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Germany tries to curb too many rules and red tape to run business

Germany tries to curb too many rules and red tape to run business

BERLIN: Small business owner Nadja Kothe spends one day each week fulfilling reporting obligations to the government, a duty she says drains valuable time and money from her design company.

To create and innovate in business, you have to think in a way that is unconventional — you break the rules over and over,” Kothe said. “But the more regulated the environment you do business in, the more difficult it becomes to take those risks.”

From rules dictating the placement of office windows, to nationwide bans on drilling at home on Sundays and piano tuning at night — laws and regulations have long dominated every last detail of public, private and commercial life in Germany.

Now the world’s fourth-largest economy is trying to stem the rising tide of red tape and cut businesses some slack. Known as the “bureaucracy brake,” the law which took effect July 1 intends to use a “one in, one out” rule, meaning that for every new regulation, German politicians must abolish an equivalent measure elsewhere.

The government anticipates the measure will save companies $816 million annually in Germany, which ranks 114th in the world for ease of starting a business, according to the World Bank. “We want to permanently prevent the growth of bureaucracy,” said Adrian Toschev, a spokesman for the German government.

In recent years, administrative costs for businesses have spiraled higher.

In 2014, the price tag for complying with regulations introduced that year alone set German companies back a whopping $11.3 billion and hurt the nation’s competitiveness on the world stage, according to the German National Regulatory Control Council (NKR). In comparison, NKR figures showed complying with new red tape in 2013 set businesses back $2.4 billion.

It requires unnecessary effort, and it doesn’t help our businesses grow,” said Ralf Oppermann, global sales director at a mid-sized electrical engineering firm in northern Germany.

Businesses remains skeptical the new measure will improve the situation. In a survey of nearly 600 small- to mid-sized companies published this year by the German Association of Family Companies, 95% of respondents said the law will merely maintain a suffocating status quo that is already paralyzing productivity and innovation.