KfW Research: Business founders want their dealings with public institutions to be simpler, faster and digital

• New survey on the topic of bureaucracy at www.gruenderplattform.de
• High bureaucratic burden is a barrier to entrepreneurial activity and willingness

Standardised and formalised rules and procedures for public and administrative activities form the basis for fair and legally compliant business management. But when they are ambiguous or excessively complex, they are perceived as bureaucratic obstacles. They create burdens particularly for small and young businesses, which have limited capacity and resources to handle bureaucratic requirements. Companies regularly mention high bureaucratic expenditure as a barrier in surveys on entrepreneurial activity and willingness in Germany. Remedying this situation is already high up on the political agenda. In a flash poll on the ‘Gründerplattform’ start-up platform www.gruenderplattform.de supported by the German Federal Ministry for Economic Affairs and Climate Action, KfW Research has identified where (prospective) young entrepreneurs have concerns. The key finding was that bureaucracy becomes an obstacle to founding a business when public institutions are too complex, too slow, too analogue, not helpful enough and not accessible enough.

On a scale of 0 to 2 (0 = not at all, 1 = somewhat, 2 = very much), (prospective) business founders rated these five stress factors as disproportionately bureaucratic. Too many appointments with authorities, multiple demands for identical information and too little understanding for the situation were, in contrast, assessed as a problem of rather average severity. Excessively high fees, false information and too many enquiries were described as causing significantly less than average stress.

“We know from many of our analyses that less bureaucracy would make everyone – men and women, young and old – more willing to start a business. In simple terms, people want faster, simpler and digital processes when dealing with public institutions as they set up a business”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “Reducing complexity with simple and clear criteria and harmonising processes across institutions are particularly promising approaches. That would also ease the pressure on employees of public institutions, who would be less tied down with clarifying and explaining the legal situation and their decisions and could focus more on addressing the applicants’ concerns.”

People who (want to) start a business have by far the most interactions with the tax office (75%), the trade office (64%), the employment agency (59%), statutory health insurance providers (57%) and the German pension insurance association (45%). The respondents reported the most complications in their dealings with the job centre and the tax office, with four in ten reporting issues. Common potential areas of dispute include approvals for the self-employment grant and recognition of self-employment, where existing scope for discretion can lead to different views. Around three in ten respondents reported problems in their dealings with the German pension insurance association and statutory health insurance providers. Here as well, potential areas of dispute exist around decisions on the status (scope for discretion) or family insurance (income ceiling). In dealing with the trade office, roughly one in four respondents reported obstacles, which may occur particularly as a result of false information provided in the business registration.

There were only few differences in the way the problems were viewed between those who had already started a business and those planning to do so. What was most notable is that existing business owners raised statutory health insurance as the main issue.

The current survey can be retrieved at
www.kfw.de/fokus

The dataset:
Users of the start-up platform (Gruenderplattform.de) were surveyed online between 7 December 2022 and 12 January 2023. The survey received responses from 65 self-employed persons and 105 aspiring business founders. Although the results of the flash poll are not representative because of the way the survey was designed, they do provide an important insight into the situation of self-employed persons and aspiring business founders in Germany.