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Supply and Use Tables (SUT) Module-I: PP3.1 Training Course Material for e-Library on System of National Accounts March 2009.

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Presentation on theme: "Supply and Use Tables (SUT) Module-I: PP3.1 Training Course Material for e-Library on System of National Accounts March 2009."— Presentation transcript:

1 Supply and Use Tables (SUT) Module-I: PP3.1 Training Course Material for e-Library on System of National Accounts March 2009

2 2 Supply and Use Tables Outline Supply and Use Tables Outline –Supply and Use of Goods and Services –Structure of Supply and Use Tables (SUT) –Trade Margins, VAT

3 3 Supply and Use of Goods and Services Production Output Intermediate consumption Supply of goods and services Final consumption Gross capital formation Exports Imports Net exports Gross capital formation Final consumption Value added/GDP - = = ++ - = +

4 4 What Are Goods and Services? They are output of production Goods –Tangible, can be stored, ownership can change, Services –Not tangible; Output is used up as delivered; Cannot be stored; Ownership cannot be transferred; Output results in change in goods, person or institutions

5 5 Goods –Goods can be transported stored and repackaged, as such the production price may be different from purchase price by other producers or users Services –Services are used when produced, therefore the price at production is same as price at use What Are Goods and Services? (Contd.)

6 6 What Are the Statistical Units? Enterprise - an institutional unit engaged in production characterized by: –Natural person, legal or social entity –Can enter into contract on behalf of own –Has ownership rights of assets –Makes decisions on income, financial and other assets –May have one or more economic activities

7 7 What Are the Statistical Units? (Contd.) Kind of economic activity Unit – an enterprise or part of an enterprise which independently engages in one kind of economic activity or predominantly one kind of economic activity without restriction to the geographical area in which that activity is carried out

8 8 What Are the Statistical Units? (Contd.) Establishment – an enterprise or part of enterprise which independently engages in one or predominantly one kind of economic activity –at one location or within a geographical area, –for which data are available, or can be meaningfully compiled that allow the calculation of operating surplus

9 9 Some Examples: Enterprise with one kind of activity and one establishment Household operated activity engaged in making rice cakes for sale

10 10 Some Examples (Contd.) Enterprise with one kind of activity and several establishments Bank with different branches(establishmen ts) in different locations Head office bank Tokyo Tokyo branch Kyoto branch Osaka branch

11 11 Some Examples (Contd.) Enterprise with several kind of activities and several establishments which are vertically integrated Region 2 Sugarcane plantation Region 1 milling Sugar refining Final output Kind of activity 1.Agricultural crop 2.Manufacturing milling and sugar refining Four establishments E1 E2 E3E4

12 12 Some Examples (Contd.) Enterprise with several kind of activities and several establishments which are horizontally integrated E1 E2 E4 Head office Manufacturing E2 E3 Transport E6 E7 E5 Trading 7 establishments 3 economic activity 1 ancillary activity

13 13 How to Classify Production Activities? Primary activity - production activity with highest share in output Secondary activity - other production activities for the market Ancillary activity - activity whose output is for internal use of the establishment or enterprise

14 14 What Type of Producers? Market producers - produce market goods, that is, the price and output level is based on demand ( price economically significant ) Non market producers - produce non market goods, that is, price and output levels not based on demand ( price not economically significant )

15 15 What are these Producers? (Contd.) Market producers - government corporations, private corporations, quasi-corporations, household unincorporated enterprises Non market producers - general government, non profit institutions, subsistence producer households

16 16 Supply and Use Tables (SUT): General An integrated part of SNA Interrelationship of industries in an economy with respect to the production and uses of their products as well as imports and exports Each industry listed across the top in Two tables –depicting outputs produced in the Supply table –depicting inputs that are consumed in the Use table A compilation tool: (a) data checking and reconciliation, and (b) gap filling

17 17 SUT (Contd.) First and an important part of SNA Can be used to derive Input-Output tables SUT more often advocated as a compilation tool for –data checking/reconciliation –data gaps filling

18 18 A Simplified Supply Table SuppliesIndustries Rest of the World Total (1)(2)(3) Products (1) Output by product and industry Imports by products Total supply by product Total (2) Total output by industry Total importsTotal supply Structure of supply and use tables

19 19 Structure of supply and use tables A Simplified Use Table UsesIndustriesRest of the World Final Consumption Gross Capital Formation Total (1)(2)(3)(4)(5) Products(1)Intermediate consumption by product and by industry Exports by product Final consumption expenditure by product Gross capital formation by product Total use by product Components of value added (2)Value added by component and by industry Total(3) Total inputs by industry

20 20 SUT (Contd.) Two identities hold –the identity by industry output by industry = input by industry –the identity by product total supply by product = total use by product

21 21 SUT (Simple numerical Example for illustration) Farmer produces wheat 1000 Imports seed 600 Miller produces flour 1800 Uses wheat 1000 The miller sells flour to exports 500 – and to a retailer 1300 Retailer sells flour to households 1600 Sales tax on sales to household 100 Purchases for resale 1300 retail margin 200 Intermediate consumption 0

22 22 Goods and services account ResourcesUses Output:Intermediate consumption Wheat1000Seed600 Flour1800Wheat1000 Retail margin200 Imports of goods and servicesHousehold consumption expenditure Seed600Flour1600 Product tax100Exports of goods and services Flour500 Total supply3700total use3700

23 23 Uses Resources Intermediate consumption Output Seed600 Wheat1000 Wheat1000 Flour1800 Retail margin200 Product tax100 GDP1500 Total3100Total3100 Production Account

24 24 Output at basic pricesAdjustments Product Farmer Miller Retailer Total Domestic Imports Sales tax Trade margin Total Supply (purch) Wheat 1000 Flour 1800 1002002100 Retail trade 200 -200- Seed -600 Totals 100018002003000600100-3700 Supply Table

25 25 Intermediate UsageFinal Use ProductFarmerMillerRetailerTotalHouseholdsExportsTotal Use Wheat1000 Flour-16005002100 Retail trade -- Seed600 Totals60010001600 5003700 Use Table (Purchasers Prices)

26 26 Valuation of transactions in SUT Basic concepts and interrelationships – Basic prices, – Producers prices, – Purchasers prices Valuation of product flows – Output – Use of goods and services – Exports and imports Trade and transport margins Taxes and subsidies on products

27 27 Equality of Supply and Use Supply at basic prices +Taxes less subsidies on products + Trade and transport margins = Supply at purchasers prices = Use at purchasers prices Transition Supply table: from basic prices to purchasers prices Use table: from purchasers prices to basic prices

28 28 Trade Margins A trade margin (wholesale or retail trade) applies only when there is a distribution service provided by the trader through buying and reselling a product A trade margin does not apply to direct sales by a producer, even when the sales are to households Trade margin is defined as the difference between the selling price of the good for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold The trade margin is the output of the distributor As with other producers, value added is obtained by subtracting intermediate consumption

29 29 Trade Margins (Contd.) Broadly, the trade margin is calculated as: Sales less purchases of goods for resale plus change in inventories for resale Note: purchases of goods for resale should exclude any transport charges invoiced separately to the distributor; such transport charges are to be shown as intermediate consumption of the distributor The trade margin is part of the difference between the basic price of a good and its purchasers price

30 30 Value Added Taxes (VAT) General Definition: A tax on goods and/or services collected in stages by enterprises and ultimately charged in full to the final purchasers. The tax rates may vary from products to products Invoiced VAT: The VAT payable on the sales of a product by a producer/trader; it is (often) shown separately on the invoice which the seller presents to the purchaser

31 31 VAT (Contd.) Deductible VAT: The VAT payable on purchases of goods and services intended for intermediate consumption, gross fixed capital formation or for resale which a producer/trader is permitted to deduct from his own VAT liability to the government in respect of VAT invoiced to its customers Non-deductible VAT: VAT payable by a purchasing producer/trader which is not deductible from his own VAT liability, if any (e.g. VAT on certain special category items such as restaurant services and alcohol)

32 32 VAT (Contd.) Incoming VAT: VAT paid by a producer/trader on purchases of goods and services intended for intermediate consumption, gross fixed capital formation or for resale Outgoing VAT: VAT collected by a producer/trader on its sales of goods and services Net VAT accrued: Outgoing VAT less deductible incoming VAT

33 33 VAT (Contd.) VAT exemption: –Production of some services. No VAT on the products, produced. Incoming VAT not refundable –Small producers irrespectively of type of products they produce. No VAT on the products produced even if VAT normally is levied on these products. Incoming VAT not refundable Zero rated Zero VAT rate on certain transactions (e.g. exports) Deductible incoming VAT refundable

34 34 Example: 20 percent Value added Tax VAT PC Producer =>1000 +200 =>Retail Store 1900 +380=2280=>House- holds Passing over of VAT to the government The PC producer200 The retail store 380 - 200=180 Total VAT accrued on this set of transactions:380 Output of computers at basic prices1000 + taxes less subsidies on products other than VAT0 = Output of computers at producers' prices excl. VAT1000 + Trade margin900 + Total VAT380 = Purchasers' prices including VAT2280

35 35 Example: Deductible VAT The retail store Receipts Total sales2280 of which VAT380 Expenditures Goods for resale1200 of which VAT200 Intermediate consumption120 of which VAT20 VAT passed over to the government: Outgoing VAT less incoming VAT380-200-20=160

36 36 Example: Deductible VAT....... The retail store The production account Uses Resources Intermediate consumption, purchasers prices (net of deductible incoming VAT) 100Output basic prices900 Gross Value added800 Accrued VAT trade0.2*800=160

37 37 Example: Zero rated VAT....... The PC producer Incomes Sales to the retail trade store1200 of which VAT200 Export4000 of which VAT (zero rated) 0 Expenditures Intermediate consumption of goods and services3600 of which: Deductible VAT500 Non-deductible VAT100 VAT passed over to the government: Outgoing VAT less incoming deductible VAT200-500=-300

38 38 Example: Zero rated VAT....... The PC producer The production account UsesResources Intermediate consumption, purchasers prices (net of deductible incoming VAT) 3100Output basic prices5000 Gross Value added1900

39 39 Example: A producer exempted from VAT Incomes Sales/output700 of which VAT0 Expenditures Intermediate consumption of goods and services550 of which: VAT (normally deductible) 40 VAT (always non-deductible) 10 VAT passed over to the government: 0

40 40 Example: A producer exempted from VAT VAT passed over to the government The production account UsesResource Intermediate consumption, purchasers prices (net of deductible incoming VAT) 550Output basic prices700 Gross Value added150 VAT refunded 0

41 41 Treatment of Imports Consistent with the Balance of Payments Manual in valuing imports of goods in total on a fob basis, and to show international transportation as a service However, in the Supply/Use framework, imports at the commodity level are valued on a cif basis (including international transportation) A cif/fob adjustment is made in the Supply table to accommodate these two valuation bases, and to ensure that domestic carriage of imports is not double counted

42 42 Example of cif/fob adjustment Assume imports cif = 1000 fob = 900 International transportation = 100 Domestic carriers = 20 Foreign carriers = 80 Also, assume domestic transportation to the user =30 Therefore, imports of goods = 900 imports of services= 80 Domestic services= 20 + 30 = 50 Supply at purchasers prices = 1030 The cif / fob adjustment ensures that these values are reflected in the Supply table

43 43 Supply Table Domestic Supply cif/fob adjust ment ImportsTotal Supply (basic) MarginTotal Supply (purch) GoodsServices Goods 1000 +301030 Transport 50-1008030-30 cif / fob adjustment +100-100 Total 50900801030- Note: the international transportation by domestic carriers is included in the purchasers price of the good through its impact on the cif value of imports

44 44 Thanks


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