the bankruptcy petition and by granting secured creditors the right to take over claims encumbered with financial pledges in case of liquidation. Portugal made resolving insolvency easier by introducing a DB2013 Portugal new insolvency law that expedites liquidation procedures and creates fast-track mechanisms both in and out of court. The Slovak Republic improved its insolvency process by redefining the roles and powers of creditors and trustees, DB2013 Slovak Republic strengthening the rights of secured creditors and redefining rules for the conversion of restructuring into a bankruptcy proceeding. Korea expedited the insolvency process by implementing a DB2013 Korea, Rep. fast track for company rehabilitation. Slovenia strengthened its insolvency process by requiring that the debtor offer creditors payment of at least 50% of the claims within 4 years; giving greater power to the creditors’ committee in a bankruptcy proceeding; prohibiting DB2013 Slovenia insolvency administrators from allowing relatives to render services associated with the bankruptcy proceeding; and establishing fines for members of management that violate certain obligations or prohibitions. Spain strengthened its insolvency process by making DB2013 Spain workouts easier, offering more protections for refinancing Doing Business 2016 OECD HIGH INCOME 102 DB year Economy Reform agreements, allowing conversion from reorganization into liquidation at any time, allowing reliefs of the stay under certain circumstances and permitting the judge to determine whether an asset of the insolvent company is necessary for its continued operation. Switzerland introduced a unified civil procedure code and DB2012 Switzerland made a number of changes to its federal bankruptcy law. Poland amended its bankruptcy and reorganization law to DB2012 Poland simplify court procedures and extend more rights to secured creditors. Slovenia simplified and streamlined the insolvency process DB2012 Slovenia and strengthened professional requirements for insolvency administrators. Israel amended its courts law to establish specialized courts DB2012 Israel for dealing with economic matters. Italy introduced debt restructuring and reorganization procedures as alternatives to bankruptcy proceedings and DB2012 Italy extended further rights to secured creditors during insolvency proceedings. France passed a law that enables debtors to implement a DB2012 France restructuring plan with financial creditors only, without affecting trade creditors. Denmark introduced new rules on company reorganization, DB2012 Denmark which led to the elimination of the suspension-of-payments regime. Australia clarified the priority of claims of unsecured creditors DB2012 Australia over all shareholders’ claims and introduced further regulation of the profession of insolvency practitioners. Austria passed a new law that simplifies restructuring DB2012 Austria proceedings and gives preferential consideration to the interests of the debtors. Belgium introduced a new law that will promote and facilitate DB2011 Belgium the survival of viable businesses experiencing financial difficulties. The Czech Republic made it easier to deal with insolvency by introducing further legal amendments to restrict setoffs in DB2011 Czech Republic insolvency cases and suspending for some insolvent debtors the obligation to file for bankruptcy. Amendments to Estonia’s recent insolvency law increased the DB2011 Estonia chances that viable businesses will survive insolvency by Doing Business 2016 OECD HIGH INCOME 103 DB year Economy Reform improving procedures and changing the qualification requirements for insolvency administrators. Amendments to Hungary’s bankruptcy law encourage DB2011 Hungary insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Japan made it easier to deal with insolvency by establishing a new entity, the Enterprise Turnaround Initiative Corporation, DB2011 Japan to support the revitalization of companies suffering from excessive debt but professionally managed. Korea made it easier to deal with insolvency by introducing DB2011 Korea, Rep. postfiling financing, granting superpriority to the repayment of loans given to companies undergoing reorganization. Amendments to the United Kingdom’s insolvency rules streamline bankruptcy procedures, favor the sale of the firm DB2011 United Kingdom as a whole and improve the calculation of administrators’ fees. Spain amended its regulations governing insolvency DB2011 Spain proceedings with the aim of reducing the cost and time. The new regulations also introduced out-of-court workouts. Poland enhanced its insolvency process through an amendment to its bankruptcy law introducing the option of a DB2010 Poland prebankruptcy reorganization procedure for financially distressed companies. Germany enhanced its insolvency process through the Act on the Implementation of Measures to Stabilize the Financial DB2010 Germany Market (Finanzmarktstabilisierungsgesetz), which removed the requirement for potentially viable companies to file for immediate insolvency in cases of overindebtedness. France enhanced its insolvency process by encouraging preinsolvency workouts and eliminating the requirement that DB2010 France a public auctioneer provide the estimation of the debtor’s assets. Estonia enhanced its insolvency process by establishing a new reorganization procedure to enable financially distressed DB2010 Estonia companies to restructure their debt and apply other means to restore financial health and profitability. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2016 OECD HIGH INCOME 104 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 OECD HIGH INCOME 105 identical to the simple average used by Doing Business . than it would have had before (line D is bigger than line 4 Thus Doing Business uses the simplest method: C in figure 14.2 of the Doing Business 2016 report). weighting all topics equally and, within each topic, giving The nonlinear transformation is not based on any equal weight to each of the topic components . 5 economic theory of an “optimal tax rate” that minimizes An economy’s distance to frontier score is indicated on a distortions or maximizes efficiency in an economy’s scale from 0 to 100, where 0 represents the worst overall tax system. Instead, it is mainly empirical in performance and 100 the frontier. All distance to frontier nature. The nonlinear transformation along with the calculations are based on a maximum of five decimals. threshold reduces the bias in the indicator toward However, indicator ranking calculations and the ease of economies that do not need to levy significant taxes on doing business ranking calculations are based on two companies like the Doing Business standardized case decimals. study company because they raise public revenue in other ways—for example, through taxes on foreign The difference between an economy’s distance to companies, through taxes on sectors other than frontier score in any previous year and its score in 2015 manufacturing or from natural resources (all of which are illustrates the extent to which the economy has closed outside the scope of the methodology). In addition, it the gap to the regulatory frontier over time. And in any acknowledges the need of economies to collect taxes given year the score measures how far an economy is from firms. from the best performance at that time. Calculation of scores for economies with 2 cities Treatment of the total tax rate covered The total tax rate component of the paying taxes For each of the 11 economies in which Doing Business indicator set enters the distance to frontier calculation in collects data for the second largest business city as well a different way than any other indicator. The distance to as the largest one, the distance to frontier score is frontier score obtained for the total tax rate is calculated as the population-weighted average of the transformed in a nonlinear fashion before it enters the distance to frontier scores for these two cities (table distance to frontier score for paying taxes. As a result of 13.1). This is done for the aggregate score, the scores for the nonlinear transformation, an increase in the total tax each topic and the scores for all the component rate has a smaller impact on the distance to frontier indicators for each topic. score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 OECD HIGH INCOME 106 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more The ease of doing business ranking ranges from 1 to 189. Doing Business topics in 2014/15 The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 decimals. which economies improved the ease of doing business the most. First, it selects the economies that in 2014/15 Doing Business 2016 OECD HIGH INCOME 107 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 OECD HIGH INCOME 108