Introducing Regulatory Impact Analysis into the Turkish Legal Framework “Training the Trainers” November 2008 Session 8 Standard Cost Model and RIAs

Policy and Administrative Costs The cost of regulation is two-fold: policy costs and administrative burdens. What is the difference? Policy costs are those related to complying with the objective of the regulation. Administrative costs are those associated with requirements to collect, keep or provide information in relation to regulation.

Example You are required to pay tax on earned income. The policy objective of the law is that you will pay a certain amount of money to the Government as taxes depending on the level of your earnings. This is the policy cost. Paying taxes requires keeping records, filling out forms, submitting information etc. These are the administrative costs of regulation.

Why Is The Difference Important? Being able to identify policy costs and admin costs means you can assess the full costs of legislation. So you can see exactly where the greatest costs come from. Administrative costs can be reduced without affecting the policy objective of the legislation. Administrative costs are important in considering the best way to implement legislation and achieve compliance. The admin costs of different options for responding to a problem influence which will deliver the greatest benefits.

What is the Standard Cost Model? A simple, pragmatic framework for measuring the administrative costs of regulation. It works by identifying the information requirements of a regulation and measuring the costs of each requirement. It is indicative and not statistically representative. It is a means to an end – the aim is to find ways to achieve simplification and reduce costs, not get a perfect set of data. Can be used for individual areas of regulation or to establish a baseline of costs.

Links to RIAs RIAs are used to measure the policy costs of new legislation or changes to existing legislation. The SCM can be used to: − measure the admin costs of existing legislation and identify areas for simplification − estimate the admin costs of new legislation or proposed changes to legislation. To consider the full effects of regulation, the two can be combined – SCM particularly useful in looking at options for implementing regulation.

SCM in Turkey SCM project in Turkey co-ordinated by the Prime Ministry Administrative Improvement Directorate. Two pilots are being conducted. SCM network of ministry representatives – if you don’t know who your ministry’s representative is, the Administrative Improvement Directorate can help. A more detailed workshop on the SCM methodology can be offered if it would be helpful.