Groningen: Expert workshop InputOutput tables

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Groningen Expert workshop Input-Output tables

• Valuation matrices in the Finnish supply and use
  tables.
• Antti Pasanen
• 15-16 September 2005

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Starting point for the compilation of valuation
matrices

• Some 93 of the domestic supply at basic prices
  on the diagonal of the supply table and some 7
  not yet determined (secondary production).
• Imports by product existed already and made about
  13 of the total. So about 4 of the total supply
  was not yet defined.
• On the use side at purchasers prices the best
  information for the final uses were Exports,
  household consumption expenditure, other
  consumption expenditure (government, non-profit
  institutions) and capital formation.
• Intermediate consumption was added to the use
  table with breakdown of industry totals to
  products (1995 breakdown levels).

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Valuation matrices
Valuation matrices

• Use table
• at
• purchasers
• prices

• Imports
• cif

Trade and transp. margins
VAT
Other taxes on products
Subsidies on products
Customs

• Use table at basic prices

• Imports
• at basic
• prices

• Use table of domestic production at basic prices

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VAT

• A list of VAT percentages by product, when full
  VAT is paid, is compiled on the basis of the
  legislation. These percentages are used in all
  the uses that are not included in the exceptions.
• (In Finland VAT legislation only came into
  effect 1.6.1994, before VAT we had sales tax\turn
  over tax)
• Main exceptions (This is a simplified version)
• 1. Intermediate inputs
• The proportion of output for which VAT is not
  charged is calculated for each of the
  industries. This gives, by industry, the
  proportion of intermediate inputs on which VAT is
  paid.

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VAT (continued...)
2. Private consumption expenditures The
purchases of tax-free products (hotel and
restaurant etc.) by households is used to reduce
VAT-percentage of these products in private
consumption 3. Investment The share of
investment from activities not liable to charge
VAT is calculated. This gives the proportion of
investment expenditure on which VAT is paid.
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VAT example
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VAT example (continued...)

• Industry totals by sector at basic prices
• Charged VAT in the supply of the products

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VAT example (continued...)

• Calculation of the non-deductible VAT shares
• Compilation of the corrected VAT percents and VAT
  value

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Turn over tax

• Calculated like other taxes on products
• No deduction right (all non-deductible)
• Is not paid for all services
• Is paid from goods and services included to goods

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Other taxes on products and subsidies on products

• The actual compilation is done by the compilation
  rule variable. Compilation rule depends on the
  available data and legislation.
• For other product taxes (excluding VAT and
  customs) proportional shares are calculated using
  accumulation information from governments
  financial records and legislation (which uses and
  products are under taxation)
• Taxes on products have six compilation rules
  (1,4,6,7,8 and 9)
• Proportional shares for the subsidies can be
  calculated from the payment information's which
  are already collected for each product separately
• Subsidies on products have three compilation
  rules (1,6 and 9)

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(No Transcript)
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Other taxes on products and subsidies on products
(continued...)

• Other taxes on products
• Energy tax
• Fuel tax
• Oil waste tax
• Car and motorcycle tax
• Asset transfer tax
• Alcohol tax
• Tobacco tax
• Soft drink tax
• Pharmacy fee
• Lottery tax

• Subsidies on products
• Agricultural products export subsidies
• Agricultural products CAP and national subsidies
• Agricultural program based subsidies
• Public transport subsidies
• Publishing
• Storage loss compensations

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Other taxes on products and subsidies on products
(continued...)

• Table 1. A part of a product tax table
• on spirits (159110) the tax was roughly 592 of
  the basic price
• In this case the compilation rule is 9 which
  means, that the uses where tax percentage (from
  basic price) is not applied are listed
• Supply all denaturated spirits except all
  products beginning with 159 (alcohol suitable for
  drinking) regardless of industry and supply type
• Value of the collected taxes (1348,2Me) is
  obtained from governments financial records and
  its divided to alcoholic products supply with
  the proportions obtained from the use of the
  products

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Customs

• Collected customs are obtained directly from the
  board of Customs for each product separately
• Customs are calculated from purchaser's prices
  without VAT and in the calculation we assume that
  EU and Non-EU imports are divided evenly
• The only operation is the product classification
  modification

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Compilation of trade and transport margins

• Before compiling the trade and transport margins
  we needed to compare the difference of supply and
  use by product
• In the supply table the unknown part of the
  supply by product needed to be scaled up (some 7
  of the domestic supply and some 4 of the total
  supply)
• at the total econony level and proportionally to
  the known supply by product
• The remaining difference between the supply and
  use of a good was now an estimate for the value
  of trade and transport margins by good

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Compilation of trade and transport margins
(continued...)

• Some assumptions on margins had to be made
• Assumptions on trade margins giving an idea of
  the different uses where each kind of trade
  margin could have been used
• Industry specific knowledge that of course varies
  by country
• We assumed that some of the industries pay no
  trade margins in their intermediate consumption
  and that some pay the wholesale margin for some
  or all products they use as intermediate inputs
  and some industries even pay retail margin on
  some specific products.

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Compilation of trade and transport margins
(continued...)

• Other assumptions were that most of the retail
  margins (besides the very specific ones in
  intermediate consumption) are paid by households,
  and that the changes in retail trade inventories
  include a wholesale margin.
• The most crucial assumption was that no transport
  margin is paid if theres trade margin in the
  purchasers price value of good.
• In this case it is assumed that the trade margin
  includes all the transportation costs.

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Compilation of trade and transport margins
(continued...)

• This allowed us to use the differences noted
  above as weights first to breakdown the total
  value of each supply trade margin to goods and
  then break these values further down to different
  uses of these goods by using the purchasers
  price value of each individual use as the weight.
  
• We of course obtained the transport margins from
  the uses where there were no trade margins.
• As a final step, it had to be made sure that
  trade and transport margins were not greater than
  the (domestic) supply for these services.

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Compilation of trade and transport margins
(continued...)

• Estimation of combined trade and transport
  margins by product
• Distribution of trade and transport margins by
  user and by product

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Transport margins

• Road, railway, water, air and pipeline
  transportation informations are collected from
  different transport statistics
• All the transportation services dont constitute
  transport margin so the procedure is a little
  more complicated
• separately invoiced input transports by goods are
  calculated
• the value is divided into transport services by
  joining traffic statistics to the product
  informations
• As a result proportional shares for the transport
  margins are obtained

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Use at basic price

• With the procedures described in previous slides
  the preliminary valuation matrices are calculated
• Valuation matrices can then be joined to the use
  matrix at purchasers prices and preliminary use
  tables at basic prices can be computed
• The final version requires balancing (manual and
  RAS) of the system by product at basic prices and
  balancing of the margins (differences in the
  margins are very small at this point)