Payable tax credits Item 10 of the agenda

Transcription

1 Payable tax credits Item 10 of the agenda Giuliano Amerini ESTAT-F March 2015 Working Group Social Protection

2 Introduction Description of payable tax credits (PTCs) Are these conceptually within the scope of ESSPROS? Review of treatment in: o ESSPROS manual and user guidelines 2012 o ESSPROS regulation o ESSPROS core system data o National accounts (ESA 2010) Proposals and recommendations to improve treatment of PTCs in ESSPROS based on national accounts approach March 2015 Working Group Social Protection Statistics 2

3 Background Since 1996 ESSPROS includes o Core system -> data largely harmonised with Nat. Accounts. o Modules -> flexibility to collect other data without impacting use of CS as a satellite of NA. Both share definition of social protection but CS has three additional restrictions. Limited to: o Cash payments, reimbursements, directly provided goods/services o Receipts and expenditures of social protection schemes o Distributive transactions On this basis, where in ESSPROS do PTCs belong? March 2015 Working Group Social Protection Statistics 3

4 What are payable tax credits (PTCs)? Tax credits: o Form of tax relief amounts subtracted from tax liability Two forms of tax credit: o Non-payable tax credits (wastable or non-refundable): Limited to value of tax liability -> Can only be granted to persons with a tax liability o Payable tax credits (non-wastable or refundable) Can exceed value of any tax liability (excess paid in cash) -> Can be granted to persons with no tax liability Some PTCs paid fully in cash original tax liability is paid by tax-payer March 2015 Working Group Social Protection Statistics 4

5 What are payable tax credits (PTCs)? Interpretation 1: A negative tax (reduction in government revenue) Fiscal benefit Interpretation 2: Two separate components o Cash component in the form of a cash transfer (government expenditure) Cash benefit o Fiscal component in the form of a negative tax (reduction in government revenue) Fiscal benefit March 2015 Working Group Social Protection Statistics 5

6 PTCs and the scope of ESSPROS Are PTCs social protection? o A PTC may or may not serve to provide social protection o Only those that conform to general definition may be in scope Are PTCs direct interventions to households? o PTC may be granted to households or units in other sectors o Only those to households and individuals may be in scope Are PTCs distributive transactions? o The cash and fiscal part of PTCs are distributive transactions. Can PTCs be part of the accounts of a scheme? o Distinct body of rules Rules in tax legislation that define PTC o Unit managing scheme Tax Authority/Ministry of finance March 2015 Working Group Social Protection Statistics 6

7 Treatment of PTC in ESSPROS Core ESSPROS manual and user guidelines 2012: o PTCs not explicitly included or excluded from CS o States that fiscal benefits are excluded. However, No definition of fiscal benefits in CS No clarification whether a PTC is a fiscal benefit or a cash benefit o Definition of fiscal benefits provided only in Appendix IV (NET) Defines them as non-cash benefits PTC in cash are not fiscal benefits Implies PTC in cash should be included in the CS o Manual supports following treatment in CS: Include -> PTC disbursed in cash Exclude -> PTC provided through reduced taxation March 2015 Working Group Social Protection Statistics 7

8 Treatment of PTC in ESSPROS Core ESSPROS regulation may provide a different interpretation: o Article 3: if a financial flow qualifies as expenditure of a social protection scheme include in CS. o If a PTC provided through reduced taxation is considered an expenditure of a scheme include in CS. PTCs for social purposes exist in nine countries (BE, CZ, DE, FR, IT, AT, SK, FI, UK), treatment in CS is inconsistent: o Some include full value o Some include only cash part o Some exclude completely Urgent action needed and clearer guidance required March 2015 Working Group Social Protection Statistics 8

9 Treatment of PTC in National accounts ESA 2010 recently adopted for national accounts: o Consider PTCs akin to cash transfers o Treat full value as government expenditure o Requires tax revenues to be recorded as total tax liability before application of PTCs Adopting ESA 2010 approach in ESSPROS means applying the following treatment to PTCs for social purposes: o Include in full (both cash and fiscal part) in CS. o Exclude from the calculation of AITR/AISCR in NET module o Exclude from any future NET enlarged module March 2015 Working Group Social Protection Statistics 9

10 Proposals and recommendations 2012 WG recommended adopting ESA 2010 approach subject to better understanding the situation and implications of the change. Further research has confirmed inconsistent treatment of PTCs Eurostat recommendations and proposals to: o Improve application of existing methodology o Bring methodology in line with ESA 2010 Details provided in DOC_SP March 2015 Working Group Social Protection Statistics 10

11 Proposals and recommendations Improving application of existing methodology: Recommendation 1 (for information): All countries to ensure cash part of any PTCs that meet the definition of social protection is reported in CS. Proposal 1 (for adoption): Each PTC to be reported under a separate scheme March 2015 Working Group Social Protection Statistics 11

12 Proposals and recommendations Expanding coverage of CS to include fiscal part of PTC: Proposal 2 (for adoption): Until manual is amended, collect total value of PTCs as optional data in CS. Proposal 3 (for discussion/adoption): Revise manual to include PTC definition and enable full coverage of PTCs in CS o Amendments detailed in DOC_SP o If proposal accepted the rest of the manual and legal acts are to be reviewed in depth to identify other required amendments. Proposal 4 (for discussion): If proposal 3 is accepted, WG members to discuss possible implementation timetable March 2015 Working Group Social Protection Statistics 12

13 Proposals and recommendations Impact on other parts of ESSPROS, if proposal 3 adopted: Proposal 5 (for discussion): Adjust NET module (restricted) to exclude PTCs that meet the definition of social protection from calculation of AITR/AISCR o Small number of countries with PTC anticipate some difficulty o However, distortion may be negligible o If proposal accepted, appendix IV and legal acts to be reviewed in depth to identify required amendments. Proposal 6 (for discussion): Any NET module following the enlarged approach will exclude the value of PTCs March 2015 Working Group Social Protection Statistics 13

14 Proposals and recommendations Other aspects (if proposal 3 is adopted): Proposal 7 (for discussion): Collect data on numbers of beneficiaries of payable tax credits. Is this feasible? Proposal 8 (for discussion): Revision of historical data for CS and modules. Is this feasible and within what timeframe? March 2015 Working Group Social Protection Statistics 14

15 Discussion Members of the Working Group are requested to: Take note of recommendation 1 (cash PTCs in CS) Discuss/adopt proposals 2-3 o Collect total value of PTC as optional data in CS o Revise manual to cover PTC in CS, review legislation If proposal 3 is adopted, discuss proposals 4-8 o Agree implementation timetable o Adjust NET module to exclude PTC o Enlarged to exclude PTC o Consider beneficiaries of PTC o Consider revision of historical data March 2015 Working Group Social Protection Statistics 15