The Ministry of Economy has piloted a web-based module that integrates a Business License application into the national Business Registry to incentivize businesses to apply for a license online, right after incorporating and obtaining a tax number. This innovation provides undigitalized municipalities an online channel with standard requirements for businesses in their jurisdictions, while gaining a free web-based back office workflow, with trusted digital legal and tax information to ease processing.
Informal business operations are associated with low productivity, reduced tax revenues, poor governance, excessive regulations, poverty and income inequality. Businesses in Chile can incorporate and get a tax number to start charging for goods and services in a simplified manner and 100% online since 2013. However, formalization according to Chilean law is incomplete until businesses have obtained a business license with one of the 347 municipalities, through a procedure that is not centralized, is unstandardized, and most of the times still in paper forms in 80% of the municipalities that are not digitalized.
The innovation consists of a participative design and implementation which provides a digital module that municipalities may offer to businesses, so that these may apply for a license, on the Corporate Registry's website, using digital identity and authorizations to send legal and tax information directly to the municipality of their jurisdiction, as well as a web-based workflow for public employees in municipalities to use and issue approvals without downloading any software.
- Assist 80% of the undigitalized municipalities so that they may provide businesses in their jurisdictions, to start business fast and avoid fines or closure.
- Incentivize business licenses in unserviced jurisdictions, remote regions or locations, and promote local economic development.
- Reduce processing times that take up to 200 days as reported by CNEP agency in 2021.
- Standardize requirements and documentation for business license applications.
- Promote transparency and minimize unnecesary procedures, surcharges or even bribes.
- Record business owners and public servants' experiences to propose improvements to local or national regulations.
Who benefited from the innovation?
- Business owners.
- Public servants/employees in municipalities.
- Policymakers in central and local government.
The technological infrastructure is ready and can set-up over 100 municipalities that are undigitalized and in need of a digital channel to offer and issue business licenses in their jurisdictions. The current infrastructure can also connect to those municipalities that have more resources and which already have their own digital channels and management software or ERP.
It is scalable. The current infrastructure has been designed for 100 municipalities, and to integrate those municipalities that are digitalized and have their own digital channel and infrastructure. Plans also include specific user experience and operational workflow improvements depending on feedback and survey conducted alongside business owner and public servant users. The module was designed and implemented gradually in stages:
- Phase 0: A Minimum Viable Product (MVP) was designed and implemented as a QA/QC test site, with the minimum business license requirements by law and most requested by most municipalities, tested amongst 12 undigitalized municipalities and their public employees, operating the module with a variety of SME scenarios designed by the Business Registry team, along with another experts recording and documenting all experiences.
- Phase 1: A fully functional and publicly available pilot with 26 municipalities, with Digital ID and interoperability features connected directly to the Business Registry ad Tax Agency website. This pilot was designed and implemented to scale to over 100 municipalities, as an estimation of jurisdictions in remote regions and locations, in which businesses were not applying for licenses. Research was conducted to understand the digital status of municipalities and the need of business licenses in their jurisdictions, as well as research regarding the minimum legal and typical requirements and documentation needed during applications. Legal reviews to requirements as stated in national and local regulations was conducted by legal analysts and policy experts, including areas such as corporate law, tax, and sectorial aspects such as building and environmental. Agile methodology was used to design and implement the MVP and successive improvements and final Pilot, along with functionalities including national Digital ID and interoperation for transferring official legal and tax information and data safely.
This innovation was inspired by an innovative service in the Business Registry website, which included similar online services that would help business owners send legal and tax documents directly to anyone with an email, in an attached folder.
What Makes Your Project Innovative?
This project provides the first centralized digital module, for businesses to apply online for their obligatory business license, connected to the national Business Registry website, no matter a business’s location or if their municipality is digitalised or not.
- Access to 12000 businesses each month.
- Simple steps, transparent requirements, and connected to legal and tax information, to send directly to the municipality.
- Simple workflow with novel use of technology, for municipalities and their public employees to offer licenses, and process them easier.
All government has the responsibility to provide efficient and effective services, however municipalities are left alone to solve the final step in business formalization. This module offers innovation in service as well as innovation in its participative design. The module brings a new service to the Business Registry, putting Digital Data, shared services and user experience to the best use for businesses.
What is the current status of your innovation?
The project was implemented with 26 municipalities, which means that these municipalities agreed and signed-up to use the module, while businesses are taking advantage of the business license application, available on the Business Registry if the municipality of their jurisdiction is there. The project was evaluated during the MVP and pilot released to the public, and the Business Registry is collecting information with regards to the use of the module on both business and municipal endpoints, observing growth in interactions and how municipalities processing times were reduced to 90 days, expecting to reduce even more as adoption occurs. The project has been shown internally and across government, as a success story and to continue uncovering potential improvements and lessons as well as ideas for new services that may relate to procedures. Training and interviews have been conducted at municipalities and government offices, as well as amongst businesses.
Collaborations & Partnerships
- The national government through the Ministry of Economy, and local governments through their 347 municipalities, work together to tackle business informality, acquiring local knowledge and more representative economic policy views.
- Municipalities, Mayors and public employees, connect to local businesses, and attend to their needs efficiently and effectively.
- Businesses collaborate with feedback for improvements to licensing procedures.
Users, Stakeholders & Beneficiaries
- Businesses will save time with the business license online, getting started wherever they are, avoiding delays and potential fines.
- Central Government will incentivize formalization and economic development locally and nationally.
- Central governments will share information and technology.
- Municipalities will get income from tax collection sooner and perform inspections efficiently.
- Municipalities will save time and resources when processing and issuing licenses.
Results, Outcomes & Impacts
Results and impacts observed from the innovation:
- Businesses follow standard and transparent instructions, avoid confusion and in-person submissions.
- Processing time is reduced from over 200 days to 90 days.
- Municipalities/businesses reduce the use of paper.
- Municipalities have more certainty of legal and tax information, sent directly from a trusted source.
- Municipalities avoid using complex or expensive software, being able to reach government digitalization goals required by law.
Measurement of impacts:
- Throughout the business user and public servant user workflow, all actions and interactions are registered in a database in realtime.
- Feedback is collected and analysed, to include in technology, operational and regulatory improvements.
Expectations for the future:
- Incorporation of at least 100 municipalities to the current module, and at least 20,000 license requests during the pilot.
Challenges and Failures
- Challenges with understanding different criteria for applying regulations, as well as different operations depending on each municipality.
- Cultural challenges with regards to changing the way public employees were used to with difficulties training them to use simple online web applications.
- Challenges with regulations that were not clear and or outdated, leading to different interpretations for applying common criteria for business licenses.
- Insufficient technology infrastructure, personnel and skills in municipalities.
- Hierarchical relationships, and bureaucracy processes between central and local government.
- Policital buy-in from government authorities and officials, as well as achieving trust amongs local official and public servants or employees.
Conditions for Success
- Growth in the number of businesses that apply for their first business license.
- Growth in the number of municipalities, which reached 26 in the pilot and are expected to reach 100 in the next year.
- Standardization of requirements, documents, and even language, for common evaluation criteria use amongst municipalities.
- Support business owners use of technology and digital services for their operations.
- Support municipalities in their digitalization efforts and help public employees with learning and adopting technology.
- Sufficient feedback from business owners, public servants, to propose reforms to national and local regulations.
- Promote the business license immediately after incorporating and getting a tax number, increasing more businesses to apply to their first business license monthly.
- Facilitate interoperability between related government services and municipalities, for efficient and effective use of information and data.
This projects' approach to the project participating of businesses, central government and municipalities, is an example to follow, to create and improve other government services. The MVP and pilot are replicable because of the simplified use of technology to transfer and share data between central government, tax agencies and municipalities, with authorization of business owners, through webservices or APIs. This avoids demanding from users to invest in technology or infrastructure (a connection to internet and digital ID is enough), or special training (just basic web browser knowledge). The design approach which followed lean and simple use of technology, is replicable in other government services that interact with non-government users, specifically related to permitting workflows in offices with low levels of digitalization, or insufficient resources and training, such as permission for land use and environmental and hygine issues.
The design of a service should involve all stakeholders to ensure there is alignment to the needs of each of these, and to make sure there is buy-in and guaranteed use of the service. Lessons were captured from users, when conducting MVP testing amongst business owners and public employees to ensure expectations were met. For example, business owners expected all government administration to be the same and have data available and interoperated, when public employees in municipalities didn't really have access to businesses legal and tax information, as well as not always knowing what requirements to ask for, nor what regulations to apply when processing. Such discoveries helped for better workflows and providing more information on regulations and standards for business owners and municipal employees throughout the workflow. Discoveries were made regarding situations and cultures depending on location, technology limitations etc, which meant reconsidering how service is designed.
The project has been received with interest across government, especially amongst municipalities and amongst public employees, because it has offered a real-world innovation, and they were involved in its design. High satisfaction ratings have been achieved when conducting surveys. Regarding business license applications, during the pilot, 22 municipalities had reported at least 1 application in their jurisdiction, with a grand total of 377 applications, an average of 17 per municipality. During the pilot, 40 business licenses have been processed successfully, reducing processing time from over 200 days to 90 days to issue businesses their licenses to operate, and corresponding municipalities receiving income from tax collection.
- Implementation - making the innovation happen
- Evaluation - understanding whether the innovative initiative has delivered what was needed
27 November 2023