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Reforming Business Policies: Implications for Iceland

This report explores the implications of policy reforms for Iceland, specifically in the areas of starting a business, dealing with licenses, employing workers, registering property, enforcing contracts, getting credit, trading across borders, protecting investors, paying taxes, and closing a business.

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Reforming Business Policies: Implications for Iceland

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  1. Doing Business 2007: How to reform Policy Implications for IcelandMelissa Johns Investment Policy Specialist, World BankNovember 21, 2006

  2. Doing Business indicators 2007 2008 2006 • Update of 2007 • Add Not paying bribes • Add Using infrastructure • Starting a business • Dealing with licenses • Employing workers • Registering property • Enforcing contracts • Getting credit • Trading across borders • Protecting investors • Paying taxes • Closing a business • Update of 2006 • Add 20 countries • - funded by Iceland • How to reform • -50 case studies www.doingbusiness.org

  3. Starting a business in Gambia in January 2006 1. Check the uniqueness of the company name 2. Notarize the company statutes 3. Payment of stamp duty and deposit of corporate tax with commissioner 4. Register with commercial registry 5. Obtain operational licenses 6. Register with Labor department 7. Register employees for Social security 8. Make a company seal Cost (right axis) Time (Number of days) Cost (% of GNI per capita) Time (left Axis) Procedures

  4. Singapore New Zealand United States Canada Hong Kong, China United Kingdom Denmark Australia Norway Ireland Japan ICELAND Sweden Finland Switzerland Top 30 on the ease of doing business, 2007 • Lithuania • Estonia • Thailand • Puerto Rico • Belgium • Germany • Netherlands • Korea • Latvia • Malaysia • Israel • St. Lucia • Chile • South Africa • Austria

  5. OECD easiest for doing business Average ease of Doing Business in 2007

  6. Poor countries regulate most

  7. Comparative ranking in the OECD Ease of Doing Business 2007

  8. Iceland’s overall ranking: #12 Areas for reform Rankings per topic

  9. Iceland’s overall ranking: #12

  10. Procedures to enforce a contract Procedures to enforce a contract Global leader

  11. Time to register property Time to register property, days Global leader

  12. What to reform in Iceland? • Protecting investors • increase disclosure requirements for related-party transactions • facilitate shareholder judicial redress for damage caused to company through self-dealing • Employing Workers • extend allowable duration of fixed term contracts • loosen requirements on night work • reduce mandatory notice period • Dealing with licenses • privatize inspections • reduce delays for construction board approvals and occupancy permit

  13. Protecting investors compared

  14. Flexible labor laws, low unemployment in Denmark Spain Greece Germany France Finland Belgium Italy Sweden Unemployment (% of total labor force, 2004) Denmark Portugal Austria Iceland United Kingdom Ireland Rigidity of Employment index (0-100)

  15. Iceland’s reforms • Dealing with licenses • administrative agencies were consolidated • as a result, the time required to obtain a design approval from Reykjavik construction board decreased to 33 days from 45 • total time decreased to 111 days from 123 • Paying taxes • net wealth tax (.6% on net wealth) was abolished in 2005 • total tax rate decreased to 27.86% from 27.88% • number of tax payments decreased to 18 from 19

  16. Top OECD (high income) reformers in 2005/06 Countries are ranked by number of reforms; countries having the same number of reforms are listed alphabetically.

  17. Reform payoff: creating jobs Unemployment (%) Lower Higher Countries ranked by ease of doing business, quintiles Note: Relationship is statistically significant at the 1% level and remains significant when controlling for income per capita

  18. New countries added Iceland funded the inclusion of 20 new countries for Doing Business 2007: • 9 in Africa • Cape Verde, Comoros, Djibouti, Equatorial Guinea, Gabon, Gambia, Guinea-Bissau, Seychelles, Swaziland • 9 in LAC • Antigua and Barbuda, Belize, Dominica, Grenada, St. Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago • 2 in ECA • Montenegro, Tajikistan

  19. As a group, small states near global average Average ease of Doing Business

  20. …But there is large variation Doing Business 2007 ranking

  21. Small states average ranking by indicator Average ranking for small states

  22. Small states did not reform much this year Percentage of countries with at least one reform, 2005/06

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