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1993 SNA Update Information - Country comments for issue:
Tax revenue, uncollectible taxes, and tax credits (recording of taxes)

Issue description
Issue description in [English] | [French] | [Russian] | [Spanish]
(a) Definition and coverage of taxes
Is it necessary to clarify the definition of taxes in the 1993 SNA and the distinction between the payment of taxes and payments for services.
(b) Accrual recording of taxes
The 1993 SNA describes the conceptual basis on which taxes should be assessed as accruing. Some practical flexibility is allowed in order to ensure that uncollectible taxes are not shown as accruing. Should greater precision be given about the degree of flexibility that is acceptable in relation to (i) the time when accrual is deemed to take place and (ii) the amounts to be shown as accruing?
(c) Tax credits
The 1993 SNA does not give guidance on the treatment of tax credits although the Government Finance Statistics Manual does. In order to correct this omission, a choice has to be made between recording these as a reduction in government tax receipts and recording some or all as government expenditure. Which alternative should the SNA adopt?
Country comments
Number of country comments for selected issue:34
  Date postedSourceComment
 10/10/2006SwedenAgreement with proposal
 15/09/2006United KingdomDefinition and coverage of a tax:
We agree that the definition and coverage of a tax should be set out clearly, with some examples. The examples should illustrate the underlying concepts; but should not suggest that they are exhaustive or prescriptive. It is important not to try to produce a comprehensive list of treatments.
 15/09/2006United KingdomAccrual recording:
We agree that taxes should be recorded on an accrual basis. And, that the expression 'due for payment' should be replaced by 'accruals'. We regret that the AEG could not agree on a single method for dealing with uncollectible taxes, but do not feel strongly enough to press for the issue to be reopened.
 15/09/2006United KingdomTax credits:
We strongly agree with the decision that payable tax credits should be recorded on a gross basis. And, that the presentation should permit the derivation of tax credits on a net basis also.
 15/09/2006LatviaAfter deep discussions and expert consultations we basically support the 1993 SNA Update Issues.
 18/08/2006ItalyWe are in favour of the recommendations.
 28/07/2006LithuaniaIn general we support the recommendations.
 27/07/2006EgyptMore clear definition is still needed to distinguish between taxes and other payment for services. Recording taxes in SNA should be more close to GFM 2001 recommendations.
 23/02/2006South African Reserve Bank We agree with the AEG recommendations and support the idea that the presentation of data should permit the derivation of tax credits on a net basis also.
 27/01/2006Central Bank of El SalvadorNo estamos de acuerdo en afectar el principio de devengado para el registro de estas operaciones, ya que distorsionaría el momento de registro del hecho económico y alteraría el déficit fiscal.
 17/01/2006Central Bank of Chile cbChile35;
 22/12/2005Serbia and MontenegroWe agree with the suggested changes.
 14/12/2005France L'INSEE attend la version définitive du texte pour se prononcer sur l'enregistrement des impôts.
L'INSEE regrette que l'enregistrement net des crédits d'impôts ait été rejeté.
 13/12/2005CanadaCanada agrees that the SNA should not include the principle of accruing taxes that are not collectible and transferring them back to the economy or writing them off as bad debt. Tax systems designed with some desired compliance level whereby the government does not spend money on audit and enforcement beyond this point. Recommending that the SNA could provide point estimates of taxes collectible would require a standard of quality at a much greater level of detail than most macroeconomic data systems are designed to produce. In addition, the optic of the SNA database being used to measure compliance of the tax system is at odds with the need for statistical agencies to distance themselves from government operations for the statistical estimates to be viewed as credible and unbiased.
Still, the SNA does need more clarity on the definition of taxes and the accrual principle associated with them. We look forward to reviewing the proposed chapter.
Canada agrees with treating payable tax credits on a gross basis and not netting them against taxes accrued. We have always implemented this approach to refundable tax credits which exist in the Canadian System.
 12/12/2005Bank of KoreaWe agree with the recommendations of the AEG.
However, in Korea, when the total amount of the credit exceeds the amount of the tax liability, the element of the credit in excess is not actually paid by the government but dealt with as next year's tax credit. In the case of tax credit, payable tax credits do not occur because all tax credit are recorded as reducing tax revenues.
 09/12/2005European Central BankThe proposed treatment complies with the 1995 ESA
 09/12/2005RussiaRosstat largely supports the recommendations on the updating 1993 SNA, made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 05/12/2005Denmark m3Denmark35;
 02/12/2005NetherlandsWe generally support the recommendations of the AEG.
 02/12/2005AustraliaAustralia agrees with the AEG recommendations.
 02/12/2005TurkeyWe agree with the recommendations made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 01/12/2005GermanyWe are pleased to express our agreement with the AEG recommendations.
 01/12/2005NorwayWe welcome a freestanding chapter on questions of taxes.
We think that payable tax credits in principle should be split, so that only the net payments are shown in the accounts. The tax should not be recorded gross, adding in the gross tax credit, as this addition represents taxes that are never paid.
 01/12/2005BrazilWe endorse the AEG decisions in the Bangkok meeting.
We would like to point out the importance of the chapter in the SNA covering the issue.
 01/12/2005IsraelWe agree with the recommendations of the AEG, including the recommendation to record tax credits on a gross basis. Since tax credits are substitutes for other benefits, only gross recording allows a satisfactory analysis. There may be other cases, where gross recording has not been made due to lack of information, although such a recording would useful for policy analysis. But that should not be a reason for not recording the tax credits, where information exists. One could, however, show the amounts of taxes that are set off by tax credits, separately.
 01/12/2005United KingdomDefinition and coverage of a tax
We agree that the definition and coverage of a tax should be set out clearly, with some examples. The examples should illustrate the underlying concepts; hut should not suggest that they are exhaustive or prescriptive. It is important not to try to produce a comprehensive list of treatments.

Accrual recording
We agree that taxes should be recorded on an accrual basis. And, that the expression 'due for payment' should be replaced by 'accruals'. We regret that the AEG could not agree on a method for dealing with uncollectible taxes, but do not feel strongly enough to press for the issue to be reopened.

Tax credits
We strongly agree with the decision that payable tax credits should be recorded on a gross basis. We agree that the presentation should permit the derivation of tax credits on a net basis also.
 30/11/2005Slovak RepublicSO SR give support to AEG recommendation related to ongoing effort for clarification of issue.
 30/11/2005ItalyIstat fully agrees with the recommendations made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 30/11/2005State Bank of PakistanWe have gone through recommendations made by Advisory Expert Group (AEG) and fully agree with them.
 29/11/2005People's Bank of ChinaI agree with your improvements and have no other suggestions.
 21/11/2005USAWe disagree with the recommendation of the AEG regarding payable tax credits. (“Payable tax credits” are a type of tax credit for which the amount of the credit that exceeds the tax liability is paid directly to the taxpayer or recipient.) The AEG has recommended that that the full amount of payable tax credits should be treated as social benefits (what is referred to as a “gross” basis). Instead, we agree with the recommendation of the Task Force on Harmonization of Public Sector Accounting that only the element of payable tax credits that is actually paid to the beneficiary should be recorded as social benefits; the element that reduces the taxpayers’ tax liability should be recorded as a reduction in taxes, consistent with the treatment other (non-payable) tax credits.
The AEG’s recommended treatment of payable tax credits requires an unnecessary imputation of taxes and social benefits, because the accounts would have to record amounts as taxes that are not actually collected and amounts as social benefits that are not actually paid. Governments make extensive use of tax allowances, exemptions, deductions, and payable or non-payable credits to achieve various policy purposes. We believe that this imputation weakens the applicability of the SNA’s current, clear definition of taxes as compulsory, unrequited payments made by institutional units to governments. By imputing values for transactions (social benefits and taxes) that differ from the amounts actually paid, this recommendation creates inconsistencies with treatment of other credits, allowances, exemptions, and deductions and would appear to open the door to additional imputations (so called “tax expenditures”). Furthermore, in designing their tax systems, countries have considerable flexibility to achieve the same results with combinations of these types of rules; therefore the supposed clear identification of social benefits that proponents of the “gross” treatment are hoping for is not likely to be obtainable in practice.
Regarding the other recommendations that are part of issue 35 (definition of tax revenue, accrual recording of taxes), we agree with the recommendations of the AEG.
 27/05/2005PakistanAgrees with the proposal recording as tax revenues amounts assessed, offset by a capital transfer representing the part unlikely to be collected.
 13/05/2005State Bank of PakistanAgreed to the proposal of recording as tax revenues amount assessed, offset by a capital transfer representing the part unlikely to be collected.
 12/04/2005GreeceSpecifically in paragraph 44 we kindly inform you that we favour recording as tax revenues amounts assessed, offset by a capital transfer representing the part unlikely to be collected.
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