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Article - Cutting Red Tape

Making our everyday life easier and reducing the burden on business


Red tape is costing people time and dampening economic growth. Among the most hurt by this are our approx. 3.6 million SMEs. Cutting red tape means giving companies more time to do business, to innovate, create jobs and to train young people.

Ensuring that our public administration is working efficiently and that we have modern and lean regulation in place is absolutely key for our businesses to be competitive and able to generate growth and employment in Germany. This is why the Federal Government runs its programme for cutting red tape and creating better regulation (in German).

The programme is proving effective

Since the introduction of the programme, the various measures taken by the Federal Government in this context have brought down the administrative costs borne by companies by a fourth – which is equivalent to more than 12 billion euros every year. This development can be clearly seen in the Cost of Bureaucracy Index (BKI), which was introduced in 2012 to create transparency at a glance. In 2006, the National Regulatory Control Council was established to help with permanent implementation of the reform agenda.

The latest Progress Report on Cutting Bureaucracy, which covers the reporting period of 2015, shows that the measures are proving effective. The cost of compliance with regulatory requirements borne by the private sector fell by approx. 1.4 billion euros that year. The 'bureaucracy brake', a rule stipulating that for each piece of regulation introduced another must be phased out, has cut the cost of compliance for businesses by 958 million euros. For the first time since its introduction, the Cost of Bureaucracy Index fell below the 100-point mark in 2015, dropping to 99.1 points.

Four figures on cutting red tape

Symbolicon für Bürogebäude

million companies
are subject to administrative requirements.

Symbolicon für Münzen

billion euros less spent on red tape every year.
That's the outcome of the 'one in, one out' rule that has been in place since 2015.

Symbolicon für Geldscheine

billion euros per year.
The amount by which companies saw their administrative costs reduced between 2006 and 2012.

Symbolicon für Summe in Euro

Cost of Bureaucracy Index
In 2015, this index fell below the initial value of 100 for the very first time.


A new drive to cut red tape

To relieve the unnecessary burden on business, particularly on SMEs. That's the goal behind the First and Second Cutting Bureaucracy Acts, the 'one in, one out' rule ('brake on bureaucracy'), and the SME test.

In late 2014, the Federal Cabinet approved a key points paper on cutting red tape. This paper was added to the existing work programme, making it more powerful. Many of the points that are part of this programme have since been implemented or are currently being put into practice. The main relief under the first Cutting Bureaucracy Act was rolled out in 2016, and the Second Cutting Bureaucracy Act further reduces the administrative burden on companies by an additional 360 million euros per year.

The Cutting Bureaucracy Act

The first Cutting Bureaucracy Act (in German) aimed at a quick and palpable reduction of the burden on companies, particularly start-ups and young, fast-growing firms.

Under the new legislation, a greater number of small companies are exempt from the accounting and record-keeping obligations set out in the Commercial Code and the Fiscal Code. New companies now have more time to submit data for the official statistics. This has been achieved by way of raising the relevant reporting thresholds from €500,000 to €800,000. For the first time, this is also being piloted for parts of the environmental statistics. The thresholds that apply for the intra-Community statistics have also been raised. The energy sector has seen the red tape affecting it cut in numerous ways. For instance, the reporting duties for biogas monitoring have been streamlined.

The Cutting Bureaucracy Act has also amended our tax law in three places: reporting obligations for persons subject to church tax have been reduced, and the threshold up to which a flat-rate income-tax rate applies for persons employed on a short-term contract is raised to €68. The calculation method used to determine the amount of income tax to be deducted from the income of spouses/civil partners has been simplified. This too has helped reduce the burden borne by our citizens.

Overall, the private sector has seen its administrative burden reduced by €705 million per year.

The Second Cutting Bureaucracy Act

The Second Cutting Bureaucracy Act (in German) eases the administrative burden felt by small firms, particularly those with only two or three employees, as are typically found in the skilled-crafts sector. The main focus of the legislation is to eliminate red tape in tax law and to promote the use of digital technology – the use of digital technology both in administrative procedures and also in the skilled-crafts sector (modernising the Crafts Code). The Second Cutting Bureaucracy Act enhances the notion of points of single contact and promote eGovernment, for instance by ensuring that uniform information on legislation and regulation is made available on internet platforms. The rules on social-security contributions are also simplified by means of the introduction of new deadlines for payment. Overall, the private sector has seen its administrative burden reduced by around €360 million per year.

Making life easier for companies

Since the reform of the Act making it easier for corporations to carry forward their losses (in German), the Federal Government has achieved great improvements of the tax barriers that had made it difficult for companies to access the capital they need, notably improving the financing options for young companies.

Since 1 January 2018, companies have been able to immediately write off purchases like office materials, tablets and word processing equipment up to a value of €800. Previously, it was only possible to immediately write off purchases up to a limit of €410 (net); higher-value assets had to be depreciated over several years. The raising of this threshold means that many assets will no longer have to be listed in tax returns over several years, and this will reduce the amount of bureaucracy for small and medium-sized enterprises in particular.

Since 1 January 2015, the 'brake on bureaucracy' (in German), has limited the compliance costs for businesses. Under the brake on bureaucracy, the Federal Government has made a political commitment to offset any now regulatory burden imposed on companies within a year, meaning that the burden on business must be eased elsewhere.

Avoiding red tape as far as possible

The SME test (Leitfaden zur Berücksichtigung der Belange mittelständischer Unternehmen in der Gesetzesfolgenabschätzung (KMU-Test) (PDF, 74 KB)), (Guidelines on accounting for the needs of SMEs in regulatory impact assessment (SME test) (PDF, 74 KB)) became mandatory on 1 January 2016. It is an internal working aid designed to support the federal ministries in taking the needs of SMEs into account as legislation is being drafted, and to help them look at alternative ways of achieving the same regulatory objective. In this way, the SME test helps to draw attention to the cost of specific pieces of regulation for small and medium-sized companies. The objective is to prevent bureaucratic burdens being placed on SMEs as much as possible. The guidelines that form the SME test are based on findings including those from a study on 'Taking account of the needs of SMEs in regulatory impact assessment' (in German).

Much red tape can be cut in all sorts of areas, for example by introducing electronic procedures and making better use of data that is already available. This will eliminate the need for multiple notification of the same information. It will also allow companies to meet their notification requirements in less time.

The reform of procurement rules has also substantially reduced the amount of red tape to be coped with by the bidding companies. The introduction of greater flexibility, e.g. in negotiations between contracting authorities and bidders, and the fact that the process largely takes place online, has facilitated the procurement process and moved public procurement into the digital age.

Core energy market data register brings reporting and information obligations together for the electricity and gas industry

A central core energy market data register for the electricity and gas industry is being established to streamline notification and information requirements for companies. The Federal Network Agency will operate the register as an online database. The website is currently being set up. Further information can be found here from the Federal Network Agency (in German).

Electronic trust services and secure digital identities

The Federal Government adopted the Act to implement the EU’s eIDAS Regulation (in German) on 29 March 2017. The key piece of this omnibus act is the “Trust Services Act” which facilitates the use of electronic trust services in Germany. The best-known trust service is the electronic, or digital signature. eIDAS introduces more such services: the electronic seal, the electronic time stamp, electronic delivery services and web page certificates.

Ornamental plants decorating the page on SME policy; Source: mauritius images / / Hans Blossey

© mauritius images / / Hans Blossey

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European level

Better regulation for Europe

Cutting red tape and pursuing better regulation are vital in our efforts to generate growth and employment in Europe. The Federal Government is working with the other Member States and the European institutions to ensure that any unnecessary burden created under EU legislation is reduced, and that law-making processes in Europe are optimised.


Better regulation and cutting red tape are a top priority for European-level institutions. In launching its REFIT programme, the European Commission has followed a holistic approach designed to reduce the administrative burden resulting from EU legislation and to do this across all Member States. The objective of the programme is to systematically and regularly review EU legislation and to look for ways of streamlining it, in order to ease the burden on business, especially SMEs. Ultimately, the process is to ensure that European legislation is efficient and powerful, that it helps reduce costs and generates growth and employment.

REFIT platform

The European Commission has established a REFIT platform that serves as a forum for dialogue with the Member States and other stakeholders. It is made up of two groups. These are the Government Group that brings together representatives of the 28 Member States (represented for Germany by the Federal Ministry for Economic Affairs and Energy), and the Stakeholder Group, which consists of 18 high-ranking representatives of business, civil society and the social partners, one representative of the Committee of the Regions, and one of the European Economic and Social Committee.

The most important task of the REFIT platform is to assess specific proposals for streamlining regulation which have been submitted by citizens or stakeholders either by post or via the 'Lighten the load - Have your say!' online portal. In its assessment, the platform looks at whether these proposals would be effective in cutting red tape and whether this can be achieved without compromising on the intended effects of the relevant EU rules. The REFIT platform then submits its proposals to the Secretariat-General of the European Commission, which has committed to responding to these proposals by either implementing them or by issuing a public statement on why it rejects the proposal.

EU SME monitor organised by the Federal Ministry for Economic Affairs and Energy

European regulation is having an ever greater impact on German SMEs and their business. This is why it is in these firms' best interest to become actively involved in the shaping of EU initiatives. However, many small companies do not have the capacity to seek out detailed information about such initiatives at an early stage.

The Federal Ministry for Economic Affairs and Energy and its EU SME monitor can help. The EU SME monitor provides SMEs with up-to-date information on EU initiatives that are relevant for them, and gives them access to public consultations held by the European Commission. Thanks to the monitor, SMEs have a chance to learn about relevant EU proposals at a very stage and can make their interests heard.

The EU SME monitor is organised by the Federal Ministry for Economic Affairs and Energy to ensure that German companies can have a say on important European regulatory initiatives.


Press releases

  • 15/04/2019 - Press release - Cutting Red Tape

    Minister Altmaier: “Burden of EU regulations must be significantly reduced”

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Further information