Friday 14 April 2017

Evidence-based European market reforms?

During its first year, the Juncker Commission published a limited number of key proposals, strategic roadmaps for the first years or the rest of the mandate. They included the new single market strategy, available in 23 official EU languages; here the English version:
Upgrading the Single Market: more opportunities for people and business; Brussels, 28.10.2015 COM(2015) 550 final (22 pages)

The communication takes aim at the goods and services markets. It was accompanied by two staff working documents, with more detailed facts and reasons, but available in English only.

Analysis and evidence, the first Commission staff working document is mercifully available through Eur-Lex in one piece:
A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

The second document, with internal market integration and competitiveness analysis, is contained in a Commission staff working document SWD(2015) 203, available through the legal portal Eur-Lex in three parts.

Although I prefer the order and  permanence of the multilingual Eur-Lex when possible, in this case it may be more convenient to download the document from a Commission web page as a whole “printed” publication:

Single Market integration and competitiveness in the EU and its member states - Report 2015; SWD(2015) 203 final (112 pages)

Single market analysis and evidence

Think of the European Union, at least potentially, as a learning organisation aiming at evidence-based structural reforms. This is about to be tested.

We take a closer view of the first Commission staff working document:
A Single Market Strategy for Europe - Analysis and Evidence; Brussels, 28.10.2015 SWD(2015) 202 final (108 pages)

The staff working paper is structured like the communication, which had measures falling  into three categories (page 3-4):

1. Creating opportunities for consumers, professionals and businesses by enabling the balanced development of the collaborative economy, giving start-ups the opportunity to scale up and grow cross-border, unlocking investment (in particular for SMEs), creating a ‘services passport’ for companies, modernising the regulation of professions, addressing restrictions in retail establishment and preventing unjustified discrimination against consumers and entrepreneurs;

2. Encouraging and enabling the modernisation and innovation that Europe needs, through more transparent, efficient, sustainable and accountable public procurement, promoting innovation procurement, modernising the EU’s intellectual property framework, and raising quality and promoting interoperability through a modernised standardisation system and European standards; and

3. Ensuring practical delivery that benefits consumers and businesses in their daily lives, by taking a smart and collaborative new approach to enforcement and implementation, improving the delivery of the Services Directive by reforming the notification procedure and strengthening the Single Market in goods

However, the SWD(2015) 202  is more detailed and well documented, laying a foundation for reforms (page 4):

This document is structured around these three categories and provides evidence to underpin each measure. Each measure is complemented by an analysis of the policy context and a description of the problem encountered and the expected impacts. The legislative measures will be subject to further impact assessment work, which will ultimately form the basis for the Commission’s decisions.  

Parallel use

This means that for each section you can consult and profit from the SWD, when you read the condensed internal market strategy communication.

By way of example, where the SWD discusses the development of the collaborative economy (sharing economy) on pages 4-8 (about four A4 pages of text), the strategy communication has boiled down the issue to about one A4 page (on pages 3-4).

Or, the communication helps SMEs and start-ups on a little less than three A4 pages (numbers 4-7), while the working document expands on the equivalent of five A4 pages (numbered 8-13).

Cross-border barriers: VAT

Ask almost any local, regional, national or EU politician ahead of elections about creating growth and jobs. Despite all the talk about helping small and medium-sized enterprises, what do they do when they face the SWD evidence (footnote 32 on page 10)?

Around 75-80 % of respondents mentioned the change in VAT regulations which came into effect in January 2015 as being a significant (or indeed the most significant) inhibitor to cross-border activities. 'Startups and the Digital Single Market, Final Report', NESTA, and The Lisbon Council, 2015.

If you want to, you can contemplate the devastating effect of the regulatory burden of national value added tax, while reading the whole paragraph following Barriers to cross-border expansion (here cleaned of footnotes you find on page 10 as well):

Start-ups and SMEs find it difficult to identify and meet the regulatory requirements when trading across borders. Amongst others, SMEs and start-ups complain about a heavy burden that a set of VAT registration and reporting obligations puts on them. Compliance with the VAT rules inevitably becomes more complicated and burdensome when a business engages in online cross-border transactions with customers located in other Member States or third countries. Since VAT is levied in the country of the customer and in accordance with that country's laws, different national VAT rules will apply and different tax authorities will be involved. Overall, 16 % of SMEs that are trading across the borders and 18 % of those that do not trade internationally perceive complicated foreign taxation regimes as a major obstacle to cross-border expansion.

This is a massive collective failure, just the case for evidence-based structural reform.
The Commission seems to have noticed, as shown by the various components of the Action plan on VAT, but is a simple, EU-wide VAT regime going to see the light of day?  

Ralf Grahn

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