TREATMENT OF SUBSIDIES IN NATIONAL ACCOUNTS*

Abstract

This document contains a critical analysis of some aspects of the treatment of subsidies in the present system of national accounts (United Nations SNA and the ESA, i.e. the European System of Integrated Economic Accounts) as background to the current discussion of their revision. One of the conventions used is that subsidies are recorded as a resource in the accounts of the market producer units which actually receive them. Should this rule of the receiver be applied in every case? The paper suggests that it would be preferable to attribute subsidies to the beneficiary in those cases where a subsidy received by one unit is the counterpart of a reduction in price which he grants to another unit which buys something from him (and which is the real beneficiary), so long as the discount is only granted to specific categories of purchasers. Recording in the accounts of the beneficiary results in a better distribution in the branch accounts and moreover greater stability of the national accounts in the face of minor institutional changes.The problem of allocation arises also for transfers designed to cover social risks or needs (illness, invalidism, old age, maternity). For this category of “social” goods and services for which general government wholly or partially assumes the costs to households, the transfer is treated either as a subsidy to collective consumption or a social benefit. The institutional arrangements, which vary from country to country, product to product and over time, give rise to profoundly different recording in the accounts. In order to restrict these differences, improve comparability between countries, permit analysis of trends over time, make the accounts less sensitive to different institutional arrangements and obtain a figure for household consumption which does not depend on the particular way in which the costs of such consumption is borne, the present document suggests that consumption subsidies should be treated as individual consumption expenditure of general government.