Methodology For Comprehensive Assessment of Regulatory Acts
2
3
Contents 1.
The general logic of the evaluation
2.
Assessment of whether the act is legal and up-to-date
2.1. Checking the Ministry of Justice registration
2.2. Check the basis for the adoption of the regulatory act
2.3. The results of applying the rule of law filters
2.4. The assessment of whether the regulatory standards adopted
pursuant to relevant international obligations (in the first stage - only DCFTA)
2.5. Evaluation of whether an act is up-to-date
3.
Evaluation of whether the act is needed
3.1. Verification of the regulatory act effectiveness
3.2.
4.
Assessment of corruption risks
5.
Assessing the impact on business processes
6.
Assessment of the value (cost) of regulation
7.
The effectiveness of the regulatory act (the ratio of the positive
Checking whether the regulatory act is needed
effect of the action act and the costs of its implementation) *
6.1. Losses (costs)
8.
Summary assessment of the regulatory act
4
1. The general logic of the evaluation 1.1. To create a quality regulatory field in Ukraine, Office analyzes existing regulatory acts and norms. The order, in which regulatory acts norms are analyzed, is determined through a transparent and inclusive process, which will be based on the stakeholder views. As a result of the assessment of each regulatory act, one of the following three decisions is recommended: to maintain, amend (change) or delete (green, yellow and red basket - respectively). 1.2. The assessment algorithm includes: - Filters, their application may result in recommendation to maintain or remove; - Evaluation criteria, their application may result in recommendation to maintain, amend or remove; - Prioritization criteria, their application may change the priority review level of the individual regulatory acts. 1.3. Principle (map) of the comprehensive assessment of regulatory acts (Rolling review) 1.Legality: Legal / Illegal (if not protected by DCFTA) 2. Whether the act is up-to-date: Up-to-date / Outdated
5
3. Need (existing regulatory impact analysis: 3.1. Effective / not effective / cannot be determined 3.2. Useful (>3) / conditionally useful (-3<3) / useless (<-3) 4. Corruption risks (1/10) Acceptable risks (<3) / Moderate risk (>4) / high risk (>7). 5. The impact on business processes: Friendly (<3) / not friendly (>4) 6. Cost of regulation: revenues / expenses = cost of regulation 7. Efficiency Benefit / cost of regulation = regulatory effect.
2. Assessment of whether the act is legal and up-to-date For the purposes of the rolling review, the definition of the legality of the act consists of 2 stages: - The establishment of the fact of registration of the regulatory act by the Ministry of Justice of Ukraine (or lack of it); - Establish the basis for its adoption (or lack of it). 2.1. Checking the Ministry of Justice registration The fact of registration is checked by looking up the information on the registration of regulatory act in the publicly available sources.
6
This filter is implemented in the check-list as a question «Is a regulatory act registered with the Ministry of Justice?» with three possible answers: - «Yes» / considered to have passed the first filter; - «No» / recommended for removal; - not applicable as the act is not subject for registration with the MoJ / considered to have passed the first filter. 2.2. Check the basis for the adoption of the regulatory act Given the constitutional principles of limitation and delegation of powers and assuming that the most important relationships should be regulated directly by laws and, all secondary legislation must have basis in the primary law. There is no doubt that it’s often impossible or impractical to provide highly detailed rules directly in the text of laws, however regulation can only be deemed legal where there is a clear basis in law for the adopted secondary legislation (in this case, the law should contain appropriate referential or blanket norms). The filter is implemented in the check-list in the form of question «Is there a law in reference to the need for additional settlement of legal relations by enacting the corresponding bylaw regulatory act?» Valid are two options: - «Yes» / considered to have passed the second filter; - «No» / recommended for removal. 2.3. The results of applying the rule of law filters In case the regulatory act provisionally recognized as a «legitimate» for both sides of the filter, then it goes to the next evaluation stage - the «assessment of usefulness».
7
In case the regulatory act arbitrarily deemed «illegal» at least one of the parts of the filter, it will be checked for protected status under the international obligations of Ukraine (DCFTA). 2.4. The assessment of whether the regulatory standards adopted pursuant to relevant international obligations (in the first stage - only DCFTA) This step serves as a filter, designed to protect against removal of acts which were adopted further to relevant international obligations of Ukraine (DCFTA). This filter is implemented in the check-list as question «Does the regulatory document rules adopted pursuant to relevant international obligations of Ukraine?». Possible answers: - «Yes» / document is recommended not for amendment. - «No» / document is recommended for removal.
8 2.5. Evaluation of whether an act is up-to-date A regulatory act is considered to be up-to-date when it is in line with the legislation adopted thereafter which have significantly changed the regulation in the area of regulation of the act, and has not been repealed by an administrative court. Evaluation is conducted by an Office expert, which consecutively provides answers to the following questions: - Are there available any publicly available judicial decisions of administrative courts abolishing the analyzed act? / If yes - that act shall be deemed not up-to-date, - if not, then the next question. - Are there available any publicly available legislation adopted thereafter which have significantly changed the regulation in the area of regulation of the act? / If yes - that act shall be deemed not up-to-date, - if not, then up-to-date.
3. Evaluation of whether the act is needed For the purposes of the rolling review, the definition of whether the regulatory act is needed consists of 2 stages: - Effectiveness; - Usefulness. 3.1. Verification of the regulatory act effectiveness EFFECTIVENESS of a regulatory act is defined as the successful achievement of the purpose for which it was adopted. This goal should be determined from the accompanying documents prepared for its adoption - the explanatory note or regulatory impact analysis. The success of its achievement should be determined from the conducted regulatory impact analysis.
9
The check-list filter ÂŤeffectiveness reviewÂť is presented as a set of consecutively and variably presented questions, according to answers to which, effectiveness is determined. As a result, the act can be determined to be: - Effective; - Conditionally effective; - Not effective; - One, the impact of which is not possible to establish. To start with the performance assessment should establish the fact of the possibility of such an assessment. To this end, the Office expert must find the following: - Whether the purpose of the adoption of a regulatory act is clear (the problem it is intended to solve)? - Is this goal measurable? - Are there any measurable projected effects of the adoption of the act in place?
a) For the purpose of determining whether the purpose of the adoption
of a regulatory act is clear Office specialist provides answers to the following questions:
a-1. Is it possible to find a regulatory impact analysis or an explanatory
note to the act? / If yes - then the question A.2. - if not, it is considered that the purpose of this act cannot be determined, and it is considered conditionally effective. In such a case, the assessment of the act is continued to the next stage.
a-2. the explanatory note or RIA include an adequately defined the
problem, to the solution of which the regulatory act was adopted? / If yes - then the question b) - if not, if not, it is considered that the purpose of this act cannot be determined, and it is considered conditionally effective. In such a case, the assessment of the act is continued to the next stage.
10
b) If the purpose can be determined, it is necessary to determine whether it
is measurable. To this end, the Office expert answers the following questions:
b-1. Do these documents have clear and appropriate criteria for
assessing effectiveness? If yes, then the question b-2, if not - it is if not, it is considered that the measurable purpose of this act cannot be determined, and it is considered conditionally effective. In such a case, the assessment of the act is continued to the next stage.
b-2. Has there been a basic analysis of the impact of the regulatory act
conducted (or another study that determines performance evaluation criteria at the time of the adoption of the act)? Is it possible to get acquainted with this data? If yes - then the question c), if not, it is if not, it is considered that the measurable purpose of this act cannot be determined, and it is considered conditionally effective. In such a case, the assessment of the act is continued to the next stage.
c) If a measurable objective is determined, the Office specialist generates an
information request to obtain data on the performance criteria for the effectiveness assessment for the period of validity of the act and sends it to the competent authority. After receiving the necessary information - compares the efficiency of the act targets and actual data on it (like) figures for the period of action of the act. The analysis may result in one of the following three conclusions: 1. The act is effective as its objective has been achieved. In such a case, the assessment of the act moves to the next stage. 2. The act is conditionally effective as its objective has been substantially achieved. In such a case, the assessment of the act moves to the next stage. 3. The act is not effective, as its objective has not been achieved. The act is recommended for removal.
11
4. The act is conditionally effective as its measurable purpose cannot be determined, and it is. In such a case, the assessment of the act moves to the next stage. 3.2. Checking whether the regulatory act is needed Assessment of whether a regulatory act is NEEDED is conducted through interviewing key stakeholders (entities whose relationship is largely regulated by the act, regulators, experts in the relevant segment of the sector). To conduct the survey * on the usefulness of the regulatory act an Office specialist prepares a special questionnaire in which, among other things, the following questions are formulated: 1. In your opinion, what problems is the regulatory act was intended to solve? 2. In your opinion, has the act been successful in solving this problem? 3. In your opinion, has the regulation of the act been useful for your market? If yes, what are its main favorable effects? Rate on 10-point scale. 4. In your opinion, has the regulation of the act been harmful to your market? If yes, what are its main adverse effects? Rate on 10-point scale. 5. Does the act include rules that should be kept in case it is cancelled? 6. Does the act include rules that should be cancelled in case the act will be kept in force? The list of stakeholders for the survey is determined on the basis of the analytical database of the Office. The result of the survey should be presented as the average value in the range from «-10» to «10».
12
If as a result of this assessment, an act receives an average rating of «-3» or lower, the regulatory act is recommended for removal, as it is considered unneeded by all stakeholder groups. If in the process of analysis, a subset of rules included in the act are listed as useful, these rules are analyzed separately. If as a result of this assessment, an act receives an average rating of -2 or higher, the assessment of the act moves to the next stage. * - It should be noted that gathering information regarding the regulatory act must be approached comprehensively, if the expert sends a request to determine whether the act is “needed”, corruption risks and impact on business processes questions should also be added.
4. Assessment of corruption risks The level of corruption risks is determined as an aggregate index of a series of assessments of corruption in the regulatory act by responding to the following questions: 1. Does the act provide for any procedure that requires mandatory interaction with public authorities? If yes, «1» rating - if not, «0». 2. Does the act provide for any procedure involving decisions to be made by public official affecting a business? If yes, «1» rating - if not, «0». 3*. Does the act provide for a procedure that gives the power to a public official to refuse resolution to business due to a defect of the subject (not on the basis of
13
compliance with the requirements of business procedures)? If yes, «1» rating - if not, «0».
3.1. Are the requirements for the subject clearly defined and so that ambiguous
construction is prevented? If yes, «0» rating - if not «1».
3.2. Is the list of requirements exhaustive? Can an official request from the
applicant any other document / information, except those that are listed directly in the regulatory act? If yes, «0» rating - if not «1». 4. Does the act include an exhaustive list of options for taking official action on each of the situations that may occur in the implementation of the act? If yes, «0» rating - if not «1».
4.1. Does the regulatory act include an exhaustive list of grounds (conditions)
under which it a given decision is made for each of the situations that may occur in the implementation of the act? If yes, «0» rating - if not «1». 5. Does the regulatory act include a clear deadline for all decisions made under each of the situations that may occur in the implementation of the act*? If yes, «0» rating - if not «1». * - If the regulatory act provides for a number of different situations / periods, it is necessary to evaluate each of them separately, but as a final evaluation assessment to use the arithmetic mean value. 6. Is there an official duty to disclose / publish decisions of public officials? If yes, «0» rating - if not «1».
14
6.1. Is there a centralized public database of similar official decisions?
If yes, «0» rating - if not «1». 7. Does the act require the public official to justify the decision in writing in case of an adverse decision? If yes, «0» rating - if not «1».
7.1. Does the act require the public official to justify the decision in writing in
case of a favorable decision? If yes, «0» rating - if not «1». 8. Is there a possibility to appeal the official decision at the administrative court? If yes, «0» rating - if not «1». 9. Does the regulatory act directly provide or provide for a situation where business is expected to interact with any other public authority or other entity, in addition to the one to which the documents are submitted? If yes, «1» rating - if not, «0». 10. Is the business required to interact with the authorities more than twice? If yes, «1» rating - if not, «0». Responses to the above questions are summarized («10» points - the highest risk, «0» points - the lowest level of risk). If the score is 5 or more - an act considered to be one requiring anti-corruption assessment (recommended for correction on the grounds of corruption risks). * - Value of a single group of questions ranges from «0» to «1» score. The final assessment of the group is estimated as the arithmetic mean ratings of each of the questions.
15
5. Assessing the impact on business processes Assessment of the impact of the regulatory act on business processes is conducted to determine the extent and nature of its impact on the freedom of doing business. Evaluation is carried out by responding to the following questions: 1. Does the regulatory act provide for unconditional significant restrictions for business (prohibition to engage in certain activities)? If yes, «1» rating - if not, «0». If the answer is «yes», then please specify how many absolute prohibitions set.
1.1. Are there exceptions to the unconditional significant restrictions?
If yes, «1» rating - if not, «0».
1.2. Does the regulatory contain an exhaustive list of exceptions to the
unconditional restrictions? If yes, «0» rating - if not «1». * 2. Does the regulatory act provide for conditional significant restrictions to doing business (opportunities to engage in activities only subject to certain requirements)? If yes, «1» rating - if not, «0». If the answer is «yes», then you must also provide the number of conditional restrictions.
2.1. Does the act contain an exhaustive list of conditions that must be fulfilled
to be eligible to carry out this economic activity? If yes, «0» rating - if not «1».
2.2. Are the conditions worded sufficiently (so that ambiguous construction
is prevented)? If yes, «0» rating - if not «1».
16
3. Does the regulatory act directly provide or provide for a situation where business is expected to provide the State (regulator / inspector) additional information (in addition to the standard tax reporting)? If yes, «1» rating - if not, «0». 4. Does the regulatory act provide for mandatory payments (other than taxes directly provided by the Tax Code)? If yes, «1» rating - if not, «0». If yes – please specify the number of payments and the amounts. 5. Does the regulatory act provide for non-mandatory payments (other than taxes directly provided by the Tax Code), the lack of payment of which can complicate carrying out economic activity (including even a single business process)? If yes, «1» rating - if not, «0». 6. Does the regulatory act provide a regulator with power to make decisions that may significantly affect the business environment? If yes, «1» rating - if not, «0». 7. Does the regulatory act make it necessity /mandatory for businesses to use the services of third parties for the successful interaction with the state? If yes, «1» rating - if not, «0». Responses to the above questions are summarized («7» points - the highest risk, «0» points - the lowest level of risk).
6. Assessment of the value (cost) of regulation Assessment of the value (cost) of regulation is defined as the ratio of the following indicators calculated on the basis of the method of calculation of regulatory impact analysis (including M-test), namely:
17 6.1. Losses (costs): 6.1.1. Business costs:
6.1.1.1 Number of business entities who are covered by the act;
6.1.1.2. The amount of funds that are directly (direct costs) to average spent
by a business entity to fulfill the requirements of the regulatory act;
6.1.1.3. The time that is spent to average business entity to fulfill the
requirements of the regulatory act;
6.1.1.4. Cost of 1 hour of the employee, which implements the requirements
of the regulatory act.
6.1.1.5. The number of times the procedures (pursuant to regulatory act) for
the year. 6.1.2. The costs to the state:
6.1.2.1. The size of the administrative costs incurred by the regulator to
ensure compliance with regulatory act (regulatory procedures).
6.1.2.1.1. The amount of funds provided for in the current year on the
financing of
the agency, which is implementing the procedures provided for
by the regulatory act.
6.1.2,1.2. The total number of agencyâ&#x20AC;&#x2122;s functions, which is implementing
the procedures provided for the regulatory act.
6.1.2.1.3. The unit cost of the function for the implementation of
procedures for the functions provided by the regulatory act.
6.1.2.1.4. Total number of employees of the whole agency tasked with
carrying out the implementation of the procedures provided for the regulatory act.
6.1.2.1.5. The number of employees within the agency, which directly
carry out the implementation procedures under regulatory act.
6.2.2.1.6. The average specific variable of the cost for the implementation
of regulatory functions. year.
6.1.2.1.7. The cost of implementing the function of regulation in the
18
6.1.2.2. The amount of the administrative costs incurred by the supervisory
agency (inspector) to ensure compliance with regulatory act (regulatory procedures).
6.1.2.2.1. The amount of funds provided for in the current year on the
financing of the body, which carries out control / oversight for compliance with regulatory act provided for supervision.
6.1.2.2.2. The total number of agencyâ&#x20AC;&#x2122;s functions related to performance
of control / oversight compliance procedures under a regulatory act.
6.1.2.2.3. The unit cost of financing of control function / oversight of
compliance with the procedures provided for the regulatory act.
6.1.2.2.4. Total number of employees of the agency overseeing /
supervising compliance procedures under regulatory act.
6.1.2.2.5. The number of employees within the agency who directly
oversee / supervise compliance procedures under a regulatory act.
6.1.2.2.6. The average specific variable of the cost for the implementation
of regulatory functions.
6.1.2.2.7. The cost of implementation of the control function / oversight
of regulatory compliance annually.
19
7. The effectiveness of the regulatory act * * - Assessment is carried out only if it is possible to evaluate the regulatory act according to the criteria «effectiveness» and «cost».
7.1. Growth of units on effectiveness criteria (for the accounting period).
7.2. The cost of implementation for the implementation of the function of
regulation (for the accounting period).
7.3. The cost of performing the functions of the compliance review / oversight
of regulation (for the accounting period).
7.4. The unit cost of a unit of increase on performance criteria.
8. Summary assessment of the regulatory act 8.1. According to the results of the analysis, Office prepares and issues a final report with recommendations: - Remove («illegal», «unneeded», «not effective»); - Amend («high corruption risks», « high-risk for economic freedom adverse impact», «high-cost»); - Keep. The decision for the recommendation for removal is accompanied by a short but clear rationale. The decision for the recommendation for amendment is accompanied by the legislation drafting technical assignment. 8.2. Rolling review assessment results taken in entirety can be used to create a quality map of the regulatory system to be used by the Office for the development of better regulation delivery legislative packages.