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Cover design: The Word Express Doing Business 2014 Estonia 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 34 Registering property .................................................................................................................. 41 Getting credit .............................................................................................................................. 49 Protecting investors ................................................................................................................... 56 Paying taxes ................................................................................................................................ 65 Trading across borders .............................................................................................................. 72 Enforcing contracts .................................................................................................................... 80 Resolving insolvency .................................................................................................................. 89 Employing workers .................................................................................................................... 94 Data notes ................................................................................................................................. 101 Resources on the Doing Business website ............................................................................ 107 Doing Business 2014 Estonia 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2012). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Estonia. To allow useful comparison, it business regulatory reforms. The data, along with also provides data for other selected economies information on ordering Doing Business 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 Estonia 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing Region: OECD high income business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: High income medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of Population: 1,339,396 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 15,830 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 22 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 21* investors, paying taxes, trading across borders, Change in rank: -1 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 75.24 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 74.12 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: 1.14 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2014 Estonia 6 THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2014 Estonia 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy’s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Estonia and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Estonia 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Estonia ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Estonia 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environment for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Estonia come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 Estonia 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Estonia Best performer globally Lithuania DB2014 Denmark DB2014 Norway DB2014 Finland DB2014 Estonia DB2014 Estonia DB2013 Poland DB2014 Indicator Latvia DB2014 DB2014 Starting a Business 61 50 40 55 57 11 53 116 New Zealand (1) (rank) Procedures (number) 5 5 4 3 4 4 5 4 New Zealand (1)* Time (days) 6.5 6.5 5.5 14.0 12.5 6.5 7.0 30.0 New Zealand (0.5) Cost (% of income per 1.5 1.6 0.2 1.1 1.9 0.9 1.6 14.3 Slovenia (0.0) capita) Paid-in Min. Capital (% 20.6 22.1 23.9 7.0 0.0 0.0 5.1 12.6 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 38 38 8 36 79 39 28 88 China (1) (rank) Hong Kong SAR, Procedures (number) 13 13 8 16 18 16 10 18 China (6) Time (days) 148.0 148.0 67.0 66.0 152.0 105.0 136.0 161.0 Singapore (26.0) Doing Business 2014 Estonia 11 Best performer globally Lithuania DB2014 Denmark DB2014 Norway DB2014 Finland DB2014 Estonia DB2014 Estonia DB2013 Poland DB2014 Indicator Latvia DB2014 DB2014 Cost (% of income per 15.0 16.1 87.2 43.3 15.4 18.0 28.6 10.6 Qatar (1.1) capita) Getting Electricity 56 55 18 22 83 75 17 137 Iceland (1) (rank) Procedures (number) 4 4 4 5 5 5 4 6 10 Economies (3)* Time (days) 111 111 38 42 108 148 66 161 Germany (17) Cost (% of income per 188.0 201.4 118.4 29.6 326.1 48.1 12.1 205.2 Japan (0.0) capita) Registering Property 15 14 7 26 33 6 10 54 Georgia (1) (rank) Procedures (number) 3 3 3 3 5 3 1 6 4 Economies (1)* Time (days) 17.5 17.5 4.0 14.0 18.0 2.5 3.0 35.0 New Zealand (1.0)* Cost (% of property 0.5 0.5 0.6 4.0 2.0 0.8 2.5 0.4 5 Economies (0.0)* value) Getting Credit (rank) 42 40 28 42 3 28 73 3 Malaysia (1)* Strength of legal rights 7 7 9 8 10 7 6 9 10 Economies (10)* index (0-10) Depth of credit 5 5 4 4 5 6 4 6 31 Economies (6)* information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 73.6 28.3 0.0 0.0 Portugal (100.0)* (% of adults) Private bureau 33.7 33.4 7.5 19.5 0.0 89.4 100.0 82.8 22 Economies (100.0)* coverage (% of adults) Protecting Investors 68 67 34 68 68 68 22 52 New Zealand (1) (rank) Extent of disclosure 8 8 7 6 5 7 7 7 10 Economies (10)* Doing Business 2014 Estonia 12 Best performer globally Lithuania DB2014 Denmark DB2014 Norway DB2014 Finland DB2014 Estonia DB2014 Estonia DB2013 Poland DB2014 Indicator Latvia DB2014 DB2014 index (0-10) Extent of director 3 3 5 4 4 4 6 2 Cambodia (10) liability index (0-10) Ease of shareholder 6 6 7 7 8 6 7 9 3 Economies (10)* suits index (0-10) Strength of investor 5.7 5.7 6.3 5.7 5.7 5.7 6.7 6.0 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 32 44 12 21 49 56 17 113 (1) Payments (number per Hong Kong SAR, 7 8 10 8 7 11 4 18 year) China (3)* United Arab Emirates Time (hours per year) 81 81 130 93 264 175 83 286 (12) Trading Across Borders 7 8 8 9 17 15 26 49 Singapore (1) (rank) Documents to export 3 3 4 4 5 4 4 5 Ireland (2)* (number) Time to export (days) 6 6 6 9 10 10 8 17 5 Economies (6)* Cost to export (US$ per 765 765 795 615 600 750 1,225 1,050 Malaysia (450) container) Documents to import 4 4 3 5 5 5 5 4 Ireland (2)* (number) Time to import (days) 5 5 5 7 11 9 7 14 Singapore (4) Cost to import (US$ per 795 795 745 625 801 800 1,100 1,025 Singapore (440) container) Enforcing Contracts 26 28 32 8 21 17 4 55 Luxembourg (1) (rank) Doing Business 2014 Estonia 13 Best performer globally Lithuania DB2014 Denmark DB2014 Norway DB2014 Finland DB2014 Estonia DB2014 Estonia DB2013 Poland DB2014 Indicator Latvia DB2014 DB2014 Time (days) 425 425 410 375 469 300 280 685 Singapore (150) Cost (% of claim) 21.9 22.3 23.3 13.3 23.1 23.6 9.9 19.0 Bhutan (0.1) Procedures (number) 35 35 35 33 27 32 34 33 Singapore (21)* Resolving Insolvency 66 70 10 3 43 44 2 37 Japan (1) (rank) Time (years) 3.0 3.0 1.0 0.9 1.5 1.9 0.9 3.0 Ireland (0.4) Cost (% of estate) 9 9 4 4 10 7 1 15 Norway (1) Outcome (0 as piecemeal sale and 1 as 0 0 1 1 0 0 1 1 going concern) Recovery rate (cents on 38.9 38.5 87.0 90.2 48.4 48.4 91.3 54.8 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Estonia 14 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Estonia 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Estonia? costs 1.5% of income per capita and requires paid-in According to data collected by Doing Business, starting minimum capital of 20.6% of income per capita (figure a business there requires 5 procedures, takes 6.5 days, 2.1). Figure 2.1 What it takes to start a business in Estonia Paid-in minimum capital (% of income per capita): 20.6 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Estonia 16 STARTING A BUSINESS Globally, Estonia stands at 61 in the ranking of 189 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Estonia to start a business. Figure 2.2 How Estonia and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2014 Estonia 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Estonia is keeping up—and where it is minimum capital required to start a business (figure falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Estonia 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Estonia 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Estonia (table 2.1)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.1 How has Estonia made starting a business easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Estonia is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new City: Tallinn firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Private Limited Company (osaühing professionals and the study of laws, regulations and or OÜ) publicly available information on business entry in Paid in Minimum Capital Requirement: EUR 2,500 that economy. Following is a detailed summary of those procedures, along with the associated time Start-up Capital: 10 times GNI per capita and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Summary of procedures for starting a business in Estonia—and the time and cost Time to No. Procedure Cost to complete complete Check online the uniqueness of the proposed company name The Commercial Register refuses to register a company if the name resembles an existing company name or registered trade mark. The Less than one day 1 entrepreneur can check proposed names online at www.rik.ee. The law no charge (online procedure) provides that the company business name shall be clearly distinguishable. Procedure can be done online Deposit the initial capital in a bank If the share capital is higher than EUR 25,000 the entrepreneur needs to deposit it in a bank. However, if the decided share capital is not over EUR 25,000, it can be established at the memorandum of association that the shareholders are not obliged to make pre-payments for the shares. 2 1 day no charge In that case a shareholder does not make a payment for the share, it will be personally liable to the company in the amount of his/her unpaid share contribution. As of October 2011, 61% of the companies were founded without making pre-payments. Doing Business 2014 Estonia 21 Time to No. Procedure Cost to complete complete Submit online the registration application to the Commercial Register The costs of registration into the Commercial Register are EUR 140.60 for regular registration or EUR 185.34 for expedited registration. A separate registration with the National Social Insurance Board, which gets its information from the Estonian Tax and Customs Board, is not required. Health insurance in Estonia is through a compulsory scheme under which employers are obliged by law to pay social tax (the source revenue for health insurance) for their employees. The rate of social tax EUR 140.60 regular is 33% of the taxable amount. This tax must be paid by the tenth day of 1 day registration or EUR 3 the month following the taxable period, and the corresponding tax 185.34 expedited return must be submitted to the local Tax and Customs Board office of registration the residence or seat of the payers of social tax by the same date. If the company undertakes operation in an area subject to special requirement, it needs to register at the Register of Economic Activities. The registration will cost EUR 19.17 and it will take up to 5 days. Register for VAT at the Estonian National Tax Board The company must register itself as VAT payer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 16,000, as calculated from the beginning of the calendar year. The company’s management board must file an application for company registration, making the company liable for VAT with the Tax and Customs Board, within 3 days as of the date on which the taxable turnover of the company. Registration shall be completed by the Tax 3 days no charge 4 and Customs Board within 3 days of filing the application. Registration may be (and in the practice, often is) effected immediately after establishment. Starting January 1, 2009 the application for registration of the company as a taxable person can also be submitted electronically via the electronic system of the Commercial Register. Register with the Central Sick Fund of Estonia In Estonia, health insurance is provided through a compulsory scheme under which employers are obliged by law to pay social tax (the source 5 of revenue for health insurance) for their employees. The employer is 1 day no charge obliged to register all new employees, contractual workers and board members with the Health Insurance Fund within 7 days from their recruitment date. Doing Business 2014 Estonia 22 Time to No. Procedure Cost to complete complete Health insurance is provided through a compulsory scheme under which employers are obliged by law to pay social tax of 33% of the taxable amount by the 10th day of the month following the taxable period. By the same date, the employer must also submit the corresponding tax declaration to the Tax and Customs Board. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Estonia 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Estonia 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 13 procedures, takes 148.0 days build a warehouse in Estonia? According to data and costs 15.0% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Estonia Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Estonia 25 DEALING WITH CONSTRUCTION PERMITS Globally, Estonia stands at 38 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Estonia to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Estonia and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2014 Estonia 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Estonia is keeping up—and deal with construction permits (figure 3.3) help show where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Estonia 27 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Estonia 28 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Estonia (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Estonia made dealing with construction permits easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Estonia made dealing with construction permits more complex DB2011 by increasing the time for obtaining design criteria from the municipality. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 29 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Estonia are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through City : Tallinn information collected from experts in construction licensing, including architects, civil engineers, Estimated construction lawyers, construction firms, utility EUR 665,013 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Estonia —and the time and cost Time to No. Procedure Cost to complete complete Obtain design criteria from Municipal authority The company must obtain the architectural and structural criteria for 30 days no charge 1 the construction from the local authority. Obtain project clearance from fire department According to the Rescue Act of 2010, 10 days are required to obtain fire safety clearance for the building project from the national rescue service agency or a local government rescue service. However in 30 days no charge 2 practice it takes 30 days. If the building project does not conform to the fire safety rules then applicant has five workdays to eliminate deficiencies from the project. * Submit Environmental Impact Assessment The Environmental Impact Assessment and Environmental Management System Act does not establish a term for submitting an environmental impact assessment report. Local municipality is the agency which decides whether it is necessary to assess the environmental impact of the project or not (if this is to be decided in 7 days no charge 3 the course of applying for a building permit, the matter of assessing the environmental impact of the project is decided in 20 days). The environmental impact of the project will also be assessed if a person wishes it to be assessed in the course of drawing up a construction project. Doing Business 2014 Estonia 30 Time to No. Procedure Cost to complete complete * Obtain project clearance from environment department The Environmental Impact Assessment and Environmental Management System Act entered into effect on April 3, 2005, providing legal bases and procedures for assessing likely environmental impact, organization of eco-management and audit schemes, and the legal bases for awarding eco-labels to prevent environmental damage. The environmental impact shall be assessed upon application for, or application for amendment of, a development consent (a building permit or a permit for the building use), if the proposed activity, which is the basis for the application for, or the amendment of, the development consent, potentially results in significant environmental impact. The impact shall also be assessed if activities are proposed that alone or in conjunction with other activities may potentially significantly affect a Natura 2000 site. A person who proposes an activity and intends to carry it out shall organize an environmental impact assessment and carry all the resulting expenses. It is up to the local municipality to decide whether it is at all necessary to assess the environmental impact of the project. There are two types of grounds for requiring an environmental impact assessment to be carried out. First of all there are instances in which it is obligatory to conduct environmental impact assessment. The hypothetical warehouse 29 days no charge 4 project should not qualify under this category. The second category is such that the local municipality is required to consider whether an environmental impact assessment is needed or not and if the local municipality decides that it is necessary, it must give reasons for such a decision. The hypothetical warehouse project might qualify under this category if for example considered to be (a part of) an industrial area development. Besides the fact that it is in hands of municipality to make a decision, there are no clear definitions on what does not exactly fall into category of projects that do not qualify for Environmental Impact Assessment (EIA). It is likely BuildCo would need to obtain a clearance but not the full scale EIA approval. The Environmental Impact Assessment and Environmental Management System Act established a term of 30 days for issuing a decision to approve the environmental impact assessment report. The time may vary from 30 days to 1 year for actual EIA approval both from Municipality and Environmental Supervisory Authority. It would also include a period of public hearing. However, that we are just getting a project clearance and our case is simple the procedure should be completed within 30 days. * Obtain project clearance from health care department A clearance for the building project from the Health Board is not required. However, this authority may be consulted by the local 28 days no charge 5 government before granting or refusing the building permit. In practice, the local government may ask the applicant to personally communicate with these authorities. There is no time limit for such communication. Further, Health Board has the right to perform state Doing Business 2014 Estonia 31 Time to No. Procedure Cost to complete complete supervision over compliance with occupational health requirements when the warehouse is put into use. * Obtain project clearance from labor inspections department A clearance for the building project from the labor inspections department is not required by law in the stage prior to approval of building permit. However, this authority may be consulted by the local government before granting or refusing the building permit. In practice, the local government may ask the applicant to personally communicate with these authorities. Labor Inspectorate has the right to perform state supervision over compliance with occupational safety requirements during construction and when the warehouse is put into 6 use. According to Occupational Health and Safety Act paragraph 13 lg 27 days no charge 1 p 17 employer is obliged to notify local department of Labor Inspectorate in written form or in a format, which can be reproduced in writing before commencing activities. Paragraph 26 lg 3 p 3 provides that after receiving of the notification inspector has the obligation to carry out the inspection. Employee of the Labor Inspectorate ordinarily has to accord the time of inspection with the owner of the building, but in extraordinary situations inspector has the right to commence supervision without informing in advance. Obtain building permit To obtain a building permit from the municipal authority, the company must submit an application for construction permit and construction design documentation. According to the Building Act, the local government must approve or refuse the issuance of a building permit within 20 days from the date on which the application for the building permit and the building design documentation are submitted. Municipality conducts internal consultations with various departments and agencies. However in practice BuildCo is likely to follow up with these authorities. In practice this increases the timeline since the Municipality starts counting only after all the clearances have been 25 days EUR 531 7 completed. Since June 2009, an energy certificate for the new building must be included in the application. The energy audit is assumed to be conducted by the engineers of the newly built warehouse. Prior construction, the builder has to notify the Municipality that the construction will begin. Receive on-site inspection by municipal authority During construction, the municipal authority may monitor work to 1 day no charge 8 check compliance with requirements. If the work is noncompliant, construction will be stopped. Doing Business 2014 Estonia 32 Time to No. Procedure Cost to complete complete Receive on-site inspection by Estonian Technical Surveillance Authority According to the amendment of Building Act from January 1, 2008 Estonian Technical Surveillance Authority may carry out state surveillance on construction sites in addition to the surveillance exercised by municipal authority. Before the building is taken into use or in case of emergency in the building already in use Estonian Technical Surveillance Authority does not have to inform the owner about inspection beforehand. In other situations owner has to be notified at least 24 hours in advance. The number of inspections is not limited by law -- it is in the discretion 9 of the Technical Surveillance Authority, however it should comply with 1 day no charge the principles of good administration practices. The costs of the evaluation services, of the expert assessment of building design documentation and of the evaluation of construction works ordered to verify conformity to the requirements are borne by the Technical Surveillance Authority. If it is established that the construction works or building design documentation does not conform to the requirements established thereof the owner of the construction works has to compensate the Technical Surveillance Authority for the costs of the evaluation services ordered to verify conformity to the requirements, including the costs of expert assessment or evaluation. Apply for permit of use and request final inspection from municipal authority The local municipality has a discretion on which agencies can be engaged in the inspection before the permit to use the building is issued. According to the law the local municipality issues or refuses to issue a permit to use within twenty days as of the date on which the 25 days EUR 64 10 last document necessary for the issue of the permit is submitted. However in practice it takes longer. BuildCo would have the right to file an action to the administrative court in case 20 days are not maintained. In practice, though few companies file lawsuits against the authorities. * Receive final inspection from municipal authority The date and the time of the final inspection is agreed between the 11 builder and the municipal authority. The permit for use is not issued 1 day no charge before the final inspection is carried out. Doing Business 2014 Estonia 33 Time to No. Procedure Cost to complete complete Obtain sewerage and water connection The water and sewage connection is to be obtained from AS Tallina 20 days EUR 1,131 12 Vesi. Obtain telephone connection ELION (Elion Ettevotted AS) is the largest telecommunication and IT service provider in Estonia, who provides telephone connection. If 13 company subscribes also to the internet connection no affiliation fee 15 days EUR 97 shall be required. ELION has to issue technical conditions for establishing telephone connection. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Estonia 34 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Estonia 35 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 111 days and costs 188.0% of connection in Estonia? According to data collected by income per capita (figure 4.1). Doing Business, getting electricity there requires 4 Figure 4.1 What it takes to obtain an electricity connection in Estonia Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Estonia 36 GETTING ELECTRICITY Globally, Estonia stands at 56 in the ranking of 189 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in 4.2). The rankings for comparator economies and the Estonia to connect a warehouse to electricity. Figure 4.2 How Estonia and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2014 Estonia 37 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Estonia Best performer in Best performer Indicator Estonia DB2014 Estonia DB2013 OECD high income globally DB2014 DB2014 Rank 56 55 Iceland (1) Iceland (1) Procedures (number) 4 4 4 Economies* (3) 10 Economies* (3) Time (days) 111 111 Germany (17) Germany (17) Cost (% of income per capita) 188.0 201.4 Japan (0.0) Japan (0.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Estonia 38 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Estonia (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Estonia made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Estonia 39 GETTING ELECTRICITY What are the details? The indicators reported here for Estonia are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Tallinn utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Elektrilevi OU verified by electricity regulatory agencies and independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Estonia—and the time and cost Time to No. Procedure Cost to complete complete Submit an application to Eesti Energia for an electricity connection and await an estimate and technical conditions After determining the fuse size and the location of the subscription shield the customer submits an application for a connection. The application can be sent by e-mail. After submitting the application, a 1 technical solution based on the data in the application will be presented 20 calendar days no charge to the customer by Eesti Energia. A contract offer is issued together with the technical conditions. There is an external inspection during this time period by Eesti Energia but no one from the applicant’s party is required to be present during the inspection. Await completion of the external connection works by Eesti Energia Once the estimate is received the connection agreement together with the supply contract can be concluded at the customer service center. After the conclusion of the contract, an invoice for making the first installment payment is sent. 89 calendar days EUR 17,951.1 2 Once the fee is received, the necessary works for the connection are carried out by Eesti Energia. Eesti Energia is in charge of the connection works beyond the metering point up to its network and an electrical contractor is in charge of the works from the metering point up to the building and internal wiring. Doing Business 2014 Estonia 40 Time to No. Procedure Cost to complete complete An independent electric inspector (Tehnokontrollikeskus) conducts an internal wiring inspection and submits the inspection report to Eesti Energia Once the internal wiring is finished, measurements required by the Electrical Safety Act are ordered and a check of compliance is requested from an independent electrical inspector with a special permit for internal wiring inspections. The inspector has to prepare protocols on 3 calendar days EUR 350.0 3 the inspection and issue a certificate of conformity. If the internal wiring is in order and conforms to the requirements, a notice on the conformity is submitted to the customer service center or sent by post to Eesti Energia. The excavation permit is obtained by the utility at the local authority which takes about 1 month. Await a notification from Eesti Energia on the completion of the works, sign a supply agreement and the final connection After the completion of the external connection works the customer will be notified of their completion and presented an invoice for payment of the second part of the connection fee, which the customer will be asked to pay within 14 days. When the connection fee is paid, the customer can conclude a network and electricity (supply) contract. However, the 4 supply contract is usually completed together with the connection 2 calendar days EUR 4,487.8 agreement as described in the procedures above. If the contract has been concluded earlier, Eesti Energia will notify the applicant of the completion of the external works and the entry into force of the network and electricity (supply) contract. After the conclusion of the network and electricity contract and certification of the internal wiring, the building will be connected to a power system network. * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 Estonia 41 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day. time and cost. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Estonia 42 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 17.5 days and costs 0.5% of the Estonia? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 3 Figure 5.1 What it takes to register property in Estonia Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2014 Estonia 43 REGISTERING PROPERTY Globally, Estonia stands at 15 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Estonia to transfer property. Figure 5.2 How Estonia and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2014 Estonia 44 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Estonia is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Estonia 45 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Estonia 46 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Estonia (table 5.1)? Table 5.1 How has Estonia made registering property easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Estonia has eased the process of property registration with the computerization of property records at the Land Registry that DB2010 has introduced the option of registering a property online for notaries. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 47 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property City: Tallinn lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: EUR 606,234 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. Summary of procedures for registering property in Estonia—and the time and cost Time to No. Procedure Cost to complete complete A notary prepares the Sale-purchase Agreement & the Agreement on Transfer of the Ownership of the Real Estate, and the parties sign it at the notary’s office Pursuant to Estonian law, it is mandatory that all transactions related to the transfer of real estate are notarized by a notary public. The parties may prepare the sale and purchase agreement in accordance with the laws of the Republic of Estonia. However, the notary will review it and if Notary fee the agreement is not in accordance with the law, then the notary will according to the amend the agreement or ask parties of the agreement to modify the Notary Fees Act agreement in accordance with the law, since the notary is financially (Part 3 Article 22) liable for any potential mistakes or law violations. for a property Copies of all documents related to the agreement (transaction data, transaction up to power of attorneys, documents concerning acquisition of the property, EUR 600,000 is copies of identity documents, etc) shall be delivered to the notary’s office 3-15 days EUR 1,010. As this 1 3-4 days before the conclusion if the agreement. All originals shall be case is a bilateral submitted to the notary on the day of the conclusion of the agreement. transaction, In case a document has not been issued in the Republic of Estonia, the therefore a notary document shall be certified by an apostille or legalized and translated fee for certifying a into Estonian prior to the conclusion of the agreement. transaction shall be the double full Since 2007 notaries use the E-Notary program which facilitates the fee, i.e. EUR 2,020. preparation of notarial deeds. E-Notary offers contract templates and VAT is 20%. necessary data about parties to and object of a transaction come from different registers. By entering personal identification code or the name of a person into the box of details of the party, E-Notary finds the respective individual and completes, based on the data of the Population Register, the rest of the blank boxes - name etc. Upon the entry of registered immovable number, E-Notary finds and displays, based on the data of the electronic Land Register, other data related to the registered immovable – address, area etc. Once the contract is signed, the notary Doing Business 2014 Estonia 48 Time to No. Procedure Cost to complete complete makes digital copy of the contract and the contract is thereof forwarded electronically to the Land Register. State fee for a Payment of the state fee (stamp duty) at a commercial bank property transaction of Less than a day The state fee for making the changes in the Land Register must be paid 565,888.67 EUR is 2 (online prior to applying for registration. 881.98 EUR procedure) (Appendix 2, State Fees Act of January 1, 2011) A notarized application is filed to the Land Register and corresponding entries are made to the Land Register The notarized application to the Land Register is filed to transfer the ownership of the real estate to the buyer in the Land Register Book. As of June 1, 2007, this application can be filed online through the "e-notary" system which allows the notary to submit the application electronically without using any paper application. Computerization of property records at the Land Registry have been ongoing for a few years has finally been completed at the end of 2008. Land Register shall publish a register notice regarding a Real Estate, which has not yet been entered in the Land Register only before opening a register part for an immovable in the register. Already paid in 3 8 days The notice is published in the official publication Ametlikud Teadaanded Procedure 2 and, if necessary, in any other manner available to the persons concerned. In case the Real Estate is already registered in the Land Register (as in this case), no publication is necessary. The documentation shall include: (i) Notarized Sale Purchase Agreement and Agreement of the Transfer of the Ownership of Real Estate (obtained in Procedure 1). (ii) Receipt of payment of state fee (obtained in Procedure 2) * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Estonia 49 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has up to 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Estonia 50 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Estonia stands at 42 in the ranking of 189 collateral and bankruptcy laws in Estonia facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 5 on the The rankings for comparator economies and the depth of credit information index and a score of 7 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Estonia support lending and borrowing. scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Estonia and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2014 Estonia 51 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened — well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Estonia support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Estonia over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 40 42 Strength of legal rights 6 6 6 6 6 6 7 7 7 7 index (0-10) Depth of credit 5 5 5 5 5 5 5 5 5 5 information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (% of adults) Private bureau 9.5 12.5 18.2 19.7 20.6 20.6 22.4 33.1 33.4 33.7 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Estonia 52 GETTING CREDIT One way to put an economy’s score on the getting shows the number of economies with this score in credit indicators into context is to see where the 2013 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Estonia in 2013 and Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Estonia 53 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Estonia (table 6.2)? Table 6.2 How has Estonia made getting credit easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Estonia improved access to credit by amending the Code of DB2011 Enforcement Procedure and allowing out-of-court enforcement of collateral by secured creditors. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 54 GETTING CREDIT What are the details? The getting credit indicators reported here for Estonia The data on the legal rights of borrowers and lenders are based on detailed information collected in that are gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as collected through a survey of a credit registry and/or well as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, credit information index, a score of 1 is assigned for a score of 1 is assigned for each of 8 aspects related to each of 6 features of the credit registry or credit legal rights in collateral law and 2 aspects in bureau (see summary of scoring below). bankruptcy law. Summary of scoring for the getting credit indicators in Estonia OECD high income OECD high income Indicator Estonia average average Strength of legal rights index (0-10) 7 7 Depth of credit information index (0-6) 5 5 Public registry coverage (% of adults) 0.0 42.9 Private bureau coverage (% of adults) 33.7 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 7 Can any business use movable assets as collateral while keeping possession of the assets; and Yes any financial institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of No movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically No to the products, proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's names? Doing Business 2014 Estonia 55 Strength of legal rights index (0–10) Index score: 7 Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is Yes liquidated? Are secured creditors either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured No creditors with grounds for relief from an automatic stay or/and sets a time limit to it? Does the law allow parties to agree in a collateral agreement that the lender may enforce its Yes security right out of court, at the time a security interest is created? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 5 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as Yes No 1 financial institutions? Are more than 2 years of historical credit information Yes No 1 distributed? Is data on all loans below 1% of income per capita Yes No 1 distributed? Is it guaranteed by law that borrowers can inspect Yes No 1 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 100,000 0 Number of individuals 200,000 0 Source: Doing Business database. Doing Business 2014 Estonia 56 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Estonia 57 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Estonia? The economy has a score of 5.7 on measure all aspects related to the protection of the strength of investor protection index, with a higher minority investors, a higher ranking does indicate that score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Estonia stands at 68 in the ranking of 189 economies on the strength of investor protection Figure 7.1 How Estonia and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 Estonia 58 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how ranking on the strength of investor protection index well regulations in Estonia protect minority investors over time shows whether the economy is slipping today, data over time show whether the protections behind other economies in investor protections—or have been strengthened (table 7.1). And the global surpassing them. Table 7.1 The strength of investor protections in Estonia over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. 67 68 Extent of disclosure 8 8 8 8 8 8 8 8 8 index (0-10) Extent of director 3 3 3 3 3 3 3 3 3 liability index (0-10) Ease of shareholder 6 6 6 6 6 6 6 6 6 suits index (0-10) Strength of investor protection index (0- 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Estonia 59 PROTECTING INVESTORS One way to put an economy’s scores on the protecting shows the number of economies with this score in investors indicators into context is to see where the 2013 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across applies to the extent of director liability index, and economies. Figure 7.2 highlights the score on the figure 7.4 to the ease of shareholder suits index. extent of disclosure index for Estonia in 2013 and Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Estonia 60 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Estonia 61 PROTECTING INVESTORS The scores recorded over time for Estonia on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Estonia 62 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Estonia (table 7.2)? Table 7.2 How has Estonia strengthened investor protections—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 63 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Estonia are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the scores for Estonia. Summary of scoring for the protecting investors indicators in Estonia OECD high OECD high income Indicator Estonia income average average Extent of disclosure index (0-10) 8 7 Extent of director liability index (0-10) 3 5 Ease of shareholder suits index (0-10) 6 7 Strength of investor protection index (0-10) 5.7 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 8 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. 2 Full disclosure of all material facts James to the board of directors is required? Whether immediate disclosure of the transaction to Disclosure on the transaction and Mr. 2 the public and/or shareholders is required? James' conflict of interest Whether disclosure of the transaction in published Disclosure on the transaction and Mr. 2 periodic filings (annual reports) is required? James' conflict of interest Whether an external body must review the terms of 0 No the transaction before it takes place? Extent of director liability index (0-10) 3 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 0 No causes to the company? Whether shareholders can hold Mr. James liable for Liable for negligence or influencing the damage that the Buyer-Seller transaction causes 1 the approval of the transaction to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 1 Liable for negligence Seller transaction causes to the company? Doing Business 2014 Estonia 64 Score Score description Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 1 Yes the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 6 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 1 Yes filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 0 No transaction? Whether the plaintiff can obtain any documents from Any information that may lead to the 4 the defendant and witnesses during trial? discovery of relevant information Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 0 No defendant and witnesses during trial? Whether the level of proof required for civil suits is 1 Yes lower than that of criminal cases? Strength of investor protection index (0-10) 5.7 Source: Doing Business database. Doing Business 2014 Estonia 65 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 25.5%. Doing Business 2014 Estonia 66 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Estonia stands at 32 in the ranking of 189 taxes in Estonia—and how much do firms pay in taxes? economies on the ease of paying taxes (figure 8.1). The On average, firms make 7 tax payments a year, spend rankings for comparator economies and the regional 81 hours a year filing, preparing and paying taxes and average ranking provide other useful information for pay total taxes amounting to 49.4% of profit (see the assessing the tax compliance burden for businesses in summary at the end of this chapter for details). Estonia. Figure 8.1 How Estonia and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2014 Estonia 67 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Estonia is keeping up—and required to prepare and file taxes (figure 8.2) help where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Estonia 68 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Estonia 69 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Estonia (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Estonia made paying taxes easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Estonia increased the unemployment insurance contribution DB2011 rate. In Estonia a municipal sales tax introduced in Tallinn made DB2012 paying taxes costlier for firms, though a later parliamentary measure abolished local sales taxes effective January 1, 2012. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 70 PAYING TAXES What are the details? The indicators reported here for Estonia are based LOCATION OF STANDARDIZED COMPANY on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see the City: Tallinn section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Estonia OECD high income OECD high income Indicator Estonia average average Payments (number per year) 7 12 Time (hours per year) 81 175 Profit tax (%) 8.1 16.1 Labor tax and contributions (%) 39.4 23.1 Other taxes (%) 2.0 2.0 Total tax rate (% profit) 49.4 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Social security gross 0 paid jointly 34 33% 37.2 contributions salaries Dividend tax 1 online filing 20 21/79 distributed 8.1 dividends property Land tax 1 0 2.5% 1.9 value Doing Business 2014 Estonia 71 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Unemployment insurance gross 0 paid jointly 0 1.4% 1.4 contributions salaries fringe Fringe benefit tax 0 paid jointly 0 68.35% 0.8 benefits fixed fee depending Heavy vehicle tax 1 0 EUR 275 0.1 on type of vehicle EUR 0.4 small Advertising tax 1 0 fixed fee 0 /m2 / day amount contract small Stamp duty 1 0 0 value amount included small Fuel tax 1 0 in price of 0 amount fuel value not Value added tax (VAT) 1 online filing 27 20% 0 added included Totals 7 81 49.4 Source: Doing Business database. Doing Business 2014 Estonia 72 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: military items.  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy’s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy’s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include Doing Business 2014 Estonia 73 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Estonia? Globally, Estonia stands at 7 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 3 (figure 9.1). The rankings for comparator economies documents, takes 6 days and costs $765. Importing the and the regional average ranking provide other useful same container of goods requires 4 documents, takes information for assessing how easy it is for a business 5 days and costs $795 (see the summary of procedures in Estonia to export and import goods. and documents at the end of this chapter for details). Figure 9.1 How Estonia and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Estonia 74 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Estonia is keeping up—and where it is falling behind. export or import (figure 9.2) help show what is Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Estonia 75 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Estonia 76 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Estonia 77 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Estonia (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Estonia made trading across borders easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 78 TRADING ACROSS BORDERS What are the details? The indicators reported here for Estonia are based LOCATION OF STANDARDIZED COMPANY on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Tallinn the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Estonia OECD high income OECD high income Indicator Estonia average average Documents to export (number) 3 4 Time to export (days) 6 11 Cost to export (US$ per container) 765 1,070 Documents to import (number) 4 4 Time to import (days) 5 10 Cost to import (US$ per container) 795 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 3 220 Customs clearance and technical control 1 25 Ports and terminal handling 1 280 Inland transportation and handling 1 240 Totals 6 765 Procedures to import Time (days) Cost (US$) Documents preparation 2 200 Doing Business 2014 Estonia 79 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 1 25 Ports and terminal handling 1 330 Inland transportation and handling 1 240 Totals 5 795 Documents to export Documents to import Bill of Lading Bill of lading Commercial invoice Cargo release order Customs export declaration Commercial invoice Source: Doing Business database. Customs import declaration Doing Business 2014 Estonia 80 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Estonia 81 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Estonia stands at 26 in the ranking of 189 dispute through the courts in Estonia? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 425 days, costs 21.9% of the value of the claim regional average ranking provide other useful and requires 35 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Estonia. Figure 10.1 How Estonia and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Estonia 82 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Estonia is keeping up—and to enforce a contract through the courts (figure 10.2) where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Estonia 83 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Estonia 84 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Estonia (table 10.1)? Table 10.1 How has Estonia made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. Estonia made enforcing contracts easier by lowering court DB2014 fees. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 85 ENFORCING CONTRACTS What are the details? The indicators reported here for Estonia are based COURT NAME on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter City: Tallinn on what the indicators cover). These procedures, and the time and cost of completing them, are Claim Value LCU: 22636 identified through study of the codes of civil procedure and other court regulations, as well as Court Name: Harju County Court through surveys completed by local litigation lawyers (and, in a quarter of the economies The procedures for resolving a commercial lawsuit, and covered by Doing Business, by judges as well). the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Estonia—and the time and cost OECD high income OECD high income Indicator Estonia average average Time (days) 425 529 529 Filing and service 30 Trial and judgment 320 Enforcement of judgment 75 Cost (% of claim) 21.9 21.0 21.0 Attorney cost (% of claim) 9.0 Court cost (% of claim) 11.9 Enforcement Cost (% of claim) 1.0 Procedures (number) 35 31 31 Number of procedures (without bonus points) 36 Electronic filing of court cases -1 Total number of procedures (including bonus 35 points) Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Estonia 86 ENFORCING CONTRACTS No. Procedure Filing and service: 1 Plaintiff’s hiring of lawyer: Plaintiff hires a lawyer to represent him before th e court. Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 2 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Court scrutiny of summons and complaint: A judge examines Plaintiff's summons and complaint for 3 formal requirements. Judge admits summons and complaint: After verifying the formal requirements, the judge decides to * admit Plaintiff’s summons and complaint. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 4 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 5 Defendant is successful in the majority of cases. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Guarantees securing attached property: Plaintiff typically submits guarantees or bonds to secure 6 Defendant against possible damages to attached property. (see assumption 5) Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 7 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Custody of assets attached prior to judgment: Defendant's attached assets are put under enforcement 8 officer's or (private) bailiff's care. (see assumption 5) Report on pre-judgment attachment: Court enforcement officer or (private) bailiff issues and delivers a 9 report on the attachment of Defendant’s property to the judge. (see assumption 5) Trial and judgment: Doing Business 2014 Estonia 87 No. Procedure Defendant’s filing of defense or answer to Plaintiff’s clai m: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 10 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Deadline for Plaintiff to answer Defendant's defense or answer: Judge sets the deadline by which Plaintiff 11 will be allowed to answer Defendant's defense or answer. Plaintiff’s written response to Defendant's defense or answer: Plaintiff responds to Defendant’s defense or 12 answer with a written pleading. Plaintiff's answer may or may not include a witness statements or expert (witness) statements. Filing of pleadings: Plaintiff and Defendant file written pleadings and submissions with the court and 13 transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 6-b of this case) Delivery of expert report by court-appointed expert: The independent expert appointed by the court * delivers his or her expert report to the court. (see assumption 6-b of this case) Pre-trial conference on procedure: The judge meets with the parties to discuss procedural issues (for 14 example which applications and motions parties intend to file, which documents parties intend to rely on, what will be presented as evidence the oral hearing or trial, etc.) * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Preliminary hearing aimed at preparing for the oral hearing: The judge meets the parties to make practical 15 arrangements for the oral hearing on the merits of the case. * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court. (see assumption 6-a) Adjournments: Court proceedings are delayed because one or both parties request and obtain an 16 adjournment to prepare for the oral hearing or trial. Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 17 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. 18 Closing of the evidence period: The court makes the formal decision to close the evidence period. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 19 Judgment date: The judge sets a date for delivery of the judgment. 20 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 21 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 22 judgment. Doing Business 2014 Estonia 88 No. Procedure Court notification of availability of the written judgment: The court notifies the parties that the written 23 judgment is available at the courthouse. 24 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. 25 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 26 the law. Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse 27 Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff's approaching of court enforcement officer or (private) bailiff to enforce the judgment: To enforce 28 the judgment, Plaintiff approaches a court enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Attachment of enforcement order to judgment: The jud ge attaches the enforcement order (‘seal’) to the 29 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a (private) bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 30 (private) bailiff requests Defendant to voluntarily comply with the judgment, giving Defendant a last chance to comply voluntarily with the judgment. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court 31 enforcement officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. Contestation of selection of assets identified for attachment: The party, Plaintiff or Defendant, who was 32 not involved in the designation of the assets to be attached, contests the selection of assets for attachment. Notification of intent to attach: A court enforcement officer or (private) bailiff notifies other creditors of 33 the intent to attach Defendant's goods. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 34 assets). 35 Sale through public auction: The Defendant’s movable property is sold at public auction. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 36 Plaintiff had advanced previously. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Estonia 89 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Estonia 90 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 38.9 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Estonia? Globally, Estonia stands at 66 in the ranking of 189 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 3.0 years on average and 11.1). The rankings for comparator economies and the costs 9% of the debtor’s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Estonia. Figure 11.1 How Estonia and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Estonia 91 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Estonia is keeping up—and where it is or on the recovery rate (figure 11.2) help show what is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Estonia 92 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. “No practice” indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for “no practice” economies is 0. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Estonia 93 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Estonia (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Estonia made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Estonia adopted a new Reorganization Act establishes a new legal procedure enabling distressed companies on the verge DB2010 of insolvency to reorganize themselves, restructure their debt, and apply other measures to regain financial health and restore profitability. Amendments to Estonia’s recent insolvency law increased the chances that viable businesses will survive insolvency by DB2011 improving procedures and changing the qualification requirements for insolvency administrators. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2014 Estonia 94 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Estonia 95 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Estonia other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Estonia 96 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Estonia adopt that contracting between employers and workers. Many affected the Doing Business indicators on employing economies that changed their labor regulations in the workers (table 12.1)? Table 12.1 What changes did Estonia make in employing workers in 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Estonia eliminated the applicable priority rules for dismissals as well as the obligation to notify and obtain the approval of a third party in case of redundancy dismissals. It also removed DB2011 restrictions on night work and reduced notice period and severance payment applicable in case of redundancy dismissals. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Estonia 97 EMPLOYING WORKERS What are the details? The data on employing workers reported here for public officials. Employment laws and regulations as Estonia are based on a detailed survey of employment well as secondary sources are reviewed to ensure regulations that is completed by local lawyers and accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy’s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 60 months - Art. 9 (1) New ECA Maximum length of fixed-term contracts, including renewals (months) 120 Minimum wage for a 19-year old worker or an apprentice (US$/month) 417.8 Ratio of minimum wage to value added per worker 0.21 Source: Doing Business database. Doing Business 2014 Estonia 98 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data Standard workday in manufacturing (hours) 8 hours - Art. 43 (2) ECA 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 5.0 Premium for night work (% of hourly pay) in case of continuous 25% operations Premium for work on weekly rest day (% of hourly pay) in case of 0% continuous operations Major restrictions on night work in case of continuous operations? Yes Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 24.0 Paid annual leave for a worker with 5 years of tenure (in working days) 24.0 Paid annual leave for a worker with 10 years of tenure (in working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 24.0 working days) Source: Doing Business database. Doing Business 2014 Estonia 99 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? No Source: Doing Business database. Doing Business 2014 Estonia 100 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 4.3 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 8.6 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 12.9 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 8.6 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 4.3 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 4.3 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 4.3 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 4.3 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Estonia 101 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Estonia 102 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Estonia 103 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Estonia 104 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Estonia 105 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Estonia 107 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Estonia 108