UN STATISTICS DIVISION FISIM, Property Income and Current Transfers International Workshop on Household Income, Consumption and Full Accounting of the Households Sector March 2012, Beijing, China

2 Outline Financial intermediation services indirectly measured (FISIM) Concept Estimation Financial services using own funds Concept Estimation Property income Concept Estimation Taxes on income and wealth Concept Estimation Social contributions and benefits Concept Estimation Other current transfers Concept Estimation Social transfers in kind Concept Estimation Current transfers Secondary distribution of income account Disposable income Primary income Allocation of primary income account Balance of primary income Current transfers Redistribution of income in kind account Adjusted disposable income

3 FISIM - Concept Indirect measure of the value of financial intermediation services provided but for which financial institutions do not charge explicitly Needs to be imputed because no explicit fees are charged Split actual interest transactions into SNA interest FISIM Applies to loans and deposits Financial institutions

4 FISIM - Concept Bank interest receivable SNA interest receivable FISIM Loans Bank interest payable FISIM Deposits SNA interest payable

5 FISIM - Concept FISIM L = FISIM on loans FISIM D = FISIM on deposits r L = lending rate r D = deposit rate rr = reference rate Y L = stock of loans Y D = stock of deposits r L Y L = actual bank interest receivable on loans r D Y D = actual bank interest payable on deposits rrY L (rrY D ) = SNA interest on loans (deposits) Record in allocation of primary income account

6 FISIM - Concept Reference rate Between interest rates on loans and deposits No service element Reflects risk and maturity structure of deposits and loans One reference rate per currency One method Average of the ratio of interest payable on deposits to the stock of deposits and ratio of interest receivable on loans to the stock of loans

7 FISIM - Concept Allocation Some portion of domestically-produced FISIM to households Final consumers (final consumption expenditure) Owners of dwellings Owners of unincorporated enterprises Same for imports of FISIM Intermediate consumption

8 FISIM - Estimation Data sources Domestically-produced FISIM If data on average stocks of loans and deposits and interest by sector from monetary authorities are available Calculate FISIM on loans to households sector Owners of dwellings (dwelling loans) Owners of unincorporated enterprises Other loans (final consumption expenditure) Calculate FISIM on deposits to households sector Owners of unincorporated enterprises (intermediate consumption) Deposits as final consumers (final consumption expenditure) Bottom up method Intermediate consumption

9 FISIM - Estimation Complete breakdown of data not always available Compute total FISIM on loans and deposits for households Allocate FISIM on loans to Owners of dwellings (dwelling loans) Owners of unincorporated enterprises Other loans (final consumption expenditure) Using indicators such as breakdown of data on loans from other sources Intermediate consumption

10 FISIM - Estimation Allocate FISIM on deposits to Owners of unincorporated enterprises (intermediate consumption) Households as final consumers (final consumption expenditure) Using indicators from other sources such as Ratio of stocks of deposits to VA for smallest size corporations Ratio of stocks of deposits to turnover for smallest size corporations Other solutions? Equal split? Professional judgement All FISIM on deposits to households as final consumers

11 FISIM - Estimation Imports of FISIM Data on stock of loans and deposits and interest on loans and deposits from rest of world account Reference rate Total FISIM on loans and deposits Allocate FISIM on loans and deposits to households sector according to distribution of domestically- produced FISIM Lack of data by currency to calculate imports of FISIM seems to be a problem in many countries

12 FISIM volume measures - Estimation Need to remove effects of changes in price from current-price FISIM – volume measures Deflation method preferable to output indicator method Deflate stock of each type of loan and deposit using general price indexes GDP deflator (excluding FISIM) Final domestic demand deflator (excluding FISIM) All-items CPI Calculate base period margin of each type of loan and deposit Base period margin on loan (deposit) = difference between interest rate on loan (deposit) and reference rate Apply base period margin on loan (deposit) to deflated stock of loan (deposit) Aggregate to obtain volume measures of FISIM

13 Financial services using own funds - Concept Possible for some financial institutions to make loans without accepting deposits Own funds Examples Credit card issuers Finance associates of retailers responsible for financial leasing Pawnshops Moneylenders Corporations Unincorporated enterprises Production and consumption Likely to be important in developing countries

14 Financial services using own funds - Concept F L = Financial service on loans r L = lending rate rr = reference rate Y L = stock of loans r L Y L = actual interest receivable on loans rrY L = SNA interest on loans

15 Financial services using own funds - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Credit card issuers Monetary and financial statistics Enterprise survey Balance of payments Finance associates of retailers Monetary and financial statistics Enterprise survey Balance of payments Pawnshops Monetary and financial statistics Enterprise survey Balance of payments Moneylenders Monetary and financial statistics Enterprise survey HUEMs survey Balance of payments

16 Property Income - Concept Property income Accrues when owners of financial assets and natural resources put them at disposal of other institutional units Sum of investment income and rent Investment income Income receivable by owner of financial asset in return for providing funds to another institutional unit Rent Income receivable by owner of natural resource (lessor or landlord) for putting natural resource at disposal of another institutional unit (lessee or tenant) for use of natural resource in production Resource lease Record in allocation of primary income account

17 Property Income - Concept Breakdown Investment income Interest Distributed income of corporations Dividends Withdrawals from income of quasi-corporations Reinvested earnings on foreign direct investment Other investment income Investment income attributable to insurance policyholders Investment income payable on pension entitlements Investment income attributable to collective investment fund shareholders Rent

18 Property Income - Concept Interest Form of income receivable by owners of certain kinds of financial assets for putting financial asset at disposal of another institutional unit Deposits Loans Debt securities (for example, bills, bonds) Accrual basis (continuously) SNA interest

19 Property Income - Concept Distributed income of corporations Dividends Investment income to which shareholders become entitled as a result of placing funds at disposal of corporations Shareholders are collective owners of corporations Record at point at which share price starts to be quoted on ex-dividend basis

20 Property Income - Concept Distributed income of corporations Withdrawals of income from quasi-corporations Part of distributable income that owner withdraws from quasi- corporation Analogous to payment of dividends Exclude withdrawals realised by sale of assets Reinvested earnings on foreign direct investment Retained earnings of a corporation or quasi-corporation which are equal to distributable income less dividends payable or withdrawal of income from corporation or quasi-corporation respectively

21 Property Income - Concept Investment income disbursements Investment income attributable to insurance policyholders Non-life, life insurance and reinsurance Standardized guarantees Result of investment of technical reserves of insurers Investment income payable on pension entitlements Defined contribution and defined benefit schemes Defined contribution – investment income on the funds and net operating surplus from renting land/buildings owned by the fund Defined benefit – actuarial calculation of increase in pension entitlement coming from past service

22 Property Income - Concept Investment income attributable to investment fund shareholders Include mutual funds and unit trusts Dividends Retained earnings attributed to investment fund shareholders Distribute to shareholders and reinjected via transaction in financial account Rent on natural resources Land Different from rentals payable on buildings or other structures In practice, single payment for rent and rentals Treat entire payment as rent if value of land exceeds value of buildings/structures Subsoil assets Minerals or fossil fuels

23 Property Income - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Investment income SNA Interest Monetary and financial statistics Enterprise survey HUEMs survey Balance of payments Interest on bonds, bills, etc Monetary and financial statistics Enterprise surveys Government finance statistics Balance of payments

24 Property Income - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Distributed income of corporations Dividends Stock exchange Tax authority Household survey Enterprise survey Balance of payments Withdrawals of income from quasi- corporations Enterprise survey Balance of payments Reinvested earnings on foreign direct investment Balance of payments

25 Property Income - Estimation Possible Source Other investment income Investment income attributable to insurance policyholders Monetary and financial statistics Insurance Supervisory Commission Balance of payments Investment income payable on pension entitlements Monetary and financial statistics Pension Supervisory Agency Balance of payments Investment income attributable to investment fund shareholders Monetary and financial statistics Enterprise surveys Balance of payments Rent Household survey HUEMs survey Government finance statistics Enterprise survey Note: If direct estimation is not possible, the total may need to be allocated to households using indicators.

26 Current transfers - Concept Current transfer Transaction in which one institutional unit provides a good or service to another unit without receiving from the latter any good or service directly in return as counterpart and does not oblige one or both parties to acquire, or dispose of, an asset Directly affects level of disposable income Should influence consumption Relatively small, often made frequently and regularly

27 Current transfers - Concept Breakdown Current taxes on income, wealth Social contributions and benefits Other current transfers Record in secondary distribution of income account

28 Taxes on income and wealth - Concept Taxes in general Compulsory, unrequited payments, in cash or in kind, made by institutional units to government units Transfers Levied on incomes of households and corporations Accrual basis of recording Evidenced by tax assessments, declarations or other instruments Include interest, fines, other penalties in practice

29 Taxes on income and wealth - Concept Taxes on income Taxes on incomes, profits and capital gains Include taxes on Individual or household income Income of corporations Capital gains Winnings from lotteries or gambling

30 Taxes on income and wealth - Concept Other current taxes Current taxes on capital Taxes that are payable periodically, usually annually on the property or net wealth of institutional units, excluding taxes on land or other assets owned or rented by enterprises and used by them in production, such taxes being treated as other taxes on production Exclude Taxes on property or wealth levied infrequently and at irregular intervals, or in exceptional circumstances Income taxes assessed on basis of value of property when incomes cannot be estimated

31 Taxes on income and wealth - Concept Other current taxes Current taxes on capital Include taxes on Land and buildings Net wealth Other assets Miscellaneous current taxes Include Poll taxes Expenditure taxes Payments by households to obtain certain licenses (for example, own or use vehicles, boats or aircraft, recreational hunting, shooting or fishing) Taxes on international transactions

32 Social contributions and benefits – Concept Social contributions Actual or imputed payments to social insurance schemes to make provision for social insurance benefits to be paid Payable by employers and employees Part of compensation of employees (primary allocation of income account) Payable by households in capacity as employed, self-employed or unemployed persons in secondary distribution of income account Net social contributions Social contributions plus contribution supplements (investment income payable on pension entitlements) less service charge Social benefits Current transfers received by households intended to provide for the needs that arise from certain events or circumstances, for example, sickness, unemployment, retirement, housing, education or family circumstances Social security benefits in cash (pension and non-pension) Other employment-related social insurance benefits (pension and non-pension) Social assistance benefits in cash

33 Other current transfers - Concept Other current transfers Insurance-related transactions Net non-life insurance and reinsurance premiums Premiums earned and premium supplements less service charge Non-life insurance and reinsurance claims Some proportion may be recorded as capital transfers Net fees under standardized guarantees Fees earned and fee supplements less service charge Calls under standardized guarantees Current transfers within general government Consist of current transfers between different government units

34 Other current transfers - Concept Other current transfers Current international cooperation Consists of current transfers in cash or in kind between governments of different countries or between governments and international organizations Miscellaneous current transfers Current transfers between central bank and general government Current transfers to NPISHs (for example, membership dues, subscriptions, voluntary donations, etc, on a regular or occasional basis) Current transfers between households (for example, remittances) Fines and penalties Lotteries and gambling Payments of compensation for injury to persons or damage to property not settled by non-life insurance claims

35 Other current transfers - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Taxes on income Individual or household income Tax authority Balance of payments Income of corporationsNot applicable to households Capital gains Tax authority Balance of payments Winnings from lotteries or gambling Tax authority Balance of payments Other current taxes Tax authority Balance of payments

36 Other current transfers - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Net social contributions and benefits Monetary and financial statistics Pension Supervisory Agency Government finance statistics Enterprise survey Balance of payments Other current transfers Insurance-related transactions Monetary and financial statistics Insurance Supervisory Commission Balance of payments Current transfers within general government Not applicable to households Current international cooperationNot applicable to households

37 Other current transfers - Estimation Note: If direct estimation is not possible, the total may need to be allocated to households using indicators. Possible Source Current transfers between central bank and general government Not applicable to households Current transfers to NPISHs Household survey Enterprise survey Current transfers between households Household survey Balance of payments Fines and penalties Government finance statistics Balance of payments Lotteries and gambling Enterprise survey Balance of payments Payments of compensation for injury to persons or damage to property not settled by non-life insurance claims Administrative data Household survey Enterprise survey Balance of payments

38 Note on Estimation Property income and current transfers receivable/payable by households and other sectors Source data may be able to provide estimate of proportion allocated to households Direct estimation is possible If not, use source data to estimate amount allocated to households in conjunction with various indicators

39 Note on Estimation Specific example Source data may only be able to provide total investment income attributable to non-life insurance policyholders Direct estimate of amount attributable to households not available Allocate estimate of investment income attributable to non-life insurance policyholders who belong to households by share of premiums for households in total premiums

40 Social transfers in kind – Concept and Estimation Social transfers in kind Goods and services provided to households by government and NPISHs either free or at prices that are not economically significant Final consumption expenditure of general government and NPISHs on behalf of households Individual goods and services (for example, health and education) Distinct from collective services (for example, defence and street lighting) Estimated from government finance statistics and survey of NPISHs

41 Thank You