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1993 SNA Update Information - AEG recommendations 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?
AEG recommendations
Number of AEG recommendations for selected issue:1
  Corresponding meetingDate postedRecommendation
 July 20059/12/2005Definition and coverage of a tax
The AEG noted that the TFHPSA paper focussed mainly on refining existing SNA text rather than on redefining existing principles.
The AEG felt strongly 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.
Accrual recording
Taxes are to be recorded on an accrual basis. The expression “due for payment” should be replaced by “accruals”.
The discussion focussed almost exclusively on the question of whether amounts should be recorded on a net or a gross basis. The principle of not including taxes that are uncollectible and/or unlikely to be collected and so affect the government surplus/deficit was agreed. Because the AEG could not agree which of the three methods in the paper was preferred, it was decided to leave the SNA unchanged in this regard.
Tax credits
A clear majority of the AEG decided that payable tax credits should be recorded on a gross basis. The presentation should permit the derivation of tax credits on a net basis also.
It was decided that the best way forward would be for the TFHPSA to prepare the proposed free-standing chapter for the SNA covering all the questions on taxes . This draft should include the rationale for the changes proposed and emphasise the underlying concepts and principles. The SNA Editor in consultation with the Project Manager and the ISWGNA will review the text to identify changes in substance and in drafting to the 1993 SNA. A report on this process will be submitted to the AEG.
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