The Frustration of Lengthy Business License Procedures in Germany

When Markus Wingens appointed an energy management position for his metal heat treatment plant, his aim was to improve energy efficiency and attract customers to his company’s sustainable business practices. Little did he know that this position would eventually become a paperwork nightmare due to the countless documents required by German law to ensure compliance with sustainable energy standards.

Germany has enacted four new laws and made 14 amendments with official regulations in effect in 2023 alone. This has led to a significant increase in paperwork and data collection requirements for businesses, all for the purpose of filling out reports. According to Wingens, many of these new procedures and standards are not significantly different from the ones his company had already met since 2012.

Wingens’ experience is not an isolated case in Germany, even in the realm of green energy. Farmers across the European Union, particularly in countries like Poland and Portugal, have been protesting against the burdensome dual regulations imposed by the government. While Europe aims to develop green energy and environmentally friendly agriculture, the lack of effective support policies for farmers has made their livelihoods increasingly difficult.

The rigid administrative processes and extensive paperwork are suffocating both farmers and businesses in Germany. The German culture of discipline exacerbates the challenges faced by businesses dealing with administrative procedures.

120 Days for a Business License

Germany has one of the most burdensome administrative procedures in the world, according to The New York Times. The largest economy in the European Union is predicted to see a growth rate of less than 0.2% this year, partially due to excessive administrative procedures hindering business operations.

For example, obtaining a business license in Germany requires an average of 120 working days, which is twice the average of Western economies. Germany’s public administration is also lagging behind other EU countries in terms of digital application implementation, still relying on traditional paper-based processes.

Companies are increasingly employing more staff solely for administrative tasks instead of utilizing their talents to improve business efficiency. This has led to a significant waste of human resources and hindered overall productivity. On average, German companies spend 64 million working hours each year on statistical reporting and administrative procedures for 375 different types of documents.

The German Chambers of Commerce and Industry surveyed 175,000 members, and the most significant difficulty reported by businesses today is not inflation, low product demand, or lack of funding, but rather administrative procedures.

Even Chancellor Olaf Scholz acknowledges the problem, stating, “We have a problem when no company can bear all the procedures we have created.”

The German government is currently planning administrative reform to save businesses and citizens approximately €3 billion per year. Some proposed reforms include reducing the mandatory document retention period for businesses by 2 years and eliminating the requirement for hotel guests to fill out certain forms.

Small and medium-sized enterprises (SMEs) in Germany are the backbone of Europe’s largest economy. However, these businesses are disproportionately affected by administrative burdens. With fewer than 500 employees, SMEs can generate revenues of up to €50 million annually. Unfortunately, these businesses spend a significant amount of time and resources on administrative procedures, ultimately reducing their overall efficiency.

Large corporations have dedicated departments and sufficient personnel to handle audits and provide necessary data to the government. Conversely, small businesses struggle due to their limited resources and are impeded by the time-consuming administrative tasks required for data collection.

Wasting Resources

According to Andreas Schweikardt, director of Gebauer, a supermarket chain in Baden-Württemberg, Germany’s public administration system leads to wasteful practices with food products. Previously, staff in the deli section would use soon-to-expire items to make discounted sandwiches. However, new regulations now require supermarkets to provide detailed ingredient listings, resulting in the disposal of almost expired items instead of using them in sandwiches.

At the seafood counter, employees must ensure that the names of marine organisms are written in both German and Latin, along with temperature checks conducted twice daily. These cumbersome regulations place an unnecessary burden on supermarket employees.

Moreover, Michael Wirkner, the founder of an advertising company in Göppingen, encountered difficulties in digitizing public administration services due to bureaucratic obstacles. Wirkner’s company reached an agreement to establish an online administrative registration system for schools across 20 districts. However, he needed approval from five data protection officials in the area to proceed.

Each official had a different interpretation of EU data protection regulations. Some claimed that Wirkner’s company could use tools from Google, while others disagreed. The prolonged negotiations with hundreds of different officials significantly delayed the implementation of digital administrative procedures.

“We are losing our direction,” concluded Wirkner.

It is clear that Germany’s administrative procedures are in urgent need of reform. The burdensome paperwork and excessive regulations are hindering the growth and efficiency of businesses, leading to wasted resources and frustrated entrepreneurs. The ongoing administrative reform aims to alleviate these challenges, creating a more business-friendly environment and allowing companies to thrive in one of the world’s largest economies.

Source: New York Times