On Approval of the Methodology for Determining the Administrative Burden on Economic Entities


Published: 2012-11-01

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Consolidated version as of 26/07/2014
 
 
Government of the Republic of Lithuania
 
 
 
RESOLUTION NO 4
 
ON APPROVAL OF THE METHODOLOGY
 
FOR DETERMINING THE ADMINISTRATIVE BURDEN ON ECONOMIC ENTITIES
 
11 January 2012
Vilnius
 
The Government of the Republic of Lithuania hereby resolves:
1. To approve the Methodology for Determining the Administrative Burden on Economic Entities (as appended).
2. To authorize:
2.1. ministries, institutions under ministries, other state institutions subordinate to the ministries, agencies of the Government of the Republic of Lithuania and other state institutions accountable to the Government of the Republic of Lithuania (hereinafter referred to collectively as “the institutions“ and separately as “the institution“), in accordance with the Methodology for Determining the Administrative Burden on Economic Entities, to assess the potential administrative burden that may be caused by the draft legal acts, providing for new, repealing and/or amending the existing information obligations for economic entities; to assess the anticipated change of the administrative burden by comparison of the potential administrative burden with the administrative burden on economic entities already being caused by the existing information obligations that are planned to be amended and/or repealed and submit the said draft legal acts to the Ministry of Economy for conclusions;
2.2. the Ministry of Economy:
2.2.1. to assess the draft legal acts submitted by the institutions, providing for new, repealing and/or amending the existing information obligations, and provide conclusions about them;
2.2.2. to provide methodological assistance in determining the administrative burden on economic entities;
2.2.3. according to the data indicated in the reports on the calculation of the administrative burden on economic entities submitted by the institutions, to calculate the change during a calendar year in the overall level of the administrative burden that is imposed on economic entities by the legal regulation initiated in the sphere of competence of each institution.
21. To establish for each institution the target of reduction of the administrative burden on economic entities – the overall level of the administrative burden that is imposed on economic entities by the legal regulation initiated in the sphere of competence of an institution shall remain unchanged or diminish during the calendar year.
3. To recommend to the municipalities and the institutions that are not subordinate to the Government of the Republic of Lithuania to assess, in accordance with the Methodology for Determining the Administrative Burden on Economic Entities, the potential administrative burden on economic entities that may be caused by the draft legal acts, providing for new, repealing and/or amending the existing information obligations for economic entities; to assess the anticipated change in the administrative burden by comparison of the potential administrative burden with the administrative burden on economic entities already being caused by the existing information obligations that are planned to be amended and/or repealed.
4. This Resolution shall enter into force on 1 March 2012.
 
 
 
Prime Minister                                                                                 Andrius Kubilius
 
 
 
Minister of Economy                                                                      Rimantas Žylius
 
APPROVED by
Resolution No 4 of the Government of the Republic of Lithuania of 11 January 2012
 
 
THE METHODOLOGY FOR DETERMINING THE ADMINISTRATIVE BURDEN ON ECONOMIC ENTITIES
 
 
I. GENERAL PROVISIONS
 
1. The purpose of the Methodology for Determining the Administrative Burden on Economic Entities (hereinafter referred to as “the Methodology”) is to regulate the determination of the administrative burden on economic entities that is caused by the information obligations for economic entities imposed by the adopted legal acts or draft legal acts as well as the anticipated change in the administrative burden.
2. The Methodology may be applied by determining the administrative burden on economic entities resulting from the information obligations imposed by both individual and several or many legal acts, also, the administrative burden on economic entities that may be imposed by the information obligations laid down in draft legal acts.
3. Definitions used in the Methodology are the following:
3.1. Administrative burden on economic entities (hereinafter referred to as “the administrative burden”) shall mean costs that are incurred or may be incurred by economic entities in the fulfilment of the information obligations laid down in legal acts or draft legal acts.
3.2. Information obligation on economic entities (hereinafter referred to as “the information obligation”) shall mean an obligation, laid down in a legal act or draft legal act, to submit to ministries, institutions under ministries, other state institutions subordinate to the ministries, agencies of the Government of the Republic of Lithuania and other state institutions accountable to the Government of the Republic of Lithuania (hereinafter referred to collectively as “the institutions“ and separately as “the institution“) or their authorized persons the information about their activities or products or other information laid down in a legal act or draft legal act; to collect, store and submit such an information on a separate request of the institutions or their authorized person; to provide such information to third parties.
3.3. Action of fulfilment of an information obligation shall mean an action that has to be performed by the employees of an economic entity or hired consultants in the fulfilment of an information obligation.
3.4. External tariff shall mean an average hourly rate for the services of hired consultants that are purchased for the performance of the action of fulfilment of an information obligation.
3.5. Target group shall mean economic entities that must fulfil the information obligation that is assessed for its imposed administrative burden.
3.6. Economic entity shall mean enterprises, their combinations (associations, confederations, consortiums and etc.) agencies or organizations, or other legal or natural persons or other organizations, a branch of a legal person or other organizations that are conducting or may conduct economic activities in the Republic of Lithuania.
3.7. Internal tariff shall mean a sum of the average hourly pay of the employee of an economic entity performing the action of fulfilment of an information obligation and the contributions of state social insurance and those of compulsory health insurance paid by the economic entity from said wage.
4. The following costs in the fulfilment of information obligations shall be attributed to the administrative burden:
4.1. a portion of the wage of the employees of an economic entity, payable as remuneration for work done in performing the actions of fulfilment of an information obligation, also, the state insurance and the compulsory health insurance contribution to be paid by the economic entity that is calculated from that portion of the wage;
4.2. remuneration paid for the consultants hired by the economic entity in reward for their services required for performance of the actions of fulfilment of an information obligation;
4.3. costs for purchasing assets, provided the assets are required for the fulfilment of information obligations and only if purchasing of relevant assets is required by legal acts or if the fulfilment of an information obligation would not be possible without purchasing these assets and provided the assets are not used for other purposes;
4.4. costs for payment for services (inspection of the means of transport or equipment, certification of equipment, training and certification of employees, special investigation and etc.), provided these services are required for fulfilment of an information obligation and only if purchasing of relevant services is required by legal acts or if the fulfilment of an information obligation would not be possible without purchasing these services and provided the services are not used for other purposes.
5. Costs that shall not be attributable to the administrative burden shall be taxes, except the taxes specified in paragraph 4.1 of the Methodology, and charges paid by an economic entity, the costs of collecting, storage or provision of information related only to the economic entity’s needs; litigation expenditure of the economic entity.
 
II. DETERMINATION OF THE ADMINISTARTIVE BURDEN
 
6. Determination of the administrative burden shall consist of the following stages:
6.1. determination of the legal acts regulating the selected area under investigation, providing for information obligations, or the draft legal acts, providing for new, repealing and/or amending the existing information obligations; in the assessment of the administrative burden caused by the adopted legal acts a decision is adopted on the scope of assessment of the administrative burden, i.e., whether all or only some of the information obligations laid down in the legal act or several legal acts regulating the area under concern will be analysed;
6.2. determination of information obligations. If the same information obligation is established in several legal acts or draft legal acts that specify and/or implement each other, efforts shall be made to ensure that in determining the administrative burden the costs incurred due to the fulfilment of such information obligation shall not be included multiple times. A sample list of information obligations shall be as follows:
6.2.1. notification of events, activities (for example, notification of the transportation of dangerous cargoes);
6.2.2. submission of reports and declarations;
6.2.3. labelling of products, articles, equipment, packaging for consumer information purposes (labelling of products or equipment, energy efficiency labelling of domestic appliances, obligation to show certain information on the packaging of goods, description of labels and etc.);
6.2.4. provision of information to the public or to certain part of the society (instruction on the use of drugs or other products and etc.);
6.2.5. request, application, application for an individual, one-time permission or exemption from the fulfilment of a particular requirement and etc.;
6.2.6. request, application, application for a general permission, licence or exemption from the fulfilment of certain requirement and etc.;
6.2.7. obligation of registration, entry into specific registers;
6.2.8. cooperation with the institutions in their performance of audit, supervision and inspection of the economic entities;
6.2.9. the requirement of collection, storage and provision of data on a separate request of the institutions or their authorized person;
6.3. determination of the origin of the information obligations – the international legal acts, European Union legal acts, the legal acts of the Republic of Lithuania, determining the establishment of a relevant information obligation in a legal act or draft legal act;
6.4. determination of the target group of each information obligation;
6.5. determination of the actions of fulfilment of each information obligation which have to be performed in the fulfilment of each information obligation. The examples of actions of fulfilment of an information obligation shall be as follows:
6.5.1. familiarising with an information obligation;
6.5.2. instructing the employees of the economic entity about the information obligation;
6.5.3. retrieving of relevant information from available data;
6.5.4. adjustment of the existing data;
6.5.5. production of new data;
6.5.6. preparation of information material;
6.5.7. filling in forms and tables;
6.5.8. holding meetings (internal and external with an auditor, lawyer and etc.);
6.5.9. inspections and checks (between them – assistance to the inspecting institution);
6.5.10. copying (for example, reproducing reports, producing labels, information leaflets);
6.5.11. provision of information (sending it to relevant institutions and etc.);
6.5.12. filing and storage of information;
6.5.13. purchasing of information technology equipment and supplies (for example, labelling equipment);
6.6. determination of how many economic entities and how many times per one calendar year must fulfil an information obligation;
6.7. determination of what employees of the economic entities (for example, senior accountants (accountants), lawyers, executives, project managers, managers, administrators, specialists and etc.) usually perform specific actions of fulfilment of an information obligation;
6.8. determination of the internal tariff;
6.9. determination of the average time, during which the employees of an economic entity perform the action of fulfilment of an information obligation;
6.10. determination of what services provided by hired consultants (for example, accountants, lawyers, auditors, business consultants and etc.) are usually purchased in the performance of specific actions of fulfilment of an information obligation;
6.11. determination of the external tariff;
6.12. determination of the average time of provision of services by hired consultants in the performance of an action of fulfilment of an information obligation;
6.13. determining of an asset that has to be acquired for the performance of an action of fulfilment of an information obligation and its average cost. Once determined that a long-term asset has to be acquired for the performance of an action of fulfilment of an information obligation, the acquisition cost of the asset during one calendar year shall be considered to be the sum of its depreciation (amortization) deductions calculated during the year under review. Acquisition of assets shall be considered to be a separate action of fulfilment of an information obligation and its cost (in the case of acquisition of long-term assets, the acquisition cost of the asset during one calendar year) – the cost of the action of fulfilment of an information obligation. The cost used for the calculation shall be the cost excluding VAT;
6.14. determination of services that have to be purchased for the performance of an action of fulfilment of an information obligation and their average cost. Acquisition of services shall be considered to be a separate action of fulfilment of an information obligation and their cost shall be considered to be the cost of the action of fulfilment of an information obligation. The cost used for the calculation shall be the cost excluding VAT.
7. The data required for determination of the administrative burden shall be collected by using statistical data, consulting experts in the appropriate fields, conducting surveys of the target groups and, also, using the data that have been obtained in determining the administrative burden caused by the same or similar information obligations and other available data.
8. For the survey of the target groups a questionnaire shall be used, the sample of which is provided in Annex 1 of the Methodology. When submitting a questionnaire by mail (or electronic mail), it is recommended to question no less than 10 entities belonging to the target group that are discharging a specific information obligation. It is recommended to select out of them no less than 4 economic entities characterized by normally efficient operation (that is, economic entities are selected for the survey that provide data which are not much different from the data provided by other economic entities). The selected economic entities shall be surveyed in more detail during an interview, thus, the correctness of the data is verified and the data are supplemented. In exceptional cases, when due to objective reasons the recommended number of economic entities cannot be surveyed (for example, if the number of the economic entities that are discharging a specific information obligation is less than 4, 10; if implementation of the requirement to survey the recommended number of economic entities would entail disproportionately large costs and etc.), a smaller number of economic entities can be surveyed. The results of the survey shall be compared with each other and it shall be decided, whether the data provided by all respondents can be included in the calculation of the costs composing the administrative burden. If an economic entity indicates that it clearly incurs more or less costs than other economic entities, the data of such respondent shall not be included in the calculation of the costs composing the overall administrative burden. In order that the costs of fulfilment of information obligations established in a legal act or draft legal act should be calculated as precisely as possible, the cost of performance of the action of fulfilment of an information obligation may be calculated pursuant to statistical or other available data and compared with the data provided by the economic entities during the survey.
9. The survey of the target groups may also include the qualitative aspects. The economic entity belonging to the target group may be surveyed for the proposals to simplify legal acts, the annoying administrative burden (i.e., the burden which is not great, but causes unreasonable inconveniences), the economic entity‘s best practice, the use of information for other purposes and etc.
10. In accordance with the data collected, calculations shall be done in order to determine the administrative burden on economic entities and the change in the anticipated administrative burden according to the formulas provided below. The collected data and results of the calculations shall be recorded in the report on the calculation of the administrative burden on economic entities according to the form contained in Annex 2 of the Methodology.
11. In accordance with the determined data, the administrative burden caused by all existing information obligations planned to be amended and/or repealed by the draft legal act and/or the potential administrative burden that may result from the draft legal act shall be evaluated; the anticipated change in the administrative burden shall be assessed. First, the administrative burden caused by each action of fulfilment of an information obligation and the administrative burden resulting from each information obligation shall be calculated, then – the overall administrative burden caused by a legal act or the potential administrative burden caused by a draft legal act.
12. The administrative burden resulting from the action of fulfilment of an information obligation shall be calculated by multiplying time spent performing the action of fulfilment of an information obligation, the tariff and quantity, showing the frequency of performance of the action of fulfilment of an information obligation and the number of the economic entities that perform the act. The internal and external tariffs and the time, during which the action of fulfilment of an information obligation is performed, shall be included in the calculations with regard to what entities (employees or hired consultants) perform the action of fulfilment of an information obligation. Calculations shall be done according to the following formulas:
ANvv = (Cv x P x Tv + Ci x Ti) x Q,
here:
ANvv – the administrative burden resulting from the action of fulfilment of an information obligation;
Tv – time (in hours) spent by an employee of an economic entity in performing the action (or its part) of fulfilment of an information obligation;
Ti – time (in hours) spent by hired consultants in performing the act (or its part) of fulfilment of an information obligation;
Cv – internal tariff;
P – overheads (costs of rent of premises or depreciation of the building, costs of telephone, heating, electricity, equipment and etc.). The recommended amount of overhead costs is 25 per cent of the internal tariff amount. The assessing institution may revise the amount of overhead costs in each separate case. If overhead costs of 25 per cent of the internal tariff amount are to be used, the administrative burden shall be calculated according to the following formula:
ANvv = (Cv x 1,25 x Tv + Ci x Ti) x Q),
here:
Ci – external tariff;
Q – quantity, which shall be calculated according to the formula:
Q = L x F,
here:
L – number of economic entities that are required to perform a relevant action of fulfilment of an information obligation. In order to calculate this variable, an assumption is made that all economic entities that are required to fulfil an information obligation are complying with this requirement;
F – frequency of performance of the action of fulfilment of an information obligation per one calendar year. In the case of a one-off information obligation (for example, notification of an event, activity, request, application, application for a one-time authorization), the frequency is “1“. If the action of fulfilment of an information obligation has to be performed less than once in a calendar year, the frequency of performance of the action of fulfilment of an information obligation for one year shall be calculated by dividing the parameter “1“ by the number of times per year that the information obligation must be fulfilled (for example, if the report has to be submitted every two years, the frequency of performance of the action of fulfilment of an information obligation per one calendar year will be 0,5).
13. The administrative burden caused by an information obligation shall be calculated by summing up the amounts of the administrative burden caused by each action of fulfilment of an information obligation performed in the fulfilment of a relevant information obligation. Calculations shall be done according to the following formula:
ANiį = ∑ ANvv,
here:
ANiį – the administrative burden caused by an information obligation;
ANvv – the administrative burden resulting from the action of fulfilment of an information obligation;
14. The administrative burden caused by all existing information obligations planned to be amended and/or repealed by an adopted legal act or draft legal act or the potential administrative burden that may be caused by a draft legal act shall be calculated by summing up the amounts of the administrative burden caused by relevant information obligations. Calculations shall be done according to the following formula:
ANta = ∑ ANiį, where:
ANta – administrative burden caused by all existing information obligations planned to be amended and/or repealed or the potential administrative burden that may be caused by a draft legal act;
ANiį – the administrative burden caused by an information obligation.
141. The change in the administrative burden likely to be caused by a draft legal act shall be calculated by comparison of the administrative burden caused by all existing information obligations planned to be amended and/or repealed by the draft legal act and the administrative burden likely to be caused by the draft legal act. The change in the administrative burden likely to be caused by a draft legal act shall be calculated according to the following formula:
ANP = ANtaN - ANtaG, where:
ANP – change in the administrative burden caused by a draft legal act;
ANtaN – the administrative burden likely to be caused by a draft legal act;
ANtaG – administrative burden caused by all existing information obligations planned to be amended and/or repealed by a draft legal act.
If a draft legal act provides for no amendments and/or repeals of the existing information obligations and only establishes new information obligations, ANtaG shall be equal to zero.
 
III. Final provisions
 
15. Institutions shall submit to the Ministry of Economy, together with the draft legal acts for which an assessment of impact on the administrative burden of economic entities must be carried out, a completed report on the calculation of the administrative burden on economic entities.
16. Repealed as of 26-07-2014.
17. The Ministry of Economy shall provide a conclusion on the submitted draft legal acts which are not to be submitted to the Government of the Republic of Lithuania, and the reports on the calculation of the administrative burden on economic entities no later than within 10 working days and, in the case of substantial volume of draft legal acts (having 10 or more pages) or complicated draft legal acts (providing for new legal regulation or substantial amendments), no later than within 15 working days from their receipt. If due to unforeseen circumstances a draft legal act must be adopted immediately, the institution may reasonably request to provide a conclusion on the draft legal act in a prompt manner. In this case, the Ministry of Economy shall provide a conclusion no later than within 5 working days.
18. The data of determination of the administrative burden shall be used for planning and monitoring the changes of the amount of the administrative burden and for validating the decisions concerning its reduction.
19. In order to compare the data of determination of the administrative burden, the same determination methods shall be used.