VII. THE PRIMARY DISTRIBUTION OF INCOME ACCOUNT
D. Subsidies (D.3)
| 7.71. | Subsidies are current unrequited payments that government units, including non-resident government units, make to enterprises on the basis of the levels of their production activities or the quantities or values of the goods or services which they produce, sell or import. They are receivable by resident producers or importers. In the case of resident producers they may be designed to influence their levels of production, the prices at which their outputs are sold or the remuneration of the institutional units engaged in production. Subsidies are equivalent to negative taxes on production in so far as their impact on the operating surplus is in the opposite direction to that of taxes on production. | | | | |  Update available. Click here |
| 7.72. | Subsidies are not payable to final consumers, and current transfers that governments make directly to households as consumers are treated as social benefits. Subsidies also do not include grants that governments may make to enterprises in order to finance their capital formation, or compensate them for damage to their capital assets, such grants being treated as capital transfers. | | | | | Update available. Click here |
1. Subsidies on products (D.31)
| 7.73. | A subsidy on a product is a subsidy payable per unit of a good or service. The subsidy may be a specific amount of money per unit of quantity of a good or service, or it may be calculated ad valorem as a specified percentage of the price per unit. A subsidy may also be calculated as the difference between a specified target price and the market price actually paid by a buyer. A subsidy on a product usually becomes payable when the good or service is produced, sold or imported, but it may also be payable in other circumstances such as when a good is transferred, leased, delivered or used for own consumption or own capital formation. |
Import subsidies (D.311)
| 7.74. | Import subsidies consist of subsidies on goods and services that become payable when the goods cross the frontier of the economic territory or when the services are delivered to resident institutional units. They include implicit subsidies resulting from the operation of a system of official multiple exchange rates (see chapters XIV and XIX). They may also include losses incurred as a matter of deliberate government policy by government trading organizations whose function is to purchase products from non-residents and then sell them at lower prices to residents (see also export subsidies in paragraph 7.76 below). |
| 7.75. | As in the case of taxes on products, subsidies on imported goods do not include any subsidies that may become payable subsequently on such goods after they have crossed the frontier and entered into free circulation within the economic territory of the country. |
Export subsidies (D.312)
| 7.76. | Export subsidies consist of all subsidies on goods and services that become payable when the goods leave the economic territory or when the services are delivered to non-resident units. They include the following:
(a) Direct subsidies on exports payable directly to resident producers when the goods leave the economic territory or the services are delivered to non-residents;
(b) Losses of government trading organizations: these consist of losses incurred as a matter of deliberate government policy by government trading organizations whose function is to buy the products of resident enterprises and then sell them at lower prices to non-residents. The difference between the buying and selling prices is an export subsidy (see also paragraph 7.78 (b) below);
(c) Subsidies resulting from multiple exchange rates: these consist of implicit subsidies resulting from the operation of an official system of multiple exchange rates (see chapters XIV and XIX). |
Exclusions from export subsidies
| 7.77. | Export subsidies do not include the repayment at the customs frontier of taxes on products previously paid on goods or services while they were inside the economic territory. They also exclude the waiving of the taxes that would be due if the goods were to be sold or used inside the economic territory instead of being exported. General taxes on products such as sales or purchase taxes, VAT, excise taxes or other taxes on products are usually not payable on exports. |
Other subsidies on products (D.319)
| 7.78. | Other subsidies on products consist of subsidies on goods or services produced as the outputs of resident enterprises that become payable as a result of the production, sale, transfer, leasing or delivery of those goods or services, or as a result of their use for own consumption or own capital formation. The most common types are the following:
(a) Subsidies on products used domestically: these consist of subsidies payable to resident enterprises in respect of their outputs which are used or consumed within the economic territory;
(b) Losses of government trading organizations: these consist of the losses incurred by government trading organizations whose function is to buy and sell the products of resident enterprises. When such organizations incur losses as a matter of deliberate government economic or social policy by selling at lower prices than those at which they purchased the goods, the difference between the purchase and the selling prices should be treated as a subsidy. Entries to the inventories of goods held by such organizations are valued at the purchasers' prices paid by the trading organizations and the subsidies recorded at the time the goods are sold;
(c) Subsidies to public corporations and quasi-corporations: these consist of regular transfers paid to public corporations and quasi-corporations which are intended to compensate for persistent losses - i.e., negative operating surpluses - which they incur on their productive activities as a result of charging prices which are lower than their average costs of production as a matter of deliberate government economic and social policy. In order to calculate the basic prices of the outputs of such enterprises, it will usually be necessary to assume a uniform ad valorem implicit rate of subsidy on those outputs determined by the size of the subsidy as a percentage of the value of sales plus subsidy. |
2. Other subsidies on production
| 7.79. | These consist of subsidies except subsidies on products which resident enterprises may receive as a consequence of engaging in production. Examples of such subsidies are the following:
(a) Subsidies on payroll or workforce: these consist of subsidies payable on the total wage or salary bill, or total workforce, or on the employment of particular types of persons such as physically handicapped persons or persons who have been unemployed for long periods. The subsidies may also be intended to cover some or all of the costs of training schemes organized or financed by enterprises;
(b) Subsidies to reduce pollution: these consist of subsidies intended to cover some or all of the costs of additional processing undertaken to reduce or eliminate the discharge of pollutants into the environment. |
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