Distribution and Use of Income Accounts Main entries and Data Needs

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1 An Introduction to System of National Accounts Integrated Transaction Accounts Lesson: VI Part I Distribution and Use of Income Accounts Main entries and Data Needs Third Intermediate-Level e-learning Course on 2008 System of National Accounts May - July 2014 SIAP 1

2 Contents Primary Income and its Distribution Primary income and its distribution Secondary distribution and redistribution of income Social transfers in kind Rerouting of insurance related transactions Use of Income SIAP 2

3 Lesson Objectives At the end of this lesson the participant will be able to: Describe all incomes in the distribution and use income accounts Understand the structure and sequence of income accounts Compile Gross National Income and related measures SIAP 3

4 Primary Income and its Distribution SIAP 4

5 Primary Income and its Distribution Distribution of Primary Income GVA CE: compensation of employees OS: operating surplus Institutional Units participating in production Property income remittances gifts donations Property income Other Institutional Units SIAP 5

6 Primary Income and its Distribution Social Transfer in Kind Also called tertiary distribution of income : Social Transfers in Kind Non-market production of services by government and NPISHs for individual consumption Purchase & delivery of goods & services by government and NPISHs to households SIAP 6

7 Primary Income and its Distribution Incomes in Main Accounts Distribution of income as reflected in the main accounts of the system is as follows Income generated from domestic production GVA / GDP Allocation of primary income Balance of primary Income / GNI Secondary distribution of income Disposable income / GNDI SIAP 7

8 Primary Income and its Distribution Distribution of Income in Kind Social transfers in kind are reflected in a separate account of the system Disposable income / GNDI Social transfers in kind Adjusted Disposable income / adjusted GNDI SIAP 8

9 Insurance schemes Insurance Scheme - Rerouting Non-Life Insurance: HFCE / IC Policy Holders Use of output (implicit) Service charges (implicit) Premiums Premium supplements Benefits Output Insurance Corporations Investment of reserves Investment Income Financial Market SIAP 9

10 Insurance schemes Social Securities transactions involved Employers Households: Employees Self-employeds non-employeds Contributions CE Contributions Contributions Benefits Social Security: General Government SIAP 10

11 Insurance schemes Employment-related Funded Social Insurance CE Employer contribution HFCE Beneficiary households contribution Service charges contribution contribution supplements Benefits Output Insurance Corporations Investment of reserves Investment Income Financial Market Net social contribution = sum of actual contributions of employer and beneficiaries + contribution supplement service charges SIAP 11

12 Use of Income SIAP 12

13 Use of Income Use of Disposable Income Disposable income of institutional units gets distributed as follows by uses: Disposable income / GNDI SIAP 13

14 Use of Income Use of Income in Accounts Distribution of income as reflected in the use of disposable income account and use of adjusted disposable income accounts as follows: Disposable income / GNDI Final consumption Change in pension entitlements Savings Adjusted Disposable income / GNDI Actual final consumption Change in pension entitlements Savings SIAP 14

15 Distribution and Use of Income STOP! Note down your answers for each question before proceeding. State whether TRUE of FALSE. In allocation of primary income account of a domestic economy, 1. CE paid to RoW is included in the resources-side. Q 1. FALSE 2. FISIM is NOT included. Q 2. TRUE 3. Withdrawals from income of quasi-corporates are included. Q 3. TRUE 4. Investment income earned by insurance agencies is included in accounts of policy holders. Q 4. TRUE 5. Income taxes are included and production taxes are not Q 5. included. FALSE 6. Insurance premiums payable are included. Q 6. TRUE 7. Reinvested earnings of FDI of a domestic company is included. Q 7. TRUE SIAP 15

16 Distribution and Use of Income STOP! Note down your answers for each question before proceeding. State whether TRUE of FALSE. In secondary distribution of income account of a domestic economy, 1. Individual and corporate taxes are included. 2. Non-life insurance premiums are NOT included at Q all. 2. FALSE 3. Employers social contribution is included. 4. Social security benefits are included. Q 4. TRUE Q 1. TRUE Q 3. TRUE 5. Expenditure on free health services provided by an NPISH is included. Q 5. FALSE 6. Social benefits (other than social transfers in kind) are Q included. 6. TRUE 7. Non-life insurance claims are included in other Q current 7. TRUE transfers. SIAP 16

17 Distribution and Use of Income STOP! Note down your answers for each question before proceeding. State whether TRUE of FALSE. In use of disposable income account of a domestic economy, 1. entries are aggregation of those for the households, Q 1. TRUE government and NPISHs. Q 2. TRUE 2. government expenditure on Q CE 3. TRUE of its employees is included. 3. a part of FISIM is included. Q 4. FALSE 4. military expenditures on weapons systems are included.. 5. expenditure on free health services provided by an NPISH Q 5. TRUE is included. 6. Social transfers in kind are included in final consumption of government. Q 6. TRUE 7. Social transfers in kind are included in final consumption Q 7. FALSE of households. SIAP 17

18 End of Part-1 Lesson VI SIAP 18

19 An Introduction to System of National Accounts Integrated Transaction Accounts Lesson: VI Part 2 Distribution and Use of Income Accounts Main entries and Data Needs First Intermediate-Level e-learning Course on 2008 System of National Accounts May July 2014 SIAP 19

20 Contents Distribution of Income Accounts by institutional sectors Use of Income by institutional sectors SIAP 20

21 Distribution of Income Accounts by institutional sectors SIAP 21

22 Distribution of Income Account Underlying Identity Allocation of Primary income Account Balance of primary income / GNI (CE + OS & MI) generated in domestic enterprises + production (t-s) + (t-s) on imports + CE from RoW (net) + PI from RoW (net) OR Balance of primary income / GNI GDP + (net) compensation of employees from RoW + Property income receivable from nonresidents - Property income payable to non-residents SIAP 22

23 Distribution of Income Account Underlying Identity Secondary Distribution of Income Account GNDI GNI + (net) current transfers from RoW + (net) taxes on income & wealth from RoW SIAP 23

24 Allocation of Primary Income Account Accounting Structure Allocation of Primary Income Account Uses Resources B.2g & B.3g OS+MI (gross) Property income payable CE (net of payable to RoW) Property income receivable Production & import taxes Subsidies ( - ) B.4g Balance of primary income / GNI CFC B.4n Balance of primary income / NNI SIAP 24

25 Allocation of Primary Income Account Accounting Structure (Contd.) Uses Resources Secondary Distribution of Income Account Current taxes on income & wealth, etc. Net Social contributions Social benefits (excl. in kind) Other current transfers Balance of primary incomes (GNI) Current taxes on income & wealth, etc. Net Social contributions Social benefits (excl. in kind) Other current transfers B.6g GNDI CFC B.6n NNDI SIAP 25

26 Allocation of Primary Income Account Household Sector try yourself Uses Resources Allocation of Primary Income Account B.2g OS / B.3g MI (gross) 1010 Compensation of employees 2600 = (net of payable to RoW) = Property income payable Property income receivable 224 Production & import Taxes 3434 B.4g GNI Subsidies (-) SIAP 26

27 Allocation of Primary Income Account Household Sector try yourself Uses Secondary Distribution of Income Account Resources 250 Current taxes on income & wealth, etc. Balance of primary incomes (GNI) 3434 Current taxes on income & wealth, etc. 170 Net Social contributions Net Social contributions Social benefits (excl. in kind) Social benefits (excl. in kind) Other current transfers Other current transfers B.6g GNDI = SIAP 27

28 Allocation of Primary Income Account Government try yourself Uses Resources Allocation of Primary Income Account B.2g OS / B.3g MI (gross) 35 Compensation of employees (net of payable to RoW) 60 Property income payable Property income receivable B.4g GNI Production & import Taxes 500 Subsidies (-) SIAP 28

29 Allocation of Primary Income Account Government try yourself Uses Secondary Distribution of Income Account Resources Current taxes on income & wealth, etc. Balance of primary incomes (GNI) 495 Current taxes on income & wealth, etc Net Social contributions Net Social contributions 50 Social benefits (excl. in kind) Social benefits (excl. in kind) 25 Other current transfers Other current transfers B.6g GNDI SIAP 29

30 Allocation of Primary Income Account Commercial Bank try yourself Uses Resources Allocation of Primary Income Account B.2g OS / B.3g MI (gross) 430 Compensation of employees (net of payable to RoW) = Property income payable Property income receivable 2020 = Production & import Taxes Subsidies (-) 830 B.4g GNI SIAP 30

31 Allocation of Primary Income Account Government try yourself Uses Secondary Distribution of Income Account Resources Current taxes on income & wealth, etc. Balance of primary incomes (GNI) 495 Current taxes on income & wealth, etc Net Social contributions Net Social contributions 50 Social benefits (excl. in kind) Social benefits (excl. in kind) 25 Other current transfers Other current transfers B.6g GNDI = SIAP 31

32 Use of Disposable Income Accounts by institutional sectors SIAP 32

33 Use of Income Account Households try yourself Uses Resources Use of Disposable Income 2337 FCE = B.6g GNDI 3164 Adjustments for changes in pension entitlements Adjustments for changes in pension entitlements 827 B.8g Gross savings SIAP 33

34 Use of Income Account Government try yourself Uses Resources Use of Disposable Income 625 FCE = B.6g GNDI 2435 Adjustments for changes in pension entitlements Adjustments for changes in pension entitlements 1810 B.8g Gross savings SIAP 34

35 End of Lesson VI SIAP 35

Distribution and Use of Income Accounts Main entries and Data Needs

An Introduction to System of National Accounts Integrated Transaction Accounts Lesson: VI Part 1 Distribution and Use of Income Accounts Main entries and Data Needs Second Intermediate-Level e-learning