65636 Regional Profile: OECD High Income © 2012 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 All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-8833-4 E-ISBN: 978-0-8213-8834-1 DOI: 10.1596/978-0-8213-8833-4 ISSN: 1729-2638 Printed in the United States Doing Business 2012 OECD HIGH INCOME 3 CONTENTS Introduction ......................................................................................................................................................................4 The business environment..............................................................................................................................................5 Starting a business........................................................................................................................................................ 11 Dealing with construction permits ............................................................................................................................ 20 Getting electricity ......................................................................................................................................................... 27 Registering property .................................................................................................................................................... 32 Getting credit ................................................................................................................................................................ 40 Protecting investors ..................................................................................................................................................... 44 Paying taxes ................................................................................................................................................................... 52 Trading across borders ................................................................................................................................................ 61 Enforcing contracts....................................................................................................................................................... 71 Resolving insolvency .................................................................................................................................................... 78 Data notes ...................................................................................................................................................................... 86 Resources on the Doing Business website ................................................................................................................ 90 Doing Business 2012 OECD HIGH INCOME 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is current as of June 1, 2011 (except for the paying taxes for a local entrepreneur to open and run a small to indicators, which cover the period January–December medium-size business when complying with relevant 2010). regulations. It measures and tracks changes in The Doing Business methodology has limitations. Other regulations affecting 10 areas in the life cycle of a areas important to business—such as an economy’s business: starting a business, dealing with construction proximity to large markets, the quality of its permits, getting electricity, registering property, infrastructure services (other than those related to getting credit, protecting investors, paying taxes, trading across borders and getting electricity), the trading across borders, enforcing contracts and security of property from theft and looting, the resolving insolvency. transparency of government procurement, In a series of annual reports Doing Business presents macroeconomic conditions or the underlying strength quantitative indicators on business regulations and the of institutions—are not directly studied by Doing protection of property rights that can be compared Business. The indicators refer to a specific type of across 183 economies, from Afghanistan to Zimbabwe, business, generally a local limited liability company over time. The data set covers 46 economies in Sub- operating in the largest business city. Because Saharan Africa, 32 in Latin America and the Caribbean, standard assumptions are used in the data collection, 24 in East Asia and the Pacific, 24 in Eastern Europe comparisons and benchmarks are valid across and Central Asia, 18 in the Middle East and North economies. The data not only highlight the extent of Africa and 8 in South Asia, as well as 31 OECD high- obstacles to doing business; they also help identify the income economies. The indicators are used to analyze source of those obstacles, supporting policy makers in economic outcomes and identify what reforms have designing regulatory reform. worked, where and why. More information is available in the full report. Doing This regional profile presents the Doing Business Business 2012 presents the indicators, analyzes their indicators for OECD high income. It also shows the relationship with economic outcomes and regional average, the best performance globally for recommends regulatory reforms. The data, along with each indicator and data for the following comparator information on ordering the Doing Business 2012 regions: European Union (EU), East Asia and the Pacific report, are available on the Doing Business website at (EAP), Eastern Europe and Central Asia (ECA), South http://www.doingbusiness.org. Asia (SA) and Latin America. The data in this report are Doing Business 2012 OECD HIGH INCOME 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s The ranking on each topic is the simple average of regulatory environment for business, a good place to the percentile rankings on its component 1 start is to find out how it compares with the indicators (see the data notes for more details). regulatory environment in other economies. Doing The aggregate ranking on the ease of doing Business provides an aggregate ranking on the ease business benchmarks each economy’s of doing business based on indicator sets that performance on the indicators against that of all measure and benchmark regulations applying to other economies in the Doing Business sample domestic small to medium-size businesses through (figure 1.1). While this ranking tells much about their life cycle. Economies are ranked from 1 to 183 the business environment in an economy, it does by the ease of doing business index. For each not tell the whole story. The ranking on the ease of economy the index is calculated as the ranking on the doing business, and the underlying indicators, do simple average of its percentile rankings on each of not measure all aspects of the business the 10 topics included in the index in Doing Business environment that matter to firms and investors or 2012: starting a business, dealing with construction that affect the competitiveness of the economy. permits, getting electricity, registering property, Still, a high ranking does mean that the getting credit, protecting investors, paying taxes, government has created a regulatory environment trading across borders, enforcing contracts and conducive to operating a business. resolving insolvency. Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. 1 Except for the ease of getting credit, for which the percentile rankings on its component indicators are weighted, the depth of credit information index at 37.5% and the strength of legal rights index at 62.5%. Doing Business 2012 OECD HIGH INCOME 6 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy stands regional average (figure 1.2). Another perspective is in 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 index (figure 1.3). other economies in the region and compared with the Figure 1.2 How economies in OECD high income rank on the ease of doing business *The economy with the best performance globally is included as a benchmark. In some cases 2 or more economies share the top ranking on an indicator. Note: For Dealing with Construction Permits, the data point on cost was corrected for Estonia. Rankings are adjusted once a year with each published report. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 7 THE BUSINESS ENVIRONMENT Figure 1.3 How OECD high income ranks on Doing Business topics Regional average ranking Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 8 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing The absolute values of the indicators tell another part business tells only part of the story, so do changes in of the story (table 1.1). Policy makers can learn much that ranking. Yearly movements in rankings can by comparing the indicators for their economy with provide some indication of changes in an economy’s those for the lowest- and highest-scoring economies regulatory environment for firms, but they are always in the region as well as those for the best performers relative. An economy’s ranking might change because globally. These comparisons may reveal unexpected of developments in other economies. An economy that strengths in an area of business regulation—such as a implemented business regulation reforms may fail to regulatory process that can be completed with a small rise in the rankings (or may even drop) if it is passed number of procedures in a few days and at a low cost. by 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 135 (Greece) 1 (New Zealand) 57 1 (New Zealand) (rank) Procedures (number) 10 (Greece) 1 (New Zealand)* 5 1 (Canada)* Time (days) 28 (Spain) 1 (New Zealand) 12 1 (New Zealand) Cost (% of income per 20.1 (Greece) 0.0 (Denmark)* 4.7 0 (Denmark)* capita) Paid-in Min. Capital (% 52.0 (Austria) 0.0 (New Zealand)* 14.1 (82 Economies*) of income per capita) Dealing with 1 (Hong Kong SAR, Construction Permits 160 (Poland) 2 (New Zealand) 53 China) (rank) Procedures (number) 33 (Czech Republic) 5 (Denmark) 14 5 (Denmark) Time (days) 301 (Poland) 26 (United States) 152 26 (Singapore)* Cost (% of income per 138.1 (Italy) 3.4 (Greece) 45.7 1.1 (Qatar) capita) Getting Electricity 156 (Canada) 1 (Iceland) 54 1 (Iceland) (rank) Procedures (number) 8 (Canada) 3 (Sweden)* 5 3 (Germany)* Time (days) 279 (Czech Republic) 17 (Germany) 103 17 (Germany) Cost (% of income per 327.2 (Italy) 0.0 (Japan) 92.8 0 (Japan) capita) Doing Business 2012 OECD HIGH INCOME 9 Lowest regional Best regional Best global Indicator Regional average performance performance performance Registering Property 174 (Belgium) 3 (New Zealand) 59 3 (New Zealand) (rank) Procedures (number) 11 (Greece) 1 (Portugal)* 5 1 (Portugal)* Time (days) 152 (Poland) 1 (Portugal) 31 1 (Portugal) Cost (% of property 12.7 (Belgium) 0.0 (Slovak Republic) 4.4 0 (Slovak Republic) value) Getting Credit (rank) 150 (Luxembourg) 1 (United Kingdom) 41 1 (United Kingdom)* Strength of legal rights 3 (Italy)* 10 (New Zealand)* 7 10 (New Zealand)* index (0-10) Depth of credit 4 (Slovak Republic)* 6 (United States)* 5 6 (Japan)* information index (0-6) Public registry coverage 1.3 (Germany) 86.2 (Portugal) 9.5 86.2 (Portugal) (% of adults) Private bureau coverage 7.3 (Denmark) 100.0 (New Zealand)* 63.9 100 (New Zealand)* (% of adults) Protecting Investors 166 (Switzerland) 1 (New Zealand) 63 1 (New Zealand) (rank) Extent of disclosure 0 (Switzerland) 10 (New Zealand)* 6 10 (France)* index (0-10) Extent of director 1 (France) 9 (New Zealand)* 5 9 (Singapore)* liability index (0-10) Ease of shareholder 3 (Luxembourg) 10 (New Zealand) 7 10 (New Zealand)* suits index (0-10) Strength of investor 3.0 (Switzerland) 9.7 (New Zealand) 6.0 9.7 (New Zealand) protection index (0-10) Paying Taxes (rank) 134 (Italy) 5 (Ireland) 62 8 (Canada) Payments (number per 33 (Israel) 4 (Norway)* 13 4 (Norway) year) Time (hours per year) 557 (Czech Republic) 59 (Luxembourg) 186 59 (Luxembourg) Trading Across 95 (Slovak Republic) 3 (Estonia) 34 1 (Singapore) Borders (rank) Documents to export 7 (New Zealand) 2 (France) 4 2 (France) (number) 5 (Hong Kong SAR, Time to export (days) 20 (Greece)* 5 (Denmark)* 10 China)* Cost to export (US$ per 1610 (Canada) 540 (Finland) 1032 450 (Malaysia) container) Doing Business 2012 OECD HIGH INCOME 10 Lowest regional Best regional Best global Indicator Regional average performance performance performance Documents to import 7 (Slovak Republic) 2 (France) 5 2 (France) (number) Time to import (days) 25 (Greece) 5 (United States)* 11 4 (Singapore) Cost to import (US$ per 1674 (Iceland) 545 (Israel) 1085 435 (Malaysia) container) Enforcing Contracts 158 (Italy) 1 (Luxembourg) 37 1 (Luxembourg) (rank) Time (days) 1290 (Slovenia) 216 (New Zealand) 518 150 (Singapore) Cost (% of claim) 33.0 (Czech Republic) 8.2 (Iceland) 19.7 0.1 (Bhutan) Procedures (number) 41 (Italy) 21 (Ireland) 31 21 (Ireland)* Resolving Insolvency 72 (Estonia) 1 (Japan) 27 1 (Japan) (rank) Time (years) 4.0 (Slovak Republic)* 0.4 (Ireland) 1.7 0.4 (Ireland) Cost (% of estate) 23 (Israel) 1 (Norway) 9 1 (Singapore)* Recovery rate (cents on 36.9 (Estonia) 92.7 (Japan) 68.2 92.7 (Japan) the dollar) Note: The methodology for the paying taxes indicators changed in Doing Business 2012; see the data notes for details. For these indicators, the best performer globally is the economy that has implemented the most efficient practices in its tax system and is not necessarily the one with the highest ranking. * 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). Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 11 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for INDICATORS MEASURE business owners and employees. Legal entities can outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day business in an economy by recording all Procedure completed once final document is procedures that are officially required or commonly received done in practice by an entrepreneur to start up and No prior contact with officials formally operate an industrial or commercial business—as well as the time and cost required to Cost required to complete each procedure complete these procedures. It also records the (% of income per capita) paid-in minimum capital that companies must Official costs only, no bribes deposit before registration (or within 3 months). The ranking on the ease of starting a business is No professional fees unless services required the simple average of the percentile rankings on by law the 4 component indicators: procedures, time, cost Paid-in minimum capital (% of income and paid-in minimum capital requirement. per capita) To make the data comparable across economies, Deposited in a bank or with a notary before Doing Business uses several assumptions about the registration (or within 3 months) business and the procedures. It assumes that all 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 all government and • Has a start-up capital of 10 times income per nongovernment entities involved in the process capita. function without corruption. And it assumes that the business: • Has a turnover of at least 100 times income per capita. • Is a limited liability company, located in the largest business city. • Does not qualify for any special benefits. • Has between 10 and 50 employees. • Does not own real estate. • Is 100% domestically owned. Doing Business 2012 OECD HIGH INCOME 12 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. 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. Doing Business 2012 OECD HIGH INCOME 13 STARTING A BUSINESS Figure 2.2 What it takes to start a business in economies in OECD high income Procedures (number) Doing Business 2012 OECD HIGH INCOME 14 STARTING A BUSINESS Time (days) Doing Business 2012 OECD HIGH INCOME 15 STARTING A BUSINESS Cost (% of income per capita) Doing Business 2012 OECD HIGH INCOME 16 STARTING A BUSINESS Paid-in minimum capital (% of income per capita) Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 17 STARTING A BUSINESS What are the changes over time? Economies around the world have taken steps making stages—and often as part of a larger regulatory reform it easier to start a business—streamlining procedures program. Among the benefits have been greater firm by setting up a one-stop shop, making procedures satisfaction and savings and more registered simpler or faster by introducing technology, and businesses, financial resources and job opportunities. reducing or eliminating minimum capital requirements. What business registration reforms has Doing Business Many have undertaken business registration reforms in 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 DB Year Economy Reform Greece made starting a business easier by implementing an DB2012 Greece electronic platform that interconnects several government agencies. Korea made starting a business easier by introducing a new DB2012 Korea, Rep. online one-stop shop, Start-Biz. 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. Spain eased the process of starting a business by reducing DB2012 Spain the cost to start a business and decreasing the minimum capital requirement. 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). 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. Italy made starting a business easier by enhancing an online DB2011 Italy registration system. Luxembourg eased business start-up by speeding up the DB2011 Luxembourg delivery of the business license. Slovenia made starting a business easier through DB2011 Slovenia improvements to its one-stop shop that allowed more online services. Doing Business 2012 OECD HIGH INCOME 18 DB Year Economy Reform Sweden cut the minimum capital requirement for limited DB2011 Sweden liability companies by half, making it easier to start a business. The business start-up process was eased by reducing the DB2010 Germany minimum capital requirement to a value that is merely symbolic. Business start-up was simplified by implementing online DB2010 Hungary registration and requiring confirmation of registration one hour after receipt of an application. The business start-up process was simplified by eliminating the minimum capital requirement, removing the notary role, DB2010 Korea, Rep. cutting taxes, putting time limits on value added tax registration, and making it possible to pay registration taxes online. The business start-up process was eased by making it DB2010 Luxembourg possible to reserve a company name online and abolishing capital duties. Business start-up was eased by reducing the minimum capital requirement from PLN 50,000 to PLN 5,000 and consolidating DB2010 Poland applications for company registration and registrations with the tax, social security, and statistics authorities. Business start-up was eased by shortening the time for company registration, allowing for simultaneous tax DB2010 Slovenia registration during company registration, and abolishing use of company seals. It is now possible to start a business by going on-line and DB2009 Canada completing 1 simple procedure. The “Project Czech Point,� where multiple registration-related documents could be obtained at one place, made it simpler DB2009 Czech Republic to register a company. As a result, 3 procedures were merged into one and the number of days required for business start- up were reduced. The minimum capital requirement to start a business was cut DB2009 Greece by 80%, reduced capital tax and made publication of company statutes quicker. The minimum capital requirement to start a business was DB2009 Hungary reduced by around 80%, introduced online filing and made the use of notaries optional. A business can now be started through a single electronic DB2009 Italy filing. The business start up process can now be completed in one DB2009 New Zealand simple online registration in less than a day. Doing Business 2012 OECD HIGH INCOME 19 DB Year Economy Reform A one-stop shop for company registration was created, DB2009 Slovak Republic merging 4 procedures into 1, and reduced cost and time for business start-up. Business start-up was eased through single-access points that reduced the cost to establish limited liability companies and DB2009 Slovenia simplified administrative procedures. The number of procedures and the time required to start a company fell. The minimum capital requirement for starting a business was DB2009 Switzerland doubled from 10,000 to 20,000 SFR making it harder for new companies to start up. The registration fee was cut in half from 800 to 400 Australian DB2008 Australia Dollars, reducing cost, as measured by the Doing Business indicator. An electronic registration and publication system was made available to all notaries. Introducing a single registration number, the new system makes publication in the State DB2008 Belgium Gazette automatic. While the reform does not cover VAT and social security registrations, the new procedure cut registration time. With the full implementation of the company registration DB2008 Czech Republic reform, the time to register a new business decreased. The commercial code was amended to introduce standard articles of association. If entrepreneurs use the model forms, DB2008 Estonia company registration-done electronically and without notary involvement-can be completed in 1 day. A new, fixed fee schedule lowered registration costs. The new Finnish Companies Act reduced the minimum share capital from € 8.000 to €2.500, or from 27% of GNIpc to about 8%. The reform also simplified documentation DB2008 Finland requirements, replacing the deed of incorporation and the minutes of the constitutive meeting by a new, simplified agreement of association. A new Company Act and a new Corporate Procedure Act DB2008 Hungary introduced standardized forms, a "silent-is-consent" rule, and electronic registration. Outdated start-up formalities were eliminated such as registering company books. Requirements for company DB2008 Portugal registration were further simplified and an online incorporation system for use by lawyers became operational. 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 2012 OECD HIGH INCOME 20 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 PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone is better off. Completing all required notifications and receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a fixed telephone line cost for a business to obtain all the necessary Registering the warehouse after its approvals to build a simple commercial warehouse completion (if required for use as collateral or in the economy’s largest business city, connect it to for transfer of the warehouse) basic utilities and register the property so that it can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking on the ease of dealing with Does not include time spent gathering construction permits is the simple average of the information percentile rankings on its component indicators: Each procedure starts on a separate day procedures, time and cost. Procedure completed once final document is To make the data comparable across economies, received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of income per capita) • Is a limited liability company operating in Official costs only, no bribes the construction business and located in • Will be connected to water, sewerage the largest business city. (sewage system, septic tank or their • Is domestically owned and operated. equivalent) and a fixed telephone line. The connection to each utility network will be 10 • Has 60 builders and other employees. meters (32 feet, 10 inches) long. The warehouse: • Will be used for general storage, such as of • Is a new construction (there was no books or stationery (not for goods requiring previous construction on the land). special conditions). • Has complete architectural and technical • Will take 30 weeks to construct (excluding all plans prepared by a licensed architect. delays due to administrative and regulatory requirements). Doing Business 2012 OECD HIGH INCOME 21 DEALING WITH CONSTRUCTION PERMITS Where do the region’s economies stand today? How easy it is for entrepreneurs in economies in OECD with construction permits suggest an answer (figure high income to legally build a warehouse? The global 3.1). The average ranking of the region and rankings of these economies on the ease of dealing comparator regions 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. The indicators underlying the rankings may be more of procedures, the time and the cost (figure 3.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to comply with formalities to build a averages both for the region and for comparator warehouse in each economy in the region: the number regions can provide useful insights. Doing Business 2012 OECD HIGH INCOME 22 DEALING WITH CONSTRUCTION PERMITS Figure 3.2 What it takes to comply with formalities to build a warehouse in economies in OECD high income Procedures (number) Doing Business 2012 OECD HIGH INCOME 23 DEALING WITH CONSTRUCTION PERMITS Time (days) Doing Business 2012 OECD HIGH INCOME 24 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: For Dealing with Construction Permits, the data point on cost was corrected for Estonia. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 25 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in OECD high income (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How have economies in OECD high income made dealing with construction permits easier—or not? By Doing Business report year DB Year Economy Reform 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. The United Kingdom made dealing with construction permits DB2012 United Kingdom easier by increasing efficiency in the issuance of planning permits. Estonia made dealing with construction permits more DB2011 Estonia complex by increasing the time for obtaining design criteria from the municipality. 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. Construction permitting was streamlined by reducing the DB2010 Czech Republic internal processing time for registering new plots. A new Spatial Planning Law was enacted to improve the DB2010 Netherlands construction regulation process. The fees related to the construction permitting process were DB2010 New Zealand increase. Doing Business 2012 OECD HIGH INCOME 26 DB Year Economy Reform An improved fire safety appraisal system was introduced for DB2010 Portugal new construction projects and faster registration of new buildings. Processes for dealing with construction permits were DB2010 Slovenia streamlined, such as lowering costs and no longer requiring a cadastre plan. The process of dealing with construction permits was eased DB2010 United Kingdom with wider use of approved inspectors, reducing the time and number of steps required. An on-line application was introduced for construction DB2009 Portugal permits. The time to obtain licenses was reduced by passing a new DB2008 Czech Republic Building Act and implementing several regulations aimed at simplifying the building process. 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 2012 OECD HIGH INCOME 27 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 INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (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 Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information • Is located in the economy’s largest Reflects the time spent in practice, with little business city, in an area where other follow-up and no prior contact with officials warehouses are located. Cost required to complete each procedure (% • Is not in a special economic zone where of income per capita) the connection would be eligible for subsidization or faster service. Official costs only, no bribes • Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land. • Is 150 meters long. • Is a new construction being connected to • Is to either the low-voltage or the medium- electricity for the first time. voltage distribution network and either • Has 2 stories, both above ground, with a overhead or underground, whichever is more total surface of about 1,300.6 square common in the economy and in the area meters (14,000 square feet), and is built on where the warehouse is located. The length a plot of 929 square meters (10,000 square of any connection in the customer’s private feet). domain is negligible. The electricity connection: • Involves installing one electricity meter. The monthly electricity consumption will be 0.07 • Is a 3-phase, 4-wire Y, 140-kilovolt-ampere gigawatt-hour (GWh). The internal electrical (kVA) (subscribed capacity) connection. wiring has been completed. Doing Business 2012 OECD HIGH INCOME 28 GETTING ELECTRICITY Where do the region’s economies stand today? How easy is it for entrepreneurs in economies in OECD getting electricity suggest an answer (figure 4.1). The high income to connect a warehouse to electricity? The average ranking of the region and comparator regions global rankings of these economies on the ease of provide a useful benchmark. Figure 4.1 How economies in OECD high income rank on the ease of getting electricity Source: Doing Business database. 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 indicators across the region and with averages both for it 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. Doing Business 2012 OECD HIGH INCOME 29 GETTING ELECTRICITY Figure 4.2 What it takes to get an electricity connection in economies in OECD high income Procedures (number) Doing Business 2012 OECD HIGH INCOME 30 GETTING ELECTRICITY Time (days) Doing Business 2012 OECD HIGH INCOME 31 GETTING ELECTRICITY Cost (% of income per capita) Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 32 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 immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with property title to the buyer’s name. The transaction the municipality) is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or resell it. The ranking on the ease of registering Does not include time spent gathering property is the simple average of the percentile information rankings on its component indicators: procedures, Each procedure starts on a separate day time and cost. Procedure completed once final document is To make the data comparable across economies, received several assumptions about the parties to the transaction, the property and the procedures are No prior contact with officials used. Cost required to complete each procedure The parties (buyer and seller): (% of property value) • Are limited liability companies, 100% Official costs only, no bribes domestically and privately owned. No value added or capital gains taxes included • Are located in the periurban area of the economy’s largest business city. • Have 50 employees each, all of whom are nationals. • Has no mortgages attached and has been under the same ownership for the past 10 • Perform general commercial activities. years. The property (fully owned by the seller): • Consists of 557.4 square meters (6,000 square • Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000 square feet). The warehouse is in good • Is registered in the land registry or condition and complies with all safety cadastre, or both, and is free of title standards, building codes and legal disputes. requirements. The property will be transferred • Is located in a periurban commercial zone, in its entirety. and no rezoning is required. Doing Business 2012 OECD HIGH INCOME 33 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 the region and comparator regions provide a useful of 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. 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. Doing Business 2012 OECD HIGH INCOME 34 REGISTERING PROPERTY Figure 5.2 What it takes to register property in economies in OECD high income Procedures (number) Doing Business 2012 OECD HIGH INCOME 35 REGISTERING PROPERTY Time (days) Doing Business 2012 OECD HIGH INCOME 36 REGISTERING PROPERTY Cost (% of property value) * Indicates a “no practice� mark. See the data notes for details. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 37 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 property registration reforms has Doing Business as by computerizing land registries, introducing time recorded in OECD high income (table 5.1)? limits 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 DB Year Economy Reform 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. Slovenia made transferring property easier and less costly by DB2012 Slovenia introducing online procedures and reducing fees. Sweden increased the cost of transferring property between DB2012 Sweden companies. Austria made it easier to transfer property by requiring online DB2011 Austria submission of all applications to register property transfers. 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. Doing Business 2012 OECD HIGH INCOME 38 DB Year Economy Reform Poland eased property registration by computerizing its land DB2011 Poland registry. 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%. Sweden made registering property easier by eliminating the DB2011 Sweden requirement to obtain a preemption waiver from the municipality DB2010 Belgium Property transfers were eased by setting statutory time limits. The property registration process was eased with an ongoing DB2010 Czech Republic reorganization effort at the registry combined with computerization. Property registration was eased with the computerization of DB2010 Estonia records at the land registry, which also allowed notaries to register property online. A fuller electronic connection between notaries and the land registry reduced the time to transfer property in France and DB2010 France made it easier to obtain encumbrance and ownership documents from the registry. Property registration was eased by reducing the maximum DB2010 Ireland chargeable stamp duty for property transactions from 9 percent of the property value to 6 percent. Property registration was sped up with computerization at DB2010 Portugal the Registry and an amendment to the Registry Code making the use of notaries optional. The lodging of a land transaction return is now processed DB2010 United Kingdom automatically and electronically by the revenue and customs authority, reducing the time to register property. Doing Business 2012 OECD HIGH INCOME 39 DB Year Economy Reform The time required to register property was reduced by DB2009 Hungary opening a new property registration office in Budapest and increasing cooperation among government agencies. The new Tele@ctes system allows notaries to access the land DB2008 France registry electronically, reducing delays. Registration fees were increased on two fronts. First, a higher tax rate for property transfers and the statement of DB2008 Germany innocuousness is required in Berlin . Second, a higher fee is being charged to register a priority in the land register. The process for registering property was sped up by opening a second registry office in Budapest. The time needed to DB2008 Hungary submit an application to the Land Registry Office and register the title decreased. The cost for registering property was decreased by passing DB2008 Poland and implementing a Law on Registry fees which changed the fee scheme from a variable rate to a fixed fee schedule. As part of a modernization initiative by the Portuguese government, real estate registries in Lisbon continue to be DB2008 Portugal computerized for better efficiency. This digitalization has cut the time to register property significantly. 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 2012 OECD HIGH INCOME 40 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 the legal rights of borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view a Strength of legal rights index (0–10) potential borrower’s financial history (positive or Protection of rights of borrowers and lenders negative)—valuable information to consider when through collateral laws assessing risk. And they permit borrowers to Protection of secured creditors’ rights through establish a good credit history that will allow easier bankruptcy laws access to credit. Sound collateral laws enable businesses to use their assets, especially movable Depth of credit information index (0–6) property, as security to generate capital—while Scope and accessibility of credit information strong creditors’ rights have been associated with distributed by public credit registries and higher ratios of private sector credit to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit information index measures rules and practices Private credit bureau coverage (% of adults) affecting the coverage, scope and accessibility of Number of individuals and firms listed in credit information available through a public credit largest private credit bureau as percentage of registry or a private credit bureau. The strength of adult population legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. Doing Business uses case scenarios to determine • Has 100 employees. the scope of the secured transactions system, • Is 100% domestically owned, as is the lender. involving a secured borrower and a secured lender and examining legal restrictions on the use of The ranking on the ease of getting credit is based on movable collateral. These scenarios assume that the the percentile rankings on its component indicators: borrower: the depth of credit information index (weighted at 37.5%) and the strength of legal rights index • Is a private, limited liability company. (weighted at 62.5%). • Has its headquarters and only base of operations in the largest business city. Doing Business 2012 OECD HIGH INCOME 41 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 high income facilitate access to credit? The global a 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 2012 OECD HIGH INCOME 42 GETTING CREDIT Another way to assess how well regulations and particular score on the strength of legal rights index. institutions support lending and borrowing in the Figure 6.3 shows the same thing for the depth of credit region is to look at the distribution of its economies by information index. Higher scores indicate stronger their scores on the getting credit indicators. Figure 6.2 legal rights for borrowers and lenders and more credit shows how many economies in the region received a information. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How extensive—and how accessible—is and lenders in economies in OECD high income? credit information in economies in OECD high income? Number of economies in region with each score on strength Number of economies in region with each score on depth of of legal rights index (0–10) credit information index (0–6) Source: Doing Business database. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 43 GETTING CREDIT What are the changes over time? When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded 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 DB Year Economy Reform 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. The Slovak Republic improved its credit information system DB2012 Slovak Republic by guaranteeing by law the right of borrowers to inspect their own data. 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. The private credit bureau, Tiresias, expanded the amount of DB2010 Greece information it distributes in its credit reports, enhancing access to credit information. Access to credit was improved by allowing all legal persons DB2010 Poland (including foreign entities) to hold or grant security interests. Regulations relating to the provision of credit information DB2009 Finland were consolidated into a single law. A nationwide online registry of all moveable collateral was launched. At this time it contains information for security DB2008 France rights in moveable property, and is being expanded to cover other assets as well. The public credit registry decreased the scope of the credit DB2008 Slovenia information collected, by increasing the minimum loan requirement from 0 to 500 Euros. 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 2012 OECD HIGH INCOME 44 PROTECTING INVESTORS Investor protections matter for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not provide such protections, investors may be reluctant to invest unless they become the controlling Extent of disclosure index (0–10) shareholders. Strong regulations clearly define Who can approve related-party transactions related-party transactions, promote clear and efficient Disclosure requirements in case of related- disclosure requirements, require shareholder party transactions participation in major decisions of the company and set clear standards of accountability for company Extent of director liability index (0–10) insiders. Ability of shareholders to hold interested What do the indicators cover? parties and members of the approving body liable in case of related-party transactions Doing Business measures the strength of minority shareholder protections against directors’ use of Available legal remedies (damages, repayment corporate assets for personal gain—or self-dealing. of profits, fines, imprisonment and rescission The indicators distinguish 3 dimensions of investor of the transaction) protections: transparency of related-party Ability of shareholders to sue directly or transactions (extent of disclosure index), liability for derivatively self-dealing (extent of director liability index) and shareholders’ ability to sue officers and directors for Ease of shareholder suits index (0–10) misconduct (ease of shareholder suits index). The Documents and information available during ranking on the strength of investor protection index is trial the simple average of the percentile rankings on these 3 indices. To make the data comparable across Access to internal corporate documents economies, a case study uses several assumptions (directly or through a government inspector) about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, • Is a publicly traded corporation listed on the extent of director liability and ease of economy’s most important stock exchange shareholder suits indices (or at least a large private company with multiple shareholders). • The price is higher than the going price for used • Has a board of directors and a chief executive trucks, but the transaction goes forward. officer (CEO) who may legally act on behalf of • All required approvals are obtained, and all Buyer where permitted, even if this is not required disclosures made, though the specifically required by law. transaction is prejudicial to Buyer. The transaction involves the following details: • Shareholders sue the interested parties and the • Mr. James, a director and the majority members of the board of directors. shareholder of the company, proposes that the company purchase used trucks from another company he owns. Doing Business 2012 OECD HIGH INCOME 45 PROTECTING INVESTORS Where do the region’s economies stand today? How strong are investor protections in economies in protection of minority investors, a higher ranking does OECD high income? The global rankings of these indicate that an economy’s regulations offer stronger economies on the strength of investor protection investor protections against self-dealing in the areas index suggest an answer (figure 7.1). While the measured. 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 2012 OECD HIGH INCOME 46 PROTECTING INVESTORS But the overall ranking on the strength of investor may also be revealing (figure 7.2). Higher scores protection index tells only part of the story. Economies indicate stronger investor protections. Comparing the may offer strong protections in some areas but not scores across the region and with averages both for others. So the scores recorded for economies in OECD the region and for comparator regions can provide high income on the extent of disclosure, extent of useful insights. director liability and ease of shareholder suits indices Figure 7.2 How strong are investor protections in economies in OECD high income? Strength of investor protection index (0–10) Doing Business 2012 OECD HIGH INCOME 47 PROTECTING INVESTORS Extent of disclosure index (0–10) Doing Business 2012 OECD HIGH INCOME 48 PROTECTING INVESTORS Extent of director liability index (0–10) Doing Business 2012 OECD HIGH INCOME 49 PROTECTING INVESTORS Ease of shareholder suits index (0–10) Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 50 PROTECTING INVESTORS What are the changes over time? Economies with the strongest protections of minority time. So reforms to strengthen investor protections investors from self-dealing require more disclosure may move ahead on different fronts—such as through and define clear duties for directors. They also have new or amended company laws or revisions to court well-functioning courts and up-to-date procedural procedures. What investor protection reforms has rules that give minority investors the means to prove Doing Business recorded in OECD high income (table their case and obtain a judgment within a reasonable 7.1)? Table 7.1 How have economies in OECD high income strengthened investor protections—or not? By Doing Business report year DB Year Economy Reform 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. Director accountability was strengthen by making it easier for DB2009 Greece shareholders to sue directors for damages caused by related- party transactions. A new law protects minority investors by allowing them to DB2009 Slovenia sue directors on behalf of the company. The country improved its ranking by 17 spots on the Protecting Investors index through extending requirements for immediate and annual disclosure to all nonlisted public DB2008 Iceland corporations. Immediate and detailed disclosures to the public are required and governing rules for boards have been introduced. The regulation and definition of related-party transactions DB2008 Norway that shareholders must approve were expanded, strengthening protections already in force. Doing Business 2012 OECD HIGH INCOME 51 DB Year Economy Reform An amendment to the Portuguese company code clarifies existing provisions on director's duties regarding related- party transactions and reforms the way directors can be held DB2008 Portugal accountable. The threshold for filing a shareholder action on behalf of a listed company was lowered from 5% to 2% of share capital, making it easier for a shareholder to sue. A provision of the Companies Act was amended which requires a company to obtain a prior approval of the DB2008 Slovenia shareholders in case of 25% or more of the company's assets would be alienated. 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 2012 OECD HIGH INCOME 52 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless complexity in tax rules avoided. According to Tax payments for a manufacturing company Doing Business data, in economies where it is more in 2010 (number per year adjusted for difficult and costly to pay taxes, larger shares of electronic or joint filing and payment) economic activity end up in the informal sector— Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures the taxes and mandatory contributions that a Time required to comply with 3 major taxes medium-size company must pay in a given year as (hours per year) well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about transactions made over the year. Information is Completing tax return forms, filing with also compiled on the frequency of filing and proper agencies payments as well as time taken to comply with tax Arranging payment or withholding laws. The ranking on the ease of paying taxes is the simple average of the percentile rankings on Preparing separate tax accounting books, if its component indicators: number of annual required payments, time and total tax rate, with a threshold Total tax rate (% of profit before all taxes) 2 being applied to the total tax rate. To make the data comparable across economies, several Profit or corporate income tax assumptions about the business and the taxes and Social contributions and labor taxes paid by contributions are used. the employer • TaxpayerCo is a medium-size business that Property and property transfer taxes started operations on January 1, 2009. Dividend, capital gains and financial • The business starts from the same financial transactions taxes position in each economy. All the taxes and mandatory contributions paid during Waste collection, vehicle, road and other taxes the second year of operation are recorded. • Taxes and mandatory contributions include • Taxes and mandatory contributions are corporate income tax, turnover tax and all measured at all levels of government. labor taxes and contributions paid by the company. • A range of standard deductions and exemptions are also recorded. 2 The threshold is defined as the highest total tax rate among the top 30% of economies in the ranking on the total tax rate. It will be calculated and adjusted on a yearly basis. The threshold is not based on any underlying theory. Instead, it is intended to mitigate the effect of very low tax rates on the ranking on the ease of paying taxes. Doing Business 2012 OECD HIGH INCOME 53 PAYING TAXES Where do the region’s economies stand today? What is the administrative burden of complying with useful information for assessing the tax compliance taxes in economies in OECD high income—and how burden for businesses (figure 8.1). The average ranking much do firms pay in taxes? The global rankings of of the region and comparator regions provide a useful these economies on the ease of paying taxes offer benchmark. Figure 8.1 How economies in OECD high income rank on the ease of paying taxes Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 54 PAYING TAXES The indicators underlying the rankings may be more as well as the total tax rate (figure 8.2). Comparing revealing. Data collected by Doing Business show what these indicators across the region and with averages it takes to comply with tax regulations in each both for the region and for comparator regions can economy in the region—the number of payments per provide useful insights. year and the time required to prepare and file taxes— 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 2012 OECD HIGH INCOME 55 PAYING TAXES Time (hours per year) Doing Business 2012 OECD HIGH INCOME 56 PAYING TAXES Total tax rate (% of profit) Note: DB2012 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 32.5% applied in DB2012, the total tax rate is set at 32.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 57 PAYING TAXES What are the changes over time? Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. 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 DB Year Economy Reform 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. The Czech Republic revised its tax legislation to simplify DB2012 Czech Republic provisions relating to administrative procedures and relationships between tax authorities and taxpayers. 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. Finland simplified reporting and payment for the value added DB2012 Finland tax and labor tax. DB2012 Greece Greece reduced its corporate income tax rate. Hungary made paying taxes costlier for firms by introducing a DB2012 Hungary sector-specific surtax 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 firms by merging several taxes, allowing 4 labor taxes and DB2012 Korea, Rep. contributions to be paid jointly and continuing to increase the use of the online tax payment system. Doing Business 2012 OECD HIGH INCOME 58 DB Year Economy Reform New Zealand reduced its corporate income tax rate and DB2012 New Zealand fringe benefit tax rate. 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. 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. The tax payment process and administration were improved DB2010 Belgium by mandating electronic filing for medium-size businesses. Paying taxes was made easier with mandatory electronic filing DB2010 Czech Republic for all taxes, a single tax institution, and unified filing. Paying taxes was made easier by extending electronic filing to DB2010 Finland corporate income taxes and reduced the burden on business and the cost of employment by cutting labor taxes. Doing Business 2012 OECD HIGH INCOME 59 DB Year Economy Reform The tax burden was eased on companies by reducing the DB2010 Iceland corporate income tax rate from 18 percent to 15 percent. The corporate income tax rate was cut from 29 percent to 27 DB2010 Israel percent. The tax burden was reduced on business by accelerating its corporate income tax reduction program from a five-year to a DB2010 Korea, Rep. three-year program. The top rate will be cut from 25 percent to 20 percent by 2010. Social security taxes were cut for businesses, and the value DB2010 Poland added tax (VAT) law was simplified. The tax burden on business was eased by reducing the corporate income tax rate from 32.5 percent to 30 percent DB2010 Spain and increasing efficiency through an electronic filing and payment system. The country reduced the corporate income tax rate, abolished DB2009 Canada the surtax of 1.12% and increased the depreciation rate for various assets. DB2009 Denmark The corporate income tax rate was reduced from 28% to 25%. Electronic filing was made mandatory for social security DB2009 France contributions above €800,000. The corporate income tax was reduced from 25% to 15%, introduced straight-line depreciation for fixed assets and DB2009 Germany reduced trade tax while no longer allowing a deduction of the tax for corporate income tax. DB2009 Greece An electronic payment of social security tax was introduced. Business registration was simplified and the corporate income DB2009 Italy tax rate was reduced from 33% to 27.5% in addition to reducing the social security tax rates. DB2009 New Zealand The corporate income tax rate was reduced from 33% to 30%. Doing Business 2012 OECD HIGH INCOME 60 DB Year Economy Reform A new tax code reduced the profit tax scale, causing a DB2008 Greece decrease in the total tax rate measured by Doing Business of 1.6%. The capital investment law was reformed. It abolished its stamp duty, reduced corporate tax by 3%, VAT from 17% to DB2008 Israel 16.5% , and decreased the employer social security contribution. The process of paying taxes was simplified by introducing e- filing for social contributions. At the same time, tax costs were DB2008 Netherlands lowered by reducing corporate income tax, several social security contributions, real estate tax and Polder Board. The corporate income tax was cut to 26.5% and the depreciation rate for computers was changed to 33%. DB2008 Portugal Mandatory books are eliminated since June 29, 2006. The CIT- autonomous tax rate on representation expenses, such as company car expenses, and daily allowances was reduced. The corporate tax rate was lowered by 2%, with a plan to DB2008 Slovenia reduce by 1% every year until 2010. The corporate income tax rate was reduced from 35% to 32.5% for 2007. Since January 2007, small and medium-sized DB2008 Spain companies are subject to a reduction from the current reduced rate of 30% to 25%. 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 2012 OECD HIGH INCOME 61 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining all the documents (excluding tariffs) associated with exporting and importing a standard shipment of goods by ocean Inland transport and handling transport, and the number of documents necessary Customs clearance and inspections to complete the transaction. The indicators cover procedural requirements such as documentation Port and terminal handling requirements and procedures at customs and other Does not include ocean transport time regulatory agencies as well as at the port. They also cover trade logistics, including the time and cost of Cost required to export and import (US$ per inland transport to the largest business city. The container) ranking on the ease of trading across borders is All documentation the simple average of the percentile rankings on its component indicators: documents, time and cost Inland transport and handling to export and import. Customs clearance and inspections To make the data comparable across economies, Port and terminal handling Doing Business uses several assumptions about the Official costs only, no bribes business and the traded goods. The business: • Do not require refrigeration or any other • Is of medium size and employs 60 people. special environment. • Is located in the periurban area of the • Do not require any special phytosanitary or economy’s largest business city. environmental safety standards other than • Is a private, limited liability company, accepted international standards. domestically owned, formally registered • Are one of the economy’s leading export or and operating under commercial laws and import products. regulations of the economy. • Are transported in a dry-cargo, 20-foot full The traded goods: container load. • Are not hazardous nor do they include military items. Doing Business 2012 OECD HIGH INCOME 62 TRADING ACROSS BORDERS Where do the region’s economies stand today? How easy it is for businesses in economies in OECD across borders suggest an answer (figure 9.1). The high income to export and import goods? The global average ranking of the region and comparator regions rankings of these economies on the ease of trading provide a useful benchmark. Figure 9.1 How economies in OECD high income rank on the ease of trading across borders Source: Doing Business database. The indicators underlying the rankings may be more documents, the time and the cost (figure 9.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to export or import a standard container of averages both for the region and for comparator goods in each economy in the region: the number of regions can provide useful insights. Doing Business 2012 OECD HIGH INCOME 63 TRADING ACROSS BORDERS Figure 9.2 What it takes to trade across borders in economies in OECD high income Documents to export (number) Doing Business 2012 OECD HIGH INCOME 64 TRADING ACROSS BORDERS Time to export (days) Doing Business 2012 OECD HIGH INCOME 65 TRADING ACROSS BORDERS Cost to export (US$ per container) Doing Business 2012 OECD HIGH INCOME 66 TRADING ACROSS BORDERS Documents to import (number) Doing Business 2012 OECD HIGH INCOME 67 TRADING ACROSS BORDERS Time to import (days) Doing Business 2012 OECD HIGH INCOME 68 TRADING ACROSS BORDERS Cost to import (US$ per container) Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 69 TRADING ACROSS BORDERS What are the changes over time? In economies around the world, trading across borders systems. These changes help improve the 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 tools to facilitate trade—including single windows, Business recorded in OECD high income (table 9.1)? risk-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 DB Year Economy Reform Belgium made trading across borders faster by improving its DB2012 Belgium risk-based profiling system for imports. Israel made trading across borders easier by changing the DB2012 Israel method used to calculate port fees. Poland made trading across borders faster by implementing DB2012 Poland electronic preparation and submission of customs documents. Slovenia made trading across borders faster by introducing DB2012 Slovenia online submission of customs declaration forms. 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 efficiency of customs administration was improved DB2010 Portugal through training for agents and enhanced customer service, reducing customs clearance times. Trading times were sped up with an electronic system for DB2010 Slovak Republic customs administration. Doing Business 2012 OECD HIGH INCOME 70 DB Year Economy Reform Customs clearance was made easier by introducing electronic DB2009 France filing and eliminating certain documents. A U-customs system is being implemented that is an internet DB2009 Korea, Rep. based system customs portal, which provides for an International Single Window. An electronic customs clearance system started working on January 1, 2007. It includes a risk management system that allows officials to target inspections enabling customs to DB2008 Austria focus on cargo deemed “risky.� This has reduced the inspected cargo to 5% of total trade. As a result, customs clearance became much faster, currently taking on average one hour compared to one day in 2005. 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 2012 OECD HIGH INCOME 71 ENFORCING CONTRACTS Well-functioning courts help businesses expand WHAT THE ENFORCING CONTRACTS their network and markets. Without effective INDICATORS MEASURE contract enforcement, people might well do business only with family, friends and others with whom they have established relationships. Where Procedures to enforce a contract through contract enforcement is efficient, firms are more the courts (number) likely to engage with new borrowers or customers, Any interaction between the parties in a and they have greater access to credit. commercial dispute, or between them and What do the indicators cover? the judge or court officer Doing Business measures the efficiency of the Steps to file and serve the case judicial system in resolving a commercial dispute Steps for trial and judgment before local courts. Following the step-by-step Steps to enforce the judgment evolution of a standardized case study, it collects data relating to the time, cost and procedural Time required to complete procedures complexity of resolving a commercial lawsuit. The (calendar days) ranking on the ease of enforcing contracts is the Time to file and serve the case simple average of the percentile rankings on its component indicators: procedures, time and cost. Time for trial and obtaining judgment The dispute in the case study involves the breach Time to enforce the judgment of a sales contract between 2 domestic businesses. Cost required to complete procedures (% of The case study assumes that the court hears an claim) expert on the quality of the goods in dispute. This distinguishes the case from simple debt No bribes enforcement. To make the data comparable across Average attorney fees economies, Doing Business uses several assumptions about the case: Court costs, including expert fees • The seller and buyer are located in the Enforcement costs economy’s largest business city. • The buyer orders custom-made goods, then fails to pay. • The dispute on the quality of the goods • The seller sues the buyer before a requires an expert opinion. competent court. • The judge decides in favor of the seller; there • The value of the claim is 200% of income is no appeal. per capita. • The seller enforces the judgment through a • The seller requests a pretrial attachment to public sale of the buyer’s movable assets. secure the claim. Doing Business 2012 OECD HIGH INCOME 72 ENFORCING CONTRACTS Where do the region’s economies stand today? How efficient is the process of resolving a commercial the ease of enforcing contracts suggest an answer dispute through the courts in economies in OECD high (figure 10.1). The average ranking of the region and income? The global rankings of these economies on comparator 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. The indicators underlying the rankings may also be procedures, the time and the cost (figure 10.2). revealing. Data collected by Doing Business show what Comparing these indicators across the region and with it takes to enforce a contract through the courts in averages both for the region and for comparator each economy in the region: the number of regions can provide useful insights. Doing Business 2012 OECD HIGH INCOME 73 ENFORCING CONTRACTS Figure 10.2 What it takes to enforce a contract through the courts in economies in OECD high income Procedures (number) Doing Business 2012 OECD HIGH INCOME 74 ENFORCING CONTRACTS Time (days) Doing Business 2012 OECD HIGH INCOME 75 ENFORCING CONTRACTS Cost (% of claim) Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 76 ENFORCING CONTRACTS What are the changes over time? Economies in all regions have improved contract periodic reviews to clear inactive cases from the docket enforcement in recent years. A judiciary can be and by making procedures faster. What reforms improved in different ways. Higher-income economies making it easier (or more difficult) to enforce contracts tend to look for ways to enhance efficiency by has Doing Business recorded in OECD high income introducing new technology. Lower-income economies (table 10.1)? often work on reducing backlogs by introducing Table 10.1 How have economies in OECD high income made enforcing contracts easier—or not? By Doing Business report year DB Year Economy Reform Korea made filing a commercial case easier by introducing an DB2012 Korea, Rep. electronic case filing system. Canada increased the efficiency of the courts by expanding DB2011 Canada electronic document submission and streamlining procedures. 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. Contract enforcement was spend up with the introduction DB2010 Norway and monitoring of tighter deadlines. The time was reduced and the procedures were improved for contract enforcement by enabling e-filing for the initiation of DB2010 Portugal a suit and by lessening the need for a judge’s intervention in the execution of judgment. Contract enforcement was sped up by introducing comprehensive electronic filing of court claims and DB2009 Austria correspondence between lawyers and the court in civil matters. Contract enforcement was simplified by establishing fixed DB2009 Belgium procedural calendars for written pleadings and introducing tighter deadlines for the delivery of expert opinions. Debt collection for contract enforcement was facilitated by DB2009 Portugal extending the use summary proceedings for lower amounts. The Code of Civil Procedure was changed with the aim of DB2008 Poland increasing speed and efficiency of court proceedings. Poland also reformed its enforcement of judgment laws. Doing Business 2012 OECD HIGH INCOME 77 DB Year Economy Reform Simplified rules were introduced for small claims in simple debt collection cases. The rules allow the courts to decide a high number of cases based on one case, eliminate DB2008 Portugal unnecessary procedural steps, force party cooperation and allow parties to submit written witness testimony. It is likely that cases will be decided faster and will be less costly. 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 2012 OECD HIGH INCOME 78 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 Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic Fees of insolvency administrators entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial institutions. The data are derived from survey Assessors’ and auctioneers’ fees responses by local insolvency practitioners and Other related fees verified through a study of laws and regulations as well as public information on bankruptcy systems. Recovery rate for creditors (cents on the dollar) The ranking on the ease of resolving insolvency is based on the recovery rate, which is recorded as Measures the cents on the dollar recovered cents on the dollar recouped by creditors through by creditors reorganization, liquidation or debt enforcement Present value of debt recovered (foreclosure) proceedings. The recovery rate is a Official costs of the insolvency proceedings function of time, cost and other factors, such as are deducted lending rate and the likelihood of the company continuing to operate. Depreciation of furniture is taken into account To make the data comparable across economies, Doing Business uses several assumptions about the Outcome for the business (survival or not) business and the case. It assumes that the affects the maximum value that can be company: recovered • Is a domestically owned, limited liability company operating a hotel. • Has 201 employees, 1 main secured creditor • Operates in the economy’s largest business and 50 unsecured creditors. city. • Has a higher value as a going concern—and the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2012 OECD HIGH INCOME 79 RESOLVING INSOLVENCY Where do the region’s economies stand today? How efficient are insolvency proceedings in economies benchmark for assessing the efficiency of insolvency in OECD high income? The global rankings of these proceedings. Speed, low costs and continuation of economies on the ease of resolving insolvency suggest viable businesses characterize the top-performing an answer (figure 11.1). The average ranking of the economies. region and comparator regions provide a useful Figure 11.1 How economies in OECD high income rank on the ease of resolving insolvency Source: Doing Business database. The indicators underlying the rankings may be more Comparing these indicators across the region and with revealing. Data collected by Doing Business show the averages both for the region and for comparator average time and cost required to resolve insolvency regions can provide useful insights. as well as the average recovery rate (figure 11.2). Doing Business 2012 OECD HIGH INCOME 80 RESOLVING INSOLVENCY Figure 11.2 How efficient is the insolvency process in economies in OECD high income Time (years) Doing Business 2012 OECD HIGH INCOME 81 RESOLVING INSOLVENCY Cost (% of estate) Doing Business 2012 OECD HIGH INCOME 82 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) * Indicates a “no practice� mark. See the data notes for details. Source: Doing Business database. Doing Business 2012 OECD HIGH INCOME 83 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 DB Year Economy Reform 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. Denmark introduced new rules on company reorganization, DB2012 Denmark which led to the elimination of the suspension-of-payments regime. France passed a law that enables debtors to implement a DB2012 France restructuring plan with financial creditors only, without affecting trade creditors. 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. 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. Switzerland introduced a unified civil procedure code and DB2012 Switzerland made a number of changes to its federal bankruptcy law. Belgium introduced a new law that will promote and facilitate DB2011 Belgium the survival of viable businesses experiencing financial difficulties. Doing Business 2012 OECD HIGH INCOME 84 DB Year Economy Reform 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 chances that viable businesses will survive insolvency by DB2011 Estonia 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. post filing financing, granting super priority to the repayment of loans given to companies undergoing reorganization. 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. 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. An act was adopted enabling distressed companies on the verge of insolvency to reorganize themselves, restructure DB2010 Estonia their debt, and apply other measures to regain financial health and restore profitability. The insolvency process was improved by encouraging DB2010 France preinsolvency workouts and no longer requiring estimation of the value of assets by a public auctioneer. The recent Act on the Implementation of Measures to Stabilize the Financial Market DB2010 Germany (Finanzmarktstabilisierungsgesetz) removes the requirement for potentially viable companies to file for immediate insolvency in cases of overindebtedness. The process of dealing with distressed companies was eased with an amendment to its bankruptcy law introducing the DB2010 Poland option of prebankruptcy reorganization for companies facing financial difficulties. Doing Business 2012 OECD HIGH INCOME 85 DB Year Economy Reform The restructuring of Enterprises Act was revised making it DB2009 Finland easier for companies in distress to reorganize. It is easier for companies in distress to restructure by allowing the court to suspend enforcement against assets essential to DB2009 Germany the continuation of the business with the aim of keeping the company working as a going concern. A new bankruptcy law was passed that is expected to allow DB2009 Greece more companies in distress to emerge as going concerns. A reorganization procedure was introduced that should make DB2009 New Zealand it easier for companies in distress to emerge as going concerns. Bankruptcy procedures were strengthened through a new law on trustee licensing that tightens professional requirements for administrators. Obtaining a trustee’s license now requires passing an exam in economics, law, finance, and DB2009 Poland management. The reform also limits trustees’ pay to maximum 3 percent of the bankrupt estate’s value, down from maximum 5 percent, increasing the recovery rate from 28 to 30 cents on the dollar. Bankruptcy laws were reformed, eliminating the need to publish insolvency notices in newspapers, introducing fast- DB2009 Portugal track procedures for small debtors and limiting procedural appeals. Upon an evaluation of the insolvency system, using the 2007 Doing Business report, the Danish High Court found that many procedural delays were caused by the trustee. The new DB2008 Denmark law provides measures for creditor and judicial monitoring of trustees' work, and institutes financial incentives for trustees to conduct proceedings more efficiently. The bankruptcy procedure was reorganized, giving larger DB2008 Italy powers to the trustee. The new rules are intended to favor going-concern transfers over piecemeal sales. Fast-track procedures were created for the voluntary liquidation of commercial enterprises. Alleviating the DB2008 Portugal administrative burden, an entrepreneur can now wind up a company at the registry office 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 2012 OECD HIGH INCOME 86 DATA NOTES The indicators presented and analyzed in Doing Business measure business regulation and the protection of property rights—and their effect on ECONOMY CHARACTERISTICS businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of regulation, such as the number of procedures to start a Gross national income (GNI) per capita business or to register and transfer commercial property. Second, they gauge the time and cost of Doing Business 2012 reports 2010 income per capita achieving a regulatory goal or complying with as published in the World Bank’s World regulation, such as the time and cost to enforce a Development Indicators 2011. Income is calculated contract, go through bankruptcy or trade across using the Atlas method (current US$). For cost borders. Third, they measure the extent of legal indicators expressed as a percentage of income per protections of property, for example, the protections capita, 2010 GNI in U.S. dollars is used as the of investors against looting by company directors or denominator. Data were not available from the the range of assets that can be used as collateral World Bank for Afghanistan; Australia; The Bahamas; according to secured transactions laws. Fourth, a set of Bahrain; Brunei Darussalam; Canada; Cyprus; indicators documents the tax burden on businesses. Djibouti; the Islamic Republic of Iran; Kuwait; New Finally, a set of data covers different aspects of Zealand; Oman; Puerto Rico (territory of the United employment regulation. States); Qatar; Saudi Arabia; Suriname; Taiwan, China; the United Arab Emirates; West Bank and The data for all sets of indicators in Doing Business Gaza; and the Republic of Yemen. In these cases 3 2012 are for June 2011. GDP or GNP per capita data and growth rates from the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Methodology Unit were used. The Doing Business data are collected in a standardized way. To start, the Doing Business team, Region and income group with academic advisers, designs a questionnaire. The Doing Business uses the World Bank regional and questionnaire uses a simple business case to ensure income group classifications, available at comparability across economies and over time—with http://www.worldbank.org/data/countryclass. The assumptions about the legal form of the business, its World Bank does not assign regional classifications size, its location and the nature of its operations. to high-income economies. For the purpose of the Questionnaires are administered through more than Doing Business report, high-income OECD 9,028 local experts, including lawyers, business economies are assigned the “regional� classification consultants, accountants, freight forwarders, OECD high income. Figures and tables presenting government officials and other professionals routinely regional averages include economies from all administering or advising on legal and regulatory income groups (low, lower middle, upper middle requirements. These experts have several rounds of and high income). interaction with the Doing Business team, involving conference calls, written correspondence and visits by Population the team. For Doing Business 2012 team members Doing Business 2012 reports midyear 2010 visited 40 economies to verify data and recruit population statistics as published in World respondents. The data from questionnaires are Development Indicators 2011. subjected to numerous rounds of verification, leading to revisions or expansions of the information collected. 3 The data for paying taxes refer to January – December 2010. Doing Business 2012 OECD HIGH INCOME 87 The Doing Business methodology offers several business lacks information or is unable to follow up advantages. It is transparent, using factual information promptly. Alternatively, the business may choose to about what laws and regulations say and allowing disregard some burdensome procedures. For both multiple interactions with local respondents to clarify reasons the time delays reported in Doing Business potential misinterpretations of questions. Having 2012 would differ from the recollection of representative samples of respondents is not an issue; entrepreneurs reported in the World Bank Enterprise Doing Business is not a statistical survey, and the texts Surveys or other perception surveys. of the relevant laws and regulations are collected and answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be Subnational Doing Business indicators collected in a large sample of economies. Because This year Doing Business published a subnational study standard assumptions are used in the data collection, for the Philippines and a regional report for Southeast comparisons and benchmarks are valid across Europe covering 7 economies (Albania, Bosnia and economies. Finally, the data not only highlight the Herzegovina, Kosovo, the former Yugoslav Republic of extent of specific regulatory obstacles to business but Macedonia, Moldova, Montenegro and Serbia) and 22 also identify their source and point to what might be cities. It also published a city profile for Juba, in the reformed. Republic of South Sudan. Information on the methodology for each Doing The subnational studies point to differences in Business topic can be found on the Doing Business business regulation and its implementation—as well as website at http://www.doingbusiness.org/methodology/. in the pace of regulatory reform—across cities in the same economy. For several economies subnational studies are now periodically updated to measure Limits to what is measured change over time or to expand geographic coverage The Doing Business methodology has 5 limitations that to additional cities. This year that is the case for the should be considered when interpreting the data. First, subnational studies in the Philippines; the regional the collected data refer to businesses in the economy’s report in Southeast Europe; the ongoing studies in largest business city and may not be representative of Italy, Kenya and the United Arab Emirates; and the regulation in other parts of the economy. To address projects implemented jointly with local think tanks in this limitation, subnational Doing Business indicators Indonesia, Mexico and the Russian Federation. were created (see the section on subnational Doing Besides the subnational Doing Business indicators, Business indicators). Second, the data often focus on a Doing Business conducted a pilot study this year on specific business form—generally a limited liability the second largest city in 3 large economies to assess company (or its legal equivalent) of a specified size— within-country variations. The study collected data for and may not be representative of the regulation on Rio de Janeiro in addition to São Paulo in Brazil, for other businesses, for example, sole proprietorships. Beijing in addition to Shanghai in China and for St. Third, transactions described in a standardized case Petersburg in addition to Moscow in Russia. scenario refer to a specific set of issues and may not represent the full set of issues a business encounters. Fourth, the measures of time involve an element of Changes in what is measured judgment by the expert respondents. When sources indicate different estimates, the time indicators The methodology for 3 of the Doing Business topics reported in Doing Business represent the median was updated this year—getting credit, dealing with values of several responses given under the construction permits and paying taxes. assumptions of the standardized case. First, for getting credit, the scoring of one of the 10 Finally, the methodology assumes that a business has components of the strength of legal rights index was full information on what is required and does not amended to recognize additional protections of waste time when completing procedures. In practice, secured creditors and borrowers. Previously the completing a procedure may take longer if the highest score of 1 was assigned if secured creditors Doing Business 2012 OECD HIGH INCOME 88 were not subject to an automatic stay or moratorium business and a new measure, the “distance to frontier.� on enforcement procedures when a debtor entered a While the ease of doing business ranking compares court-supervised reorganization procedure. Now the economies with one another at a point in time, the highest score of 1 is also assigned if the law provides distance to frontier measure shows how much the secured creditors with grounds for relief from an regulatory environment for local entrepreneurs in each automatic stay or moratorium (for example, if the economy has changed over time. movable property is in danger) or sets a time limit for Ease of doing business the automatic stay. The ease of doing business index ranks economies Second, because the ease of doing business index now from 1 to 183. For each economy the ranking is includes the getting electricity indicators, procedures, calculated as the simple average of the percentile time and cost related to obtaining an electricity rankings on each of the 10 topics included in the index connection were removed from the dealing with in Doing Business 2012: starting a business, dealing construction permits indicators. with construction permits, registering property, getting Third, a threshold has been introduced for the total tax credit, protecting investors, paying taxes, trading rate for the purpose of calculating the ranking on the across borders, enforcing contracts, resolving ease of paying taxes. All economies with a total tax insolvency and, new this year, getting electricity. The rate below the threshold (which will be calculated and employing workers indicators are not included in this adjusted on a yearly basis) will now receive the same year’s aggregate ease of doing business ranking. In ranking on the total tax rate indicator. The threshold is addition to this year’s ranking, Doing Business presents not based on any underlying theory. Instead, it is a comparable ranking for the previous year, adjusted meant to emphasize the purpose of the indicator: to for any changes in methodology as well as additions of 4 highlight economies where the tax burden on business economies or topics. is high relative to the tax burden in other economies. Construction of the ease of doing business index Giving the same ranking to all economies whose total tax rate is below the threshold avoids awarding Here is one example of how the ease of doing business economies in the scoring for having an unusually low index is constructed. In the Republic of Korea it takes 5 total tax rate, often for reasons unrelated to procedures, 7 days and 14.6% of annual income per government policies toward enterprises. For example, capita in fees to open a business. There is no minimum economies that are very small or that are rich in capital required. On these 4 indicators Korea ranks in th th rd natural resources do not need to levy broad-based the 18 , 14 , 53 and 0 percentiles. So on average st taxes. Korea ranks in the 21 percentile on the ease of th starting a business. It ranks in the 12 percentile on th th getting credit, 25 percentile on paying taxes, 8 Data challenges and revisions th percentile on enforcing contracts, 7 percentile on resolving insolvency and so on. Higher rankings Most laws and regulations underlying the Doing indicate simpler regulation and stronger protection of Business data are available on the Doing Business property rights. The simple average of Korea’s website at http://www.doingbusiness.org. All the st percentile rankings on all topics is 21 . When all sample questionnaires and the details underlying the economies are ordered by their average percentile indicators are also published on the website. Questions on the methodology and challenges to data can be submitted through the website’s “Ask a Question� 4 In case of revisions to the methodology or corrections to the function at http://www.doingbusiness.org. underlying data, the data are back-calculated to provide a comparable time series since the year the relevant economy or topic was first included in the data set. The time series is available on the Ease of doing business and distance to Doing Business website (http://www.doingbusiness.org). The Doing Business report publishes yearly rankings for the year of publication frontier as well as the previous year to shed light on year-to-year developments. Six topics and more than 50 economies have been This year’s report presents results for 2 aggregate added since the inception of the project. Earlier rankings on the measures: the aggregate ranking on the ease of doing ease of doing business are therefore not comparable. Doing Business 2012 OECD HIGH INCOME 89 rankings, Korea stands at 8 in the aggregate ranking investors). These correlations suggest that economies on the ease of doing business. rarely score universally well or universally badly on the indicators. More complex aggregation methods—such as principal components and unobserved components— Consider the example of Canada. It stands at 12 in the yield a ranking nearly identical to the simple average aggregate ranking on the ease of doing business. Its 5 used by Doing Business. Thus, Doing Business uses ranking is 3 on both starting a business and resolving the simplest method: weighting all topics equally and, insolvency, and 5 on protecting investors. But its within each topic, giving equal weight to each of the ranking is only 59 on enforcing contracts, 42 on 6 topic components. trading across borders and 156 on getting electricity. If an economy has no laws or regulations covering a Variation in performance across the indicator sets is specific area—for example, insolvency—it receives a not at all unusual. It reflects differences in the degree “no practice� mark. Similarly, an economy receives a of priority that government authorities give to “no practice� or “not possible� mark if regulation exists particular areas of business regulation reform and the but is never used in practice or if a competing ability of different government agencies to deliver regulation prohibits such practice. Either way, a “no tangible results in their area of responsibility. practice� mark puts the economy at the bottom of the Economies that improved the most across 3 or more ranking on the relevant indicator. Doing Business topics in 2010/11 The ease of doing business index is limited in scope. It Doing Business 2012 uses a simple method to calculate does not account for an economy’s proximity to large which economies improved the most in the ease of markets, the quality of its infrastructure services (other doing business. First, it selects the economies that in than services related to trading across borders and 2010/11 implemented regulatory reforms making it getting electricity), the strength of its financial system, easier to do business in 3 or more of the 10 topics the security of property from theft and looting, its 7 included in this year’s ease of doing business ranking. macroeconomic conditions or the strength of Thirty economies meet this criterion: Armenia, Burkina underlying institutions. Faso, Burundi, Cape Verde, the Central African Variability of economies’ rankings across topics Republic, Chile, Colombia, the Democratic Republic of Congo, Côte d’Ivoire, The Gambia, Georgia, Korea, Each indicator set measures a different aspect of the Latvia, Liberia, FYR Macedonia, Mexico, Moldova, business regulatory environment. The rankings of an Montenegro, Morocco, Nicaragua, Oman, Peru, economy can vary, sometimes significantly, across Russian Federation, São Tomé and Príncipe, Senegal, indicator sets. The average correlation coefficient Sierra Leone, Slovenia, the Solomon Islands, South between the 10 indicator sets included in the Africa and Ukraine. Second, Doing Business ranks these aggregate ranking is 0.36, and the coefficients economies on the increase in their ranking on the ease between any 2 sets of indicators range from 0.17 of doing business from the previous year using (between protecting investors and getting electricity) comparable rankings. to 0.57 (between starting a business and protecting Selecting the economies that implemented regulatory 5 reforms in at least 3 topics and improved the most in See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to the aggregate ranking is intended to highlight Do It� (World Bank, Washington, DC, 2005). Principal components economies with ongoing, broad-based reform and unobserved components methods yield a ranking nearly programs. 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. 6 7 A technical note on the different aggregation and weighting Doing Business reforms making it more difficult to do business are methods is available on the Doing Business website subtracted from the total number of those making it easier to do (http://www.doingbusiness.org). business. Doing Business 2012 OECD HIGH INCOME 90 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2012 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 183 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Reports http://www.doingbusiness.org/custom-query/ Access to Doing Business reports as well as subnational and regional reports, reform case Law library studies and customized economy and regional Online collection of business laws and profiles regulations relating to business and gender http://www.doingbusiness.org/reports/ issues http://www.doingbusiness.org/law-library/ Methodology http://wbl.worldbank.org/ The methodologies and research papers underlying Doing Business Contributors http://www.doingbusiness.org/methodology/ More than 9,000 specialists in 183 economies who participate in Doing Business Research http://www.doingbusiness.org/contributors/doing- Abstracts of papers on Doing Business topics business/ and related policy issues http://www.doingbusiness.org/research/