Slovakia Is Launching “1 In – 2 Out” Reform

Images_of_Money via flickr || CC

June 2021 will go down in the history of improving the business environment in Slovakia. It has joined the countries that have introduced a system to reduce the costs of doing business, which stem from bureaucracy and other regulations. This will help Slovakia to recover from the crisis, increase business productivity, increase competitiveness and, ultimately, improve people’s standard of living in general.

What is it about? The problem of regulatory burden plagues most economies. It manifests itself in the form of an increase in the number of laws, reports, restrictions, tightening or increases in fees, taxes, levies and other obligations that plague businesses and increase their costs.

The most successful countries have been those that have opted for a systemic approach in the form of mandatory quantification of the impact of changes in laws on business costs in order to reduce them. Such solutions include “one in one out”, or “one in two out” rules. Their essence is that when regulatory burdens increase, ministries must also propose to reduce them by a set amount, either the same or double.

In Slovakia, people have been inspired by successful examples from abroad and from this month they have introduced the one in one out rule and from January next year they will move to one in two out.

How will it work in practice? Let’s imagine that a new record keeping system is introduced by law, which will take up 5 minutes of business time per employee per month. On the face of it, this seems an insignificant burden. In companies, however, it will have to be done by specific people. If we calculate this over the cost to all businesses of the apportioned part of the wages of these employees, we find that employers in Slovakia will pay more than EUR 24 million a year for this.

After the new law, such a change in the law should also include a proposal to save employers elsewhere EUR 24 million, or EUR 48 million from next year. In practice, therefore, it should not be a law for a law, but a euro for a euro of costs, or a euro for two because this is important for improving the business environment.

Similarly, if the Social Insurance Institution imposes new reporting in the law, or the Statistical Office makes the provision of new information compulsory, or if a ministry introduces the obligation to use special equipment, or if administrative fees are increased, this will also be the case.

I am pleased that we have managed to get the “1 in – 2 out” reform off the ground. I believe that its benefits will soon be felt by entrepreneurs in Slovakia, just like in Germany, for example, where they managed to reduce costs for entrepreneurs by EUR 2 billion between 2015 and 2018.

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Jan Oravec