METAC Workshop March 14-17, 2016 Beirut, Lebanon National Accounts Compilation Issues Session 9: Taxes on products

Taxes - topics Definition Classification Recording Taxes on production and imports – Taxes vs Service fees – Taxes on products/VAT

Definition … compulsory, unrequited payments, in cash or in kind, made by institutional units to government units. – … unrequited because the government provides nothing in return to the individual unit making the payment, transfers; taxes vs fees: 2008 SNA, 8.54 … used by the Government to provide goods or services to other units, either individually or collectively

Classification... part of (D)istributive transaction: Taxes on production and imports (D2) – Taxes on products (D21) Value added type taxes (VAT) (D211) Taxes and duties on imports excluding VAT (D212) – Import duties (D2121) – Taxes on imports excluding VAT and duties (D2122) Export taxes (D213) Taxes on products except VAT, import and export taxes (D214) – Other taxes on production (D29) Current taxes on income, wealth, etc. (D5) – Taxes on income (D51) – Other current taxes (D59)

Recording Taxes on production and import – on accrual basis, when the activities, transactions or other events occur that create the liabilities to pay taxes not to include taxes unlikely ever to be collected – under uses in the generation of income account and under resources in the allocation of primary income account. Product taxes: – … depends on the valuation used for the recording of output: basic prices/producer price* Other taxes on production: – … whatever the valuation of output used, other taxes on production are always recorded as a charge on value added in the generation of income account Current taxes on income and wealth – on accrual basis; – under Secondary distribution of income account: Resources for the Government; Uses for other institutional sectors

Taxes on production and imports Taxes on products – payable per unit of some good or service; – depend on the value or quantity of products – excluded from basic price but included in the producer price and purchaser price Other taxes on production – all taxes except taxes on products that enterprises incur as a result of engaging in production – not related to the value or quantity of products – Included in basic price and also included in purchaser price

Service fee, product taxes and taxes on production

VAT … collected at each stage of the process of production, – … but ultimately charged in full to the final purchasers Terminology, 2008 SNA, 6.58: Invoiced VAT : payable on the sales of a producer; it is shown separately on the invoice that the producer presents to the purchaser. Deductible VAT: payable on purchases of goods or services intended for intermediate consumption, gross fixed capital formation or for resale that a producer is permitted to deduct from his own VAT liability to the government in respect of VAT invoiced to his customers. Non-deductible VAT: payable by a purchaser that is not deductible from his own VAT liability, if any.

VAT Legislation Taxable person, registration according to VAT Act: – Registration threshold, based on annual turnover of taxable supplies Exempt supplies – Non-market services provided by Government and NPIs, Financial services, Education and Health – Entities dealing only with exempt supplies are not registered as taxable persons “Zero” - rated supplies: – Exported goods and services – International transport – Agro- products and live-stocks – Land and buildings for residential purposes

VAT 2008 SNA requirements: net system of recording VAT: – Output of goods and services are valued excluding invoiced VAT; – Imports are similarly valued excluding invoiced VAT; – Purchases of goods and services are recorded including non-deductible VAT; – Under the net system, VAT is recorded as being payable by purchasers, not sellers, and then only by those purchasers who are not able to deduct it. Almost all VAT is therefore recorded in the SNA as being paid on final uses, mainly on household consumption, but also including exempted activities.

References 2008 SNA, Chapter

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