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					                    COUNCIL OF                             Brussels, 21 June 2006
            THE EUROPEAN UNION


                                                           10728/06
        Interinstitutional File:
          2006/0020 (COD)                                  LIMITE

                                                           STATIS 44
                                                           COMPET 180
                                                           CODEC 665


NOTE
from :             General Secretariat
to :               Statistics Working Party
No. Cion prop. :   6715/06 STATIS 17 COMPET 30 CODEC 181 - COM(2006) 66 final
Subject :          Proposal for a Regulation of the European Parliament and of the Council
                   concerning structural business statistics



Delegations will find attached a Presidency note on the proposal for a Recast of the Structural
Business Statistics regulation [COM(2006) 66 final], Annex I, as well as a non-paper discussing the
impact of the new Nace regulation on SBS, provided by the Commission (Annex II).


The Presidency notes that the discussion on 25 April 2006 was vital, since mainly core issues of the
regulation were discussed thoroughly. The Presidency note systematically analyses these points in
order to provide a preliminary basis for the next Working Party meeting on this file, which is
expected to take place under the Finnish Presidency on 12 July.


                                       ___________________




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                                               DG C I                         LIMITE EN
                                                                                               ANNEX I


                         Information on the Member States’ views on the
           Proposal for a Regulation of the European Parliament and of the Council
                              concerning structural business statistics



Based on the discussions of the Working Party on Statistics of 25 April 2006, the Presidency has
taken the liberty to elaborate this synopsis of the MS’ views and main concerns which shall serve as
a basis for further deliberations on the subject. Topics raised in the course of the written
consultation but not tackled in the above-mentioned meeting were also taken into account.
Delegations will find a summary of the following main issues:
      Interplay between NACE Rev. 2 and SBS and the breakdown of activities
      Newly introduced module on small ad hoc data collections
      Pilot studies / non-market activities of sections M-O of NACE Rev.1.1
      Labour input variables
      New annex on business services


General remarks

In the course of the first discussion in the Council Working Party on Statistics on 25 April 2006, the
Member States (MS) sounded out mainly general views on the text. No detailed discussion with
reference to individual articles of the proposal took place. Despite the fact that there was a general
agreement on the aims of the proposal, concerns in particular with reference to the consequences of
the implementation of NACE Rev.2 and the burden on enterprises were raised.


In general, MS supported the intention of this proposal focusing on improvement of the statistical
coverage of the services sector. On the other hand, many MS raised general concerns as the
reductions proposed do not outweigh the considerable increase of burden put especially on the small
and medium-sized enterprises predominant in large parts of the services sector. It is noted that
burden on respondents is one of the main issues to consider for many MS.




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ANNEX I                                         DG C I                           LIMITE EN
Main issues

Interplay between NACE Rev.2 and SBS and the breakdown of activities

The interplay between the proposal for a regulation on NACE Rev.2 and that on SBS seems to be
the most crucial point raised by many MS. Some MS even proposed to wait with the adoption of the
SBS Regulation until the amended NACE Regulation has been adopted and to refer the SBS Recast
on NACE Rev.2 exclusively. Also, the deferral of the first reference year to 2008 was demanded. It
was questioned to set up the SBS Recast Regulation under the structure of NACE Rev.1.1 only for
two or even one year.


The discussion on consequences of NACE Rev.2 for SBS goes hand in hand with the concerns of
several Member States regarding activity breakdown for services according to 4-digit codes of
NACE. Among other amendments the SBS Recast proposal foresees an additional coverage of
certain NACE categories in services (divisions 90 and groups 921 and 922 of NACE Rev.1.1) in
Annex I (Common Module) and a more detailed breakdown of results by 4-digits of NACE for
services of sections H, I and K of NACE Rev.1.1, covered by Annex I of the present SBS
Regulation. Furthermore, NACE Rev.2 itself is more detailed than NACE Rev. 1.1, reflecting the
change in the structure of the economy mainly in service activities. The general breakdown of
activities by 4-digits as foreseen in the SBS Recast proposal can imply additional burden on
enterprises and NSI’s caused by increased sample sizes or could otherwise lead to insufficient
quality of the data.


The Commission agreed to prepare a non paper in order to assess the consequences of the NACE
revision for SBS systematically. This non paper (Annex II), distributed with this Presidency Note,
shall support further discussions. The question on how to perform the transition of SBS Recast to
NACE Rev.2 was answered by the Commission as being dealt with by comitology.




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ANNEX I                                       DG C I                         LIMITE EN
For illustration, a summary of possible SBS requirements for the forthcoming years, taking into
account NACE Rev.2 and SBS Recast, can be found in the following table:


                                                                                        Reference Year
Requirements
                                                                      2006      2007   20081      2009   2010   2011

Assumption: SBS Recast enters into force 2007 and no derogation is requested

SBS according to current SBS regulation (NACE Rev.1.1)                  x

SBS according to SBS Recast (NACE Rev.1.1)                                       x       x

SBS according to SBS Recast (NACE Rev.2)2                                                x         x      x      x

Assumption: SBS Recast enters into force 2007 and derogation for 2007 is requested

SBS according to current SBS regulation (NACE Rev.1.1)                  x        x

SBS according to SBS Recast (NACE Rev.1.1)                                               x
                                            2
SBS according to SBS Recast (NACE Rev.2)                                                 x         x      x      x

Assumption: SBS Recast enters into force 2007 and maximum derogation of four years is requested

SBS according to current SBS regulation (NACE Rev.1.1)                  x        x       x

SBS according to current SBS Regulation amended by NACE
                                                                                         x         x      x
Regulation (NACE Rev.2)
                                           2
SBS according to SBS recast (NACE Rev.2)                                                                         x




The possibilities of accuracy flags for low quality data as well as transitional periods for the
transmission of data regarding new requirements of SBS Recast were promoted by the Commission.
The present proposal foresees transitional periods of four years for the implementation of new
variables in Annex I (Common Module) and Annex III (Distributive Trade) and in general for
Annex IX (Business Demography). The transitional period for Annex VIII (Business Services) is
two years with the possibility of an extension of further two years by comitology procedure.
Nevertheless, some clarification concerning transitional periods for the breakdown of activities
seems to be necessary.


Overall, the Commission argued that the SBS Recast can well be implemented simultaneously with
the introduction of NACE Rev.2, provided that derogation requests foreseen in the present proposal
will be accepted in comitology.


1
       Year of double reporting
2
       Transposition of codes of SBS from NACE Rev.1.1 to NACE Rev.2 by comitology

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ANNEX I                                                    DG C I                                 LIMITE EN
Ad hoc Module

The Ad hoc Module seemed to be a major problem for many MS. The comments from MS reach
from dropping the Ad hoc Module to asking for more precision with respect to its formulation or
making the Ad hoc Module optional with regard to participation. Despite the fact that details
regarding ad hoc data collections will only be decided in comitology, the formulation in the SBS
Recast proposal seems to be too vague for numerous MS. Burden for respondents as well as costs
for NSI were the major concerns in this respect.


Regarding financing, the Commission argued that the possibility of co-financing is already
mentioned in the present proposal, and it would not be possible to sharpen the formulation due to
the nature of the Commission’s budgetary procedures. In any case, some more precision of the Ad
hoc Module seems to be possible.


Pilot studies / non-market activities of sections M-O of NACE Rev.1.1

Many MS brought forward that any possible extension to non-market activities of sections M, N,
and O of NACE Rev.1.1 (pilot studies concerning non-market activities) does not comply with the
aim of the SBS Regulation. They argue that the SBS Regulation should only deal with market
oriented activities and not with non-market oriented activities. Furthermore, it should be clarified
that participation in pilot studies will happen on a voluntary basis, as it was confirmed by the
Commission during the meeting.


The Commission stated that there is no general intention to extend the data collection to the non-
market activities. The aim of the Commission is to observe market liberalisation with a small set of
variables available from administrative sources. In contrast to market activities of sections M-O of
NACE Rev.1.1, for which a comitology procedure is foreseen after evaluation of pilot studies, any
other extension of the SBS Regulation’s scope to non-market activities requires a co-decision
procedure guaranteeing full legislative power to MS.




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ANNEX I                                         DG C I                          LIMITE EN
Labour input variables of Annex I and Annex III

Various remarks and concerns were expressed regarding the introduction of additional labour input
variables in Annex I and Annex III. The most important issue raised was the considerable additional
burden for enterprises especially in the services sector where small enterprises predominate in
certain NACE categories. Since a variety of part-time models of employment could exist
simultaneously in the same enterprise, the full-time equivalents are difficult to estimate.
Furthermore, these figures - crucial for productivity measures – are not part of the accounting
systems of enterprises and therefore impose a large burden on them.


The Commission argued that the different views of the MS are all well known and were discussed
in several working groups. There seemed a majority of MS to be in favour of full time equivalents;
some countries even have them in administrative sources. Therefore a decision for full time
equivalents in Annex I was made, although hours worked would have been the ideal variable for
productivity analysis.


New annex on business services (Annex VIII)

The new annex on business services is broadly supported by the MS. Nevertheless, concerns
regarding the burden on enterprises were expressed; all the more as so, as it is difficult for
enterprises to provide information on turnover by type of client and turnover by type of product.
Additionally, a further evaluation of the available pilot studies was requested and problems for MS
not participating in the pilot actions were mentioned.


The Commission informed that the information requested for in Annex VIII have been tested
carefully in several pilot actions since 1999. A regular evaluation of results was carried out by a
special working group on business services and reported to several committees. As regards burden
on enterprises, Annex VIII of the proposal already represents a compromise as data for some
economic activities are requested only in a multi yearly frequency. A threshold of 10 persons
employed was introduced additionally.




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ANNEX I                                         DG C I                          LIMITE EN
Information of the Legal Service in relation to the recasting procedure

Dated 4 April 2006, the Consultative Working Party of the Legal Services of the European
Parliament, the Council and the Commission issued its common opinion on the Commission
proposal’s compliance with the recast formalities3. The amendments regarding codification of the
SBS Recast proposal identified by this common opinion, which was distributed in the Working
Party on Statistics on 25 April 2006, have to be taken into consideration in the further proceedings.
The representative of the Legal Service of the Council informed the delegates in the meeting that
discussions in the Working Party can refer to grey shaded parts of the proposal and parts
additionally identified by the Consultative Working Party only.


                                    _______________________




3
      These are laid down in the Interinstitutional Agreement of 28 November 2001 on a more
      structured use of the recasting technique for legal acts (2002/C 77/01)


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ANNEX I                                        DG C I                          LIMITE EN
                                                                                           ANNEX II

                                 COMMISSION "NON-PAPER"


 Effects on the activity breakdown for the reporting in mandatory data series relating to the
             SBS Regulation, its proposed recast and the NACE Rev. 2 proposal


Background: The Commission proposals for NACE Revision 2 and the recast and amendment of
the SBS Regulation are being discussed more or less in parallel by the lawmakers in co-decision. In
the Council working group meeting of 25 April 2006, both proposals were analyzed, and the
respective effects on the reporting requirements by National Statistical Institutes were deemed
worthy of a closer analysis. If NACE 2 is adopted, there will be effects, and the recast would yield
additional effects. EUROSTAT has been asked to compare the reporting requirements as regards
the economic activity breakdown for mandatory data under Annexes I to IV of the SBS Regulation.


The situation: The changes in activity breakdowns brought about by the NACE Rev. 2 are the
result of altered, shifted, and deeper breakdowns and are not described here in detail. The
Commission proposal for a recast of the SBS Regulation including its amendments results in shifted
variables, added and deleted variables, deeper breakdown to NACE class level, and in the additional
coverage of new NACE categories – divisions 90 and 92 in Annex I. For the requested comparison,
only the mandatory data are considered, and only Annexes I to IV are compared to each other. As
regards regional data breakdown, the breakdown to NUTS 2 level is aggregated at division level for
Annexes I, II and IV and at group level for Annex III.


It appeared useful to compare all possible scenarios and situations for the interplay between NACE
2 and SBS recast: the current reporting schedule with the SBS regulation 58/97 and all subordinated
Commission Regulations in force and according to NACE Rev. 1.1 (the status quo); a situation with
the current SBS framework reported under NACE Rev. 2; a situation where the SBS recast is
adopted as proposed and reported under NACE Rev. 1.1.; and a situation where the proposed recast
is adopted and data are reported under NACE Rev. 2. The attached Excel-file puts all of these
situations next to each other for the mandatory data transmission under Annexes I to IV.




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ANNEX II                                       DG C I                         LIMITE EN
Conclusion: It is evident that the changes in activity breakdown are negligible except for Annex I.
It is here, however, that the major thrust of the legislative proposal is meant to be rooted, i.e. in a
deeper and more representative coverage of the services part of the economy. The increased activity
breakdown following a revision of both the NACE and the SBS would therefore mainly show the
success of the intended adaptation of reporting to an altered economical situation and not
necessarily indicate a proportionate increase in reporting burden.


                                        ____________________




Annex: Table with requirements comparison




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ANNEX II                                         DG C I                           LIMITE EN
                                                                                                                ANNEX TO ANNEX II
Requirements of SBS Regulation regarding activity breakdown per series only mandatory series



    ANNEX I             Horizontal module
                                                                required       current SBS       current SBS           SBS recast        SBS recast
                                                            breakdown        NACE Rev.1.1        NACE Rev.2        NACE Rev.1.1         NACE Rev.2
                                                                                                               (incl. activities that
                                                                                                                are part of NACE
                                                                                                                 Rev.1.1 90, 92.1
                                                                                                                         and 92.2)


         1A                  national series               current SBS:               384                418                    431            497
                                                 regroupings Section
                                                9;          SBS: recast
                                                                   4-digit

         1B                       size class               current SBS:               177                187                    194            218
                                                 regroupings Section
                                                     9 for services, rest:
                                                                  3-digit;
                                                     SBS recast: 3-digit


         1C                  regional series                       2-digit             43                68                       45            68
         1D                      preliminary               current SBS:               177                187                    194            218
                                                 regroupings Section
                                                     9 for services, rest:
                                                                  3-digit;
                                                     SBS recast: 3-digit




    ANNEX II                       Industry


         2A                    annual series                       4-digit            260                262                    260            262
                               annual series                       3-digit            125                114                    125            114
         2B        environmental protection                        2-digit             27                33                       27            33
                expenditure broken down by
                      environmental domain
         2D            size class breakdown                        3-digit            125                114                    125            114
               size class breakdown for R&D                        3-digit            125                114
                                   variables
         2E                             KAU                        4-digit            260                262                    260            262
         2F                  regional series                       2-digit             28                34                       28            34
         2H            Multi-yearly series on                      4-digit             93                70
                 employment (homeworkers)




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ANNEX TO ANNEX II                                             DG C I                                                LIMITE EN
         2J Multi-yearly series on intangible          4-digit   260               262     260   262
               investment and subcontracting

         2L              Multi-yearly series on        3-digit   121               105
                purchases of energy products

         2N                    preliminary data        3-digit   125               114     125   114
         2O          environmental protection          2-digit   27                33       27   33
                 expenditure broken down by
                                      size class
         2P              Multi-yearly series on        4-digit                             260   262
                 breakdown by type of actvity
                   (previously included in 2A)



   ANNEX III                              Trade


         3A                    preliminary data        3-digit   19                21       19   21
         3B                      national series       4-digit   79                91       79   91
         3C          employment size classes           3-digit   19                21       19   21
                         turnover size classes         3-digit   19                21       19   21
         3E                        regional data       3-digit   19                21       19   21
         3F     Multi-yearly regional statistics       3-digit   12                13       12   13
                   for Sale, maintenance and
                  repair of motor vehicles and
                    motorcycles; retail sale of
               automotive fuel and retail trade
                                             only
                Multi-yearly regional statistics       3-digit    7                 9       7     9
                            for retail trade only

         3D     Multi-yearly statistics for retail     4-digit   28                37       28   37
                                      trade only
                      Multi-yearly statistics on       4-digit   28                37
                   category of sales space for
                                retail trade only
                           product breakdown           4-digit   79                91       79   91
         3G              Multi-yearly series on        4-digit                              79   91
                 breakdown by type of actvity
                   (previously included in 3B)




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ANNEX TO ANNEX II                                    DG C I                              LIMITE EN
  ANNEX IV                     Construction


       4A                      annual series          4-digit        17               22      17   22
              annual series optional for Site         4-digit        10               8       10    8
                 preparation and Building of
             complete constructions or parts
                    thereof; civil engineering

                       annual series for Site         4-digit         7               14
                 preparation and Building of
             complete constructions or parts
               thereof; civil engineering only

                               annual series          3-digit         5               9       5     9
                               annual series          2-digit         1               3
       4D              size class breakdown           3-digit         5               9       5     9
       4E                                KAU          4-digit        17               22      17   22
        4F                    regional series         2-digit         1               3       1     3
       4H              Multi-yearly series on         4-digit        17               22
             employment (part-time workers)

        4J Multi-yearly series on intangible          4-digit        17               22      17   22
              investment and subcontracting

             Multi-yearly series on intangible        3-digit         5               9       5     9
              investment and subcontracting

       4K              Multi-yearly series on         3-digit         5               9       5     9
                subcontracting by size class

       4M    Multi yearly turnover by activity        4-digit                                 17   22
             breakdown (previously included
                                       in 4A)

             Multi yearly turnover by activity        4-digit                                 7    14
             breakdown for Site preparation
                    and Building of complete
              constructions or parts thereof;
                        civil engineering only
               (previously included in series
                                          4A)
       4N                    preliminary data         3-digit         5               9       5     9




                                                 ______________________




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ANNEX TO ANNEX II                                  DG C I                                  LIMITE EN

				
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