Abstract
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The costs of complying with regulation, including environmental regulation, causes three types of social costs, namely: the costs of fulfilling regulatory obligations, administrative costs and efficiency costs. The sum of all social costs represents the operating costs of each regulation. Administrative costs represent the costs of the public sector that arise due to administration-related regulation. This group of costs includes material costs, wages, investments and other costs arising from tax collection, supervision or counselling. Other state costs include the costs of introducing new legislation and its interpretation, as well as the opportunity costs that represent a loss of revenue due to legal deficiencies when collecting tax. In the context of private costs, we may distinguish between direct and indirect taxation costs. Direct costs are a loss of income due to the payment of tax liabilities, while indirect costs include the costs that occur to taxpayers for complying with regulatory obligations. The group of indirect costs includes the costs of acquiring knowledge for correct fulfilment of tax obligation, the opportunity cost of the time spent by the taxpayer (or company) on fulfilling tax forecasts and other forms, payments for counselling, the costs of obtaining, delivering and storing data and other cash expenditures, like postage, copying or transportation.
Measuring compliance costs is extremely important, because according to the OECD report, regulations and formalities may inhibit innovation and cause unnecessary barriers to economic efficiency, trade and investment. The Standard Cost Model (SCM) is the most commonly used international methodology for measuring (environmental) compliance costs of companies. In-depth interviews on administrative costs, gross salary data for the time spent on filling out the forms, and online and telephone surveys are also frequently used.
In the addition to the above approaches compliance costs for environmental may also be estimated in another way, i.e. on the basis of the calculated estimates of expenditures on environmental protection in the industrial sector. This sector includes environmental expenditures in coal mining and quarry industry, production and consumption of electricity, gas and water resources.
This paper evaluates the costs of environmental regulations in 23 countries of the EU in 2016 using the latter methodology and compare the results with the most recent studies in the field. Recommendations will be especially given for EU countries with the highest compliance costs. Empirical results demonstrate that countries from Eastern Europe, i.e. the Czech Republic, Romania, Slovenia, Bulgaria, Poland, and Slovakia have the highest estimated costs of environmental regulation, ranging from 0,80% to 1,04% of GDP. On the other hand, the countries from Western Europe, namely Portugal, France, Austria, the Netherlands, the United Kingdom, and Sweden have the lowest estimated cost of environmental regulation, ranging between 0.17% and 0.27% of GDP.
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