1. General introduction to Business Registers Tuesday 29 March 2011 Mrs Vibeke Skov Møller (vsm@dst.dk) and Mr Søren Schiønning Andersen (ssa@dst.dk)

2. Business statistics - 1 A description of business units and their transactions Different aspects of business structure and development: - Production - Commodities - Accounts - Employment For that purpose business statistics comprises: - Different units - Different sectors - Different variables - Different time measures

3. Business statistics - 2 Two different approaches: - The institutional approach: -from the perspective of the transactors (the units) - The functional approach: -from the perspective of the phenomena (the activities)

4. Business statistics - 3 A coherent system of business statistics requires: -Standardised statistical units -Standardised classifications for the classification of units and delineation of populations -ISIC -Institutional sector -Region -Size -Standard classifications of goods and services -HS, TiS classification -Uniformly and consistently defined core variables

5. Definition of a Business Register (Eurostat) - 1 A data base used for statistical purposes … of business and other organisations, … and of units into which they are divided, … whose activities contribute to the GDP of the country … by the exercise of control over the use of resources.

6. Definition of a Business Register - 2 Why central Business Register? Five advantages: - Efficiency - Quality (specialisation) - Standardisation - No gaps or overlaps - Coordination tool A Business Register serving statistics: - On different fields of activity - On different subjects - On different reference periods

7. Definition of a Business Register - 3 A centralised (statistical) business register is a tool for obtaining a coherent system of business statistics … - It is necessary … - But it is not sufficient … Four main criteria for success: 1. A high level of quality 2. Top management must support/require use of the BR 3. Statisticians must see tangible improvements 4. Users must be involved in set-up, use & maintenance

8. Purposes of a business register Objectives: -Maximum coverage - share of units or share of GDP? -High quality – improved efficiency of statistical production and reduced burden on enterprises -Authority – the source / sampling frame for all business surveys Uses: -For detection and construction of statistical units -For preparation/coordination of surveys and grossing up -For statistical analysis (e.g. business demography) -As a tool for mobilisation of administrative data

9. Let’s start with the units – three main types Reporting/collection unit (input side) -The unit from which statistical data is obtained and by which statistical forms/questionnaires are completed -If/when collection of statistical data is enforced by law this must be done vis-à-vis the legal unit Observation unit (input side) -The unit about which data are reported (e.g. “a factory”) Statistical unit (output side) -The basis for statistical aggregations (e.g. KAU) -The building block for tabulations Luckily, these units most often coincide … !

10. Why standardise statistical units? In real life business units … - vary considerably in size - have unique operational structures - have many different legal structures - have multiple activities - often have multiple geographical locations - use different accounting systems This necessitates definitions of standardised statistical units to collect integrated, consistent, comparable and unduplicated data across all businesses - large and small Statistical units are defined on two main “levels”: - “Enterprise level” (where financial decisions are made) - “Establishment level” (where production is decided and/or takes place)

11. The EU standards on statistical units - Council Regulation 696/93 of 15 March 1993 … - defines 8 different statistical units … - for mandatory usage by Member States … - if the usage is specified in a Community legal act … - Member States may be authorised to use other statistical units … - according to the management comitology procedure. The Annex contains: - The list of units - Criteria for defining units - Definitions and explanatory notes specific to each unit - Additional explanatory notes

12. The list of statistical units -Institutional unit -Enterprise -Enterprise group -Local unit -Kind-of-activity unit (KAU) -Local kind-of-activity unit (LKAU) -Unit of homogeneous production (UHP) -Local unit of homogeneous production (LUHP) OBS: -Legal unit (not a statistical unit and thus not in the unit Regulation, but required by the BR Regulation)

13. The legal unit According to the BR Regulation, legal units are: -“legal persons whose existence is recognised by law independently of the individuals or institutions which may own them or are members of them, and -natural persons who are engaged in an economic activity in their own right.” -Information about legal units is most often the prime source for business registers, but … -legal units are constructs of law and do not always reflect economic reality. There may be legal or fiscal advantages of separating production factors into two or more different legal units. In the economic view these legal units cannot act without the others.

14. The enterprise -The smallest combination of legal units … -producing goods or services … -with a certain degree of autonomy in decision making... -for which statistical data can be provided. -Having one or more activities … -at one or more geographical locations. - Normally, one enterprise = one legal unit, but... - it can also correspond to a grouping of several legal units, because …

15. The local unit - 1 -Part of an enterprise -A geographically identified place (strict definition) -One or more activities are carried out -One or more persons work -Can comprise ancillary activities only -If a person works in more than one place, or at home, the local unit is the place from which instructions emanate or work is organised. -It must be possible to specify employment at any local unit -Exception for legal units being the basis for an enterprise which must have a local unit even if nobody works there (there must always be an address)

16. The local unit – 2: Problem areas -Movable activities -Taxis, haulage operator, vessels -Non-permanent activities -Building and construction -External sourcing of ancillary activities -Activities changing place -At the customer’s address -At fairs and market places -Street vendors -Activities at home -Child minder, home sewer -Other activities -Vending machines, laundrette, leased departments, summer businesses, unmanned gas stations etc.

17. The enterprise group - Association of enterprises - Legal and/or financial links - Used for studies of concentration - Growing importance A multi-national enterprise group (MEG) has at least two enterprises or legal units in different countries. A truncated enterprise group are the enterprises and legal units of a MEG, which are resident in the same country. Now required in the Business Register Regulation

18. The kind-of-activity unit (KAU) -Part of an enterprise … -contributing to one main activity (four DIGIT Nace), but... -can also have secondary activities. -Corresponds to one or more operational sub-divisions of the enterprise (the local units with the same main activity belonging to the particular enterprise). -Indication or calculation of basic economic information (e.g. operating surplus).

19. The local kind-of-activity unit (LKAU) The LKAU is the part of a KAU corresponding to a local unit. This means that it is: -Part of an enterprise … -situated in one location … -engaged in one main activity, but … -Can have secondary activities. -Each enterprise equals at least one LKAU. -Corresponds to the operational definition of the “establishment” in ISIC rev. 3

20. The institutional unit - Decision making autonomy in respect of its principal function - A complete set of accounts An enterprise is an institutional unit in its capacity as a producer of goods and services In the corporate enterprises sector, the enterprise corresponds to the institutional unit In the households sector the institutional unit covers all activities, whilst the term “Enterprise” only covers the productive activities

21. Synoptic overview table One location:One or more locations: Locations in different countries: A single activity: - LKAU - LUHP - KAU - UHP One or more activities: - Local unit- Enterprise - Enterprise group - Institutional unit - MEG Plus: Legal unit (administrative unit – not statistical)

22. Business Register: Basic conceptual model - Simple to understand … - Difficult to do … - Difficult to explain to users and providers Institutional dimension Productive dimension } } In most cases the units coincide!

23. The EU standards on Business Registers Regulation (EC) No 177/2008 of the EP and of the Council of 20 February 2008 establishing a common framework for business registers for statistical purposes and repealing Council Regulation (EEC) No 2186/93 Why: - Single European Market (Intrastat) - and later the EMU - Need for information on structural changes - SMEs and services statistics - Response burden - Coordination of business statistics - Internationalisation of enterprises

24. EU standards (2): Scope / coverage – article 3 Registers shall be compiled of: All enterprises carrying out economic activities contributing to GDP [i.e. whole economy, incl. agriculture and public sector] … and their local units; The legal units of which those enterprises consist; [Truncated enterprise groups and multinational enterprise groups; and all-resident enterprise groups.] Which exercise wholly or partially a productive activity… and employ half a person or more Households producing for own consumption, or … letting of own property are not included

25. EU standards (3): Sources / access – article 4 Countries may collect the information required using any sources they consider relevant. Getting access: National statistical authorities shall be authorised to collect, for statistical purposes, information contained in administrative and legal files. [Giving access: Different policies in different countries] Where data cannot be collected at reasonable cost, national authorities may use estimation procedures, while respecting the need for accuracy and quality.

26. EU standards (4): Variables – article 5 A statistical business register shall … - permit collection of data on units from administrative sources - provide a sampling base for surveys - enable analysis of business demography Variables in a statistical business register fall in four groups: - Identification variables - Demographic variables - Economic / stratification variables - Relationship / control variables

27. Identification variables Legal unitEnterprise group Local unit Identity number (ID)XXXX NameXXXX AddressX(X) X Phone no., fax no. etc.(X) External identity number (if any - e.g. VAT) X(X) ID of respons. legal unit(s)X ID of related enterpriseX ID of related enterprise group XX ID of enterprise group headX Type of enterprise groupX

28. Demographic variables Legal unitEnterprise group Local unit Date of creation: Legal persons: Incorporation Natural persons: Recognition as economic operator Statistical units: Start of activities XXXX Date of cessation: Legal unit: When cease to be part of an enterprise Statistical units: Final cessation of activities XXXX

29. Economic / stratification variables Legal unitEnterprise group Local unit Legal formX Principal / main activityXXX Secondary activity(X) Ancillary activity(X) Size (persons employed)XXX Size (no. of employees)XX Size (full-time equivalents)(X) Size (turnover)X(X) Geographical locationX Inst. (sub)sector, cf. ESAX

30. Relationship / control variables Legal unit Date of association to / separation from EGX ID of resident legal unit(s) controlledX ID of controlling resident legal unitX “Coordinates” of non-resident legal unit(s) controlledX “Coordinates” of controlling non-resident legal unitX ID and ownership (%) of resident legal unit(s) ownedX ID and ownership (%) of owning resident legal unitX “Coordinates” and ownership (%) of non-resident legal unit(s) owned X “Coordinates” and ownership (%) of owning non-resident legal unit X

31. EU standards (3): Updating – article 8 Entries onto and removals from the registers shall be updated at least annually. The frequency of updating shall depend on the kind of unit, the variable considered, the size of the unit and the source used for the update. Annually a copy that reflects the state of the registers at the end of the year must be made and kept for at least 30 years.

32. The Danish Business Register set-up Principal data providers Other data providers “CBR-core” Legal units CBR data base LKAU The statistical business register is one satellite in a wider system

33. The Danish Statistical Business Register - 1 LKAU (adm.) LKAU Legal unit (adm.) Enterprise VAT unit 1VAT unit 2 VAT unit 3 Enterprise group KAU Entity model

34. The Danish Statistical Business Register - 2 -The SBR is an on-line up-to-date data base of all private and public enterprises in Denmark (low threshold for registration) -The SBR is maintained on the basis of the Law on Statistics DK -The SBR contains all basic data to construct/extract and maintain all survey populations (except re agriculture) -The most important characteristics/variables maintained are: –Name and address –Creation and cessation –Ownership and institutional sector –Activity (main and up to three secondary) –Statistics (turnover and employment) –Telephone no. and email-address –Relations to other (types of) units –Historical information

35. The Danish Statistical Business Register - 4 Lessons learned (from a Danish perspective): -Concentrate efforts on large/complex units -Other units should be treated automatically -Experienced staff is needed – not everything can be handled automatically -Be careful not to over-complicate the functionalities, -It easily becomes very complex and expensive, so … KEEP IT SIMPLE !!! Do not let the register grow faster than the maintenance and control routines

36. Conclusion DIFFICULT WITH … IMPOSSIBLE WITHOUT !!