National Practices Concerning Competitive Neutrality - …

1 Competitive Practices This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD 2012 Competitive Neutrality : National Practices OECD 2012 3 TABLE OF CONTENTS Executive Summary.

2 5 Chapter 1 Introduction .. 9 About this report .. 9 Definition of Competitive Neutrality and priority areas .. 10 Structure of the report .. 12 Notes .. 12 Chapter 2 National Competitive Neutrality Frameworks .. 13 Overview of findings .. 13 Legal or regulatory frameworks and other guidance .. 16 Application to traditional SOEs and other public bodies .. 18 Oversight, investigation and enforcement of Competitive Neutrality .. 20 Notes .. 22 Chapter 3 Main Individual Elements in Obtaining Competitive Neutrality .. 25 Operational form of government business.

3 25 Identifying costs .. 35 Commercial rate-of-return .. 46 Accounting for public service obligations .. 51 Tax Neutrality .. 58 Regulatory Neutrality .. 62 Debt Neutrality and outright subsidies .. 67 Public procurement .. 73 Notes .. 78 Bibliography .. 83 Annex Questionnaire .. 85 Tables Overview of country respondents .. 9 Competitive Neutrality frameworks and oversight .. 14 Regulated markets where SOEs or other public bodies operate in competition with private 18 Organisational forms of publicly-owned corporate entities.

4 27 Structural separation .. 31 Review of government stake and relevance of commercial objectives .. 34 Transparency and disclosure requirements .. 36 Identifying costs/income from commercial and non-commercial activities .. 40 4 Competitive Neutrality : National Practices OECD 2012 Attribution of liabilities .. 44 Commercial ROR policy for public undertakings .. 47 Compensating for public service obligations .. 52 Tax treatment of public undertakings relative to private undertakings .. 59 Regulatory (dis-)advantages faced by public undertakings.

5 63 Sources of financing for public undertakings and advantages associated with ownership .. 68 Boxes Competitive Neutrality frameworks and oversight .. 17 Application of Competitive Neutrality framework to government business activity in Australia .. 20 Remedying non-compliance in Spain .. 22 Case Study: Swiss Institute of Meteorology .. 30 Supervising the use of public funds in Spain .. 39 The European Transparency Directive .. 42 Case Study: Lithuanian Police Department .. 43 Actuarial calculations for Bord G is in Ireland.

6 45 ROR calculations in Hungary .. 48 Case study: The Australian Valuation Office .. 49 Case study: Hungarian Office for Translation and Attestation .. 50 Determining when compensation for public service obligations in EU Member States does not constitute State aid according to the Altmark Criteria , and is thus not subject to State aid control .. 54 Determining adequate compensation for public service obligations in Hungary .. 55 Compensation of Public Service Obligations Example from the public transport sector in Poland.

7 56 Case Study: The News Agency of the Slovak Republic .. 57 EU Commission VAT Directive Article 13 (Application of VAT on transactions of public authorities) .. 61 Case study: Finnish Road Enterprise .. 62 The tax Neutrality system in Australia .. 62 Restricting competition for the purpose of ensuring the provision of services of general economic interest The EU approach .. 65 Case Study: Swiss Post .. 66 Regulatory Neutrality adjustments Australia .. 67 Case Study: La Poste .. 71 Case Study: Russian federal budget subsidies to state-owned credit institutions.

8 72 EU Rules on Public Procurement .. 74 Ensuring Competitive Neutrality in Managed Competitions Australia .. 75 Case Study: Dala-Mitt rescue services in Sweden .. 77 Competitive Neutrality : National Practices OECD 2012 5 EXECUTIVE SUMMARY This report summarises the responses to a comprehensive questionnaire Concerning National approaches to Competitive Neutrality . The questionnaire was sent to state ownership functions and competition authorities in all OECD member countries, the European Union (EU) and a small number of observer countries.

9 Thirty countries have responded so far, many of which providing consolidated replies from various branches of government. National Competitive Neutrality frameworks. In all countries, public sector entities are providing goods and services in competition with the private sector or in areas where private sector businesses could potentially compete. In specific jurisdictions, the degree to which aspects or elements of Competitive Neutrality are considered vary: In the case of all EU (including EEA) member States, specific provisions of EU law bearing on Competitive Neutrality apply to all undertakings regardless of ownership, including private companies entrusted with public service obligations ( services of general economic interest) and companies benefiting from special and exclusive rights.

10 The European Commission (EU Commission) is responsible for enforcing the EU rules on Competitive In most countries, aspects or elements of Competitive Neutrality are dealt with through competition laws and policies. While most of these policies explicitly give public and private businesses equal rights and obligations, the extent to which competition policies and laws apply to different types of government businesses differ ( general government activities may fall outside the scope for competition law, or exemptions from competition law may exist in statutory laws for state-owned enterprises (SOEs) in specific sectors, especially in the network sectors where universal service obligations are of importance).