Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

• 20.67The social security funds subsector (S.1314) consists of all social security units, regardless of the level of government that operates or manages the schemes. If a social security scheme does not meet the requirements to be an institutional unit, it would be classified with its parent unit in one of the other subsectors of the general government sector. If public hospitals provide a non-market service to the community as a whole and if they are controlled by social security schemes, they are classified to the social security funds subsector.

THE GOVERNMENT FINANCE PRESENTATION OF STATISTICS

Framework

• 20.68Experience has shown that for government, an alternative presentation to the ESA sequence of accounts in the central framework is better suited to certain analytical requirements. This alternative is known as the government finance statistics ('GFS') presentation. It gives a different but still integrated picture of government accounts with the following measures of government economic activity: revenue, expenditure, deficit/surplus, financing, other economic flows and balance sheet levels.

• 20.69The ESA based GFS presentation consists of transactions recorded in the various ESA current accounts, capital account and financial account, rearranged for non-financial transactions into a single account presentation more appropriate to fiscal analysis.

• 20.70In the GFS system, revenue is defined as the aggregate of all transactions recorded under positive resources in the ESA central framework, and subsidies receivable in the current accounts as well as capital transfers receivable recorded in the capital account. Expenditure is an aggregate of all transactions recorded under positive uses and under subsidies payable in the current accounts as well as capital expenditure — gross capital formation plus capital transfers payable — recorded in the capital account. These measures of revenue and expenditure are specific to the GFS presentation, but the underlying transactions are those of the ESA.

• 20.71The difference between revenue and expenditure, equivalent to the surplus/deficit, is the net lending/net borrowing (B.9). The financing of the surplus/deficit is shown in the financial account, where net acquisitions of financial assets and net incurrence in liabilities are recorded. Expenditure and revenue entries have a counterpart entry in the financial account. Financial transactions may also lead to two entries in the financial account. This reflects the double entry principle where every transaction has a matching transaction in the financial account. In principle, the net lending/net borrowing can be derived also from transactions in financial assets and liabilities.

• 20.72The GFS presentation is shown below:

Government finance statistics presentation	Government finance statistics presentation
	Revenue
	Taxes
	Social contributions
	Sales of goods and services
	Other current revenue
	Capital transfer revenue
less	Expenditure
less	Intermediate consumption
less	Compensation of employees
less	Interest
less	Subsidies
less	Social benefits
less	Other current expenditure
less	Capital transfer expenditure
less	Investment expenditure
equals	Net lending/net borrowing
equals	Net financial transactions

• 20.73Additional accounts in the GFS system are for other economic flows, and balance sheets, coherent with the ESA sequence of accounts. Such accounts allow a complete reconciliation of the change in balance sheet and the flows taking place during the accounting period. For each asset or liability, the following identity holds:

	opening balance sheet
plus	transactions
plus	revaluations
plus	other changes in volume
equals	closing balance sheet

• 20.74The balance sheet shows total asset levels — non-financial and financial — as well as liabilities stocks outstanding, which enables the following to be derived: net worth as total assets minus total liabilities, and financial net worth as total financial assets minus total liabilities.

• 20.75Government finance statistics presents the financial performance of general government and its subsectors, or any grouping of government units, and also individual institutional units such as the budgetary central government.

Revenue

• 20.76A revenue transaction is one that increases net worth, and has a positive impact on net lending (+)/net borrowing (–). Government revenue is usually dominated by compulsory levies imposed by government in the form of taxes and social contributions. For some levels of government, transfers from other government units and grants from international organisations are a major source of revenue. Other general categories of revenue include property income, sales of goods and services, and miscellaneous transfers other than grants. The total government revenue of an accounting period is calculated by summing transactions that are receivable, as follows:

Total revenue	=		total taxes	D.2 + D.5 + D.91
		+	net social contributions	D.61
		+	total sales of goods and services	P.11 + P.12 + P.131
		+	other current revenue	D.39 + D.4 + D.7
		+	other capital revenue	D.92 + D.99

Taxes and social contributions

• 20.77Total taxes comprise taxes on production and imports (D.2), current taxes on income and wealth, etc. (D.5) and capital taxes (D.91). Net social contributions consist of actual social contributions (employers’ actual social contributions (D.611) and households’ actual social contributions (D.613)), employers’ imputed social contributions (D.612) and households’ social contribution supplements (D.614) less social insurance scheme service charges (D.61SC).

• 20.78Estimating taxes and social contributions can be difficult. The problems involved and the recommended solutions are described in the section ‘Accounting issues relating to general government’ of this Chapter. While taxes are recorded in several of the accounts of the ESA central framework, in the government finance statistics presentation all taxes are presented as one category of revenue, with sub-classifications according to the base on which the tax is levied. Capital taxes are shown as revenue taxes in the government finance statistics presentation.

• 20.79Tax and social contributions revenue data ([^E0034]) are used to compile total tax or fiscal burden ratios, such as the ratio of total tax to the level of GDP, used in international comparisons. In this context, compulsory social contributions are presented simultaneously with tax statistics and are included in the measures of fiscal burden or compulsory levies.

Sales

• 20.80Total sales of goods and services consist of market output (P.11) and payments for non-market output (P.131). They also include — except when they are used for the market/non-market test (see paragraph 20.30) — output for own final use (P.12). Most of the output produced by general government consists of goods and services that are not sold, or that are sold at prices that are not economically significant. The distribution of a non-market output does not accord with the concept of revenue. For goods and services, only actual sales and some specific imputed sales are included in revenue.

• 20.81Market output (P.11) of government comprises:

• (a) the market output of market establishments included in government, such as a weapons factory that is part of the ministry of defence, or canteens set up by government units for their employees, that charge economically significant prices;

• (b) secondary market products sold by non-market establishments, sometimes referred to as 'incidental sales', such as those arising from research and development contracts between public universities and corporations, or publications sold by government units at economically significant prices.

• 20.82The above-quoted 'incidental sales' are distinct from the token museum entrance fees paid by visitors, which are usually partial payments for non-market output (P.131). Other significant partial payments include payments to hospitals or schools, when these are non-market.

• 20.83The value of own-account capital formation is considered revenue in the ESA based government finance statistics, and included under sales. Sales include also the value of goods and services produced and provided as compensation of employees in kind or as other payment in kind.

• 20.84Sales revenue in the ESA based government finance statistics takes an output perspective: they do not differ from output, whereas actual sales to customers differ by changes in inventories. However such changes in inventories are likely to be small for government units and other non-market producers, mostly engaged in the production of services rather than in the production of goods. Sales are valued at basic prices.

From the ESA central framework to GFS transactions and aggregates

ESA resources	ESA resources	ESA GFS revenue
P.1	Output, of which
	Market output (P.11)	Sales of goods and services
	Output for own final use (P.12)	Sales of goods and services
	Non-market output (P.13), of which:
	— Payments for non-market output (P.131)	Sales of goods and services
	— Non-market output, other (P.132)	Not accounted for in total revenue
D.2	Taxes on production and imports (receivable)	Total taxes
D.3	Subsidies (receivable)	Other current revenue
D.4	Property income	Other current revenue
D.5	Current taxes on income and wealth	Total taxes
D.61	Net social contributions	Net social contributions
D.7	Other current transfers	Other current revenue
D.91r	Capital taxes (receivable)	Total taxes
D.92r	Investment grants (receivable)	Other capital revenue
D.99r	Other capital transfers (receivable)	Other capital revenue
ESA uses and capital transactions	ESA uses and capital transactions	ESA GFS expenditure
---	---	---
P.2	Intermediate consumption	Intermediate consumption
D.1	Compensation of employees	Compensation of employees
D.2	Taxes on production and imports (payable)	Other current expenditure
D.3	Subsidies (payable)	Subsidies
D.41	Interest	Interest
D.4	Property income (excluding D.41)	Other current expenditure
D.5	Current taxes on income	Other current expenditure
D.62	Social benefits other than social transfers in kind	Social benefits other than social transfers in kind
D.632	Social transfers in kind via market producers	Social transfers in kind via market producers
D.7	Other current transfers	Other current expenditure
D.8	Adjustment for the change in pension entitlements	Other current expenditure
P.31	Individual consumption expenditure on market output	Social transfers in kind via market producers
P.31	Individual consumption expenditure on non-market output	Not accounted for in total expenditure
P.32	Collective consumption expenditure	Not accounted for in total expenditure
P.5	Gross capital formation	Capital expenditure
NP	Acquisition less disposal of non-produced assets	Capital expenditure
D.92p	Investment grant (payable)	Capital expenditure
D.99p	Other capital transfers (payable)	Capital expenditure

In the ESA central framework, net lending/net borrowing (B.9) is the balancing item of the capital account. The balancing item of general government in the ESA GFS presentation is identical to the net lending/net borrowing (B.9). This box explains why.

The ESA central framework

The first account is the production account, and therefore the first resource of an institutional sector in the ESA is its output. As the majority of services provided by government are not sold at economically significant prices and so are non-market, government output is measured by convention as the sum of production costs.

Similarly, final collective consumption expenditure, consisting of services provided to the community by government such as general services, defence, safety and public order, are measured as the sum of production costs. Also by convention, collective consumption expenditure (P.32) is equal to the actual final consumption (P.4) of government.

Final individual consumption expenditure of households provided directly by government on a non-market basis is also measured by its production costs.

As a result, two types of flows are ‘imputed’ in the ESA accounts of government:

• (1) on the resources side, the non-market output, other (P.132) recorded in the production account;

• (2) on the uses side, the actual final consumption (P.4) and the social transfers in kind — non-market production (D.631). They are recorded in the redistribution of income in kind account, and in the use of adjusted disposable income account.

Each imputed flow is equal to the sum of actual flows: the production costs. These two types of imputed flows, on the resource side and on the uses side, balance in the ESA sequence of accounts.

The ESA GFS presentation of statistics

The same basic transaction categories are used in the ESA GFS presentation, but mainly on the basis of actual monetary flows, to obtain the total revenue and the total expenditure of government. Only a selection of imputed flows is taken into account: imputed social contributions and capital transfers in kind.

Eliminating from the resources side the non-market output (P.132) to obtain total revenue, and eliminating from the uses side the actual final consumption (P.4=P.32) and the social transfers in kind — non-market production (D.631) to obtain total expenditure, results in the same balancing item: the net lending/net borrowing (B.9).

The only social transfers in kind that are accounted for in the GFS aggregate total expenditure of government are social transfers in kind provided to households via market producers (D.632), as they are subject to real payments of government units. Those transactions are also to be added to the sum of production costs (equal to non-market output, other — P.132) to obtain the final consumption expenditure of the general government.

P.3 = P.132 + D.632

Other revenue

• 20.85Other current revenue consists of property income (D.4), other subsidies on production (D.39) and other current transfers (D.7).

• 20.86Property income comprises interest (D.41), distributed income of corporations (dividends and withdrawals from income of quasi-corporations) (D.42) and, more marginally, reinvested earnings on foreign direct investment of government (D.43), other investment income (D.44) and rent (D.45).

• 20.87Other current transfers (D.7) include mainly intra-government transfers. They shall be consolidated when drawing up the accounts of the sector as a whole.

• 20.88Other capital revenue comprises investment grants (D.92) and other capital transfers (D.99) received from other units, predominantly from other government units (although consolidation carried out when presenting statistics may reduce their apparent size) and EU institutions, but also from other various units, reflecting transactions such as repayment by a debtor subsequent to the activation of a guarantee.

• 20.89Grants, which are sometimes defined in other statistical systems as transfers other than subsidies received by one government unit from another government unit or an international organisation, are not an ESA category. Their amount should be equivalent to the sum of the following transfer revenue: D.73 + D.74 + D.92, together with D.75 + D.99 in some cases.

• 20.90Subsidies received by government units consist only of other subsidies on production. When received by producing entities belonging to general government, subsidies on products are included in the valuation of the output and sales at basic prices.

Expenditure

• 20.91An expenditure transaction is one that has a negative impact on net lending (+)/net borrowing (–). Total expenditure consists of current and capital expenditure. Current expenditure includes production related expenses (compensation of employees and intermediate consumption); property income payable (which is mainly interest); and transfer payments (such as social benefits, current grants to other governments, and miscellaneous other current transfers).

• 20.92The total government expenditure of an accounting period is calculated using the following equation, summing transactions which are payable:

Total expenditure	=		intermediate consumption	P.2
		+	compensation of employees	D.1
		+	interest	D.41
		+	social benefits other than social transfers in kind	D.62
		+	social transfers in kind via market producers	D.632
		+	subsidies	D.3
		+	other current expenditure	D.29 + (D.4 – D.41) + D.5 + D.7 + D.8
		+	capital expenditure	P.5 + NP + D.92 + D.99

Compensation of employees and intermediate consumption

• 20.93Compensation of employees and intermediate consumption are costs of production for units of government.

• 20.94Compensation of employees (D.1) includes wages and salaries (D.11) paid as well as employers' social contributions (D.12), including imputed social contributions, that are viewed in the ESA as uses of households and as resources of government, and thus not to be consolidated. Compensation is recorded on an accrual basis, at the time the work is done, and not at the time the wage is due for payment or paid. Wages include bonus and other lump sums (due to arrears or contract renewal) paid, and the relevant time of recording can be difficult to determine: when covering long periods of employment, it is often the time of determination of the bonus rather than the time period that the bonus is nominally intended to cover.

• 20.95Intermediate consumption (P.2) comprises the goods and services consumed during the accounting period in the production process. It differs in concept from purchases, and other possible kinds of acquisitions: any acquisition enters inventories prior to being removed upon consumption. Goods and services may be acquired by market and non-market establishments of government as well.

• 20.96In concept, the time of recording of intermediate consumption is clear: at the time the product is used up in the production process. The time of recording of purchases and other acquisitions is in concept the delivery, although there may be cases when delivery can be difficult to ascertain.

Social benefits expenditure

• 20.97Social benefits expenditure consists of social benefits other than social transfers in kind (D.62), that, in turn, consist mainly of cash payments, and of social transfers in kind provided to households via market producers (D.632). Social transfers in kind via market producers are government expenditure financing goods and services provided to households by market producers. Typical examples are health care, and goods and services provided by doctors and pharmacists, financed by government units, through social security schemes or social assistance programmes.

• 20.98Social benefits expenditure excludes social transfers in kind provided to households by non-market producers of government. Governments often produce services and goods and distribute them for free or at prices that are not economically significant. To avoid duplication, in the government finance statistics presentation, the relevant costs of production of these goods and services are recorded only once as expenditure — intermediate consumption, compensation of employees, other taxes on production — and as revenue — other subsidies on production. In the ESA sequence of accounts, these costs are balanced by a resource under non-market output, and recorded again as a use under final consumption expenditure (P.3) to be distributed as social transfers in kind. It can be relevant, for analytical purposes, to calculate a broader aggregate of social transfers to include the latter: social benefit in cash (D.62) plus social transfers in kind (D.63).

• 20.99In the ESA, even when retirement benefits paid to government employees are considered as the liquidation of a government liability (see section ‘Accounting issues relating to general government’), they are also recorded as a payment of current expenditure and the related contributions are included as revenue. However, when the scheme is funded, such contributions and benefits are considered to be financing, and so an adjustment for the change in pension entitlements (D.8) is added to expenditure: it is equal to social contributions received as pensions or other retirement benefits less social benefits paid for pensions or other retirement benefits for those schemes the obligations of which are recognised as liabilities.

Interest

• 20.100Interest expenditure includes what is due for the cost of incurring liabilities, notably on loans, bills, notes and bonds, but also on deposit liabilities or other instruments that are liabilities of government. Interest is recorded on an accrual basis (see section ‘Accounting issues relating to general government’).

• 20.101Interest expenditure is adjusted for FISIM in the ESA-based government finance statistics. Interest paid to financial institutions on loans and deposits is partitioned into a service component, which is recorded as intermediate consumption, and a property income component which is recorded as interest paid. The same adjustment applies to government interest revenue paid by financial institutions on deposits or loans.

Other current expenditure

• 20.102Other current expenditure comprises other taxes on production (D.29), property income other than interest (D.4-D.41), current taxes on income and wealth etc. (D.5), other current transfers (D.7) and the adjustment for the change in pension entitlements (D.8).

• 20.103Whereas other taxes on production paid by units of government are recorded as government expenditure, taxes on products are not separately shown as government expenditure. This is because, on the one hand, such taxes, not being a resource for market producers of government, whose output is valued at basic prices, do not appear under their uses, and, on the other hand, taxes on products entering intermediate consumption of government are included in its valuation at purchasers' prices.

Capital expenditure

• 20.104Capital expenditure comprises capital transfers, in the form of investment grants (D.92) and other capital transfers (D.99), as well as investment expenditure: gross capital formation (P.5, which consists of gross fixed capital formation — P.51g, plus changes in inventories — P.52, and acquisitions less disposals of valuables — P.53); and acquisitions less disposals of non-produced non-financial assets (NP). Disposals of non-financial assets, such as buildings, are not recorded as revenue, but as negative capital expenditure, making the net lending/net borrowing (B.9) more positive.

Link with government final consumption expenditure (P.3)

• 20.105Making the link between total government expenditure and its components with government final consumption expenditure (P.3) is important for users of fiscal and other macroeconomic statistics.

• 20.106Final consumption expenditures by general government are equal to the total of their output (P.1), plus the expenditure on products supplied to households via market producers (i.e. social transfers in kind — D.632), minus the sales of goods and services (P.11+P.12+P.131).

• 20.107The output of government — market output, own account capital formation and non-market output — is equal to the sum of its costs of production (compensation of employees, intermediate consumption, consumption of fixed capital, and taxes on production paid net of subsidies on production received), plus the net operating surplus (B.2n) generated by market establishments of government.

• 20.108Thus, the following calculation gives final consumption expenditures using selected items of government expenditure and revenue, as well as the net operating surplus (B.2n):

	compensation of employees (D.1)
plus	intermediate consumption (P.2)
plus	consumption of fixed capital (P.51c1)
plus	other taxes on production, payable (D.29 U)
less	other subsidies on production, receivable (D.39 R)
plus	operating surplus, net (B.2n)
equals	output (P.1)

• and:

	output
less	sales of goods and services (P.11+P.12+P.131)
plus	social transfers in kind via market producers (D.632)
equals	final consumption expenditure (P.3)

Government expenditure by function (COFOG)

• 20.109A classification of expenditure transactions using the classification of functions of government (COFOG) is integral to the government finance presentation: it is a major analytical instrument of government expenditure, especially useful for international comparisons. This classification shows the purpose for which expenditure transactions are undertaken. Such purposes differ from the administrative arrangement of governments, for example an administrative unit responsible for health services can undertake activities with an educational purpose, such as training of medical professionals. A cross presentation of government transactions by economic nature (the usual ESA classification) and according to functions is requested.

• 20.110The COFOG classification describes government expenditure according to ten major functions set out below, and according to two additional levels of increased detailed breakdown not presented here. As an example, the second level is necessary to provide information on research and development expenditure, as well as to provide information on government expenditure dedicated to the risks and social needs of social protection.

• 20.111The COFOG classification is consistent with the distinction made between collective non-market services and individual non-market services provided by government: the six first functions correspond to collective services, as well as some limited parts of the others. This enables government final collective consumption expenditure to be calculated. The total expenditure aggregate and the expenditure transactions broken down by function are consistent with those in the ESA government finance statistics. Therefore, it does not include social transfers in kind — non-market production (D.631), already accounted for with production costs of government.

Table 20.1 —  COFOG, the 10 functions of government

Code	Function	Type of service
01	General public services	Collective
02	Defence	Collective
03	Public order and safety	Collective
04	Economic affairs	Collective
05	Environmental protection	Collective
06	Housing and community amenities	Collective
07	Health	Mainly individual
08	Recreation, culture and religion	Mainly collective
09	Education	Mainly individual
10	Social protection	Mainly individual

Balancing items

The net lending/net borrowing (B.9)

• 20.112The government net lending (+)/net borrowing (–) (B.9) is the difference between total revenue and total expenditure. It is equal to the balancing item of the capital account (B.9N) in the ESA accounts. It represents the amount the government has available to lend or must borrow to finance its non-financial operations.

• 20.113Net lending (+)/net borrowing (–) is also the balancing item of the financial account (B.9F in the central framework). In concept, it is the same as the balancing item of the capital account, although in practice a statistical discrepancy can occur.

• 20.114The term 'net lending/net borrowing' is a sort of terminological shortcut. When the variable is positive (meaning that it shows a financing capacity), it should be called net lending (+); when it is negative (meaning that it shows a borrowing need), it should be called net borrowing (–).

Changes in net worth due to saving and capital transfers (B.101)

• 20.115The difference between all transactions that affect net worth during the accounting period is the balancing item: changes in net worth due to saving and capital transfers (B.101).

• 20.116The changes in net worth due to saving and capital transfers provide a useful measure of government accounts and policies as they represent the resources acquired or consumed in the government's current operations.

• 20.117The changes in net worth due to saving and capital transfers equal net lending/net borrowing plus net acquisition of non-financial assets (P.5 + NP) minus consumption of fixed capital (P.51c1).

	Net saving plus capital transfers (B.101)
less	acquisitions less disposals of non-financial assets (P.5+NP)
plus	consumption of fixed capital (P.51c1)
equals	net lending/net borrowing (B.9)
equals	transactions in financial assets less liabilities (financing)

Financing

• 20.118The financial account of government in the GFS records the transactions in financial assets and liabilities as described in Chapter 5.

Transactions in assets

• 20.119Currency and deposits (F.2) reflects mainly movements in government deposits at banks, notably at central banks, which can fluctuate substantially from one period to another, in particular due to Treasury operations. Other government units such as local government and social security funds also hold substantial deposits in bank accounts.

• 20.120Debt securities (F.3) mainly reflect net purchases of bills, notes or bonds issued by banks, non-financial corporations, or non-residents including foreign governments, the purchases being carried out predominantly by asset-rich social security funds or other reserve funds. Government purchases of bonds issued by other resident government units are reported under this heading in a non-consolidated presentation, but are excluded from this heading in a consolidated presentation, being reported instead as debt redemption.

• 20.121Loans (F.4) include, in addition to loans to other government units, lending to foreign governments, public corporations, and students. Loan cancellations are also reflected here with a counterpart entry under capital transfer expenditure. Loans granted by government not likely to be repaid are recorded in the ESA as capital transfers, and are not reported here.

• 20.122Equity and investment fund shares (F.5) capture acquisitions less disposals of equity in corporations by government units. These may reflect equity injections in public corporations or portfolio investments, privatisation proceeds or super-dividends. They consist mainly of the following:

• (a) equity injections (generally in the form of cash) to specific public corporations where government is acting as an investor with the expectation of a return on invested funds. Such injections are not considered as government expenditure in national accounts;

• (b) portfolio investments, in the form of purchases of quoted shares on the market made by government units such as asset-rich social security funds, or other portfolio investment operations;

• (c) net investment in mutual funds, which are alternative investment vehicles. In particular, placements in money market mutual funds are reported here, rather than under currency and deposits, despite being close substitutes for bank deposits;

• (d) privatisations conducted by special privatisation agencies, as such entities are classified to general government;

• (e) distributions by public corporations to their owners in excess of their operational profit excluding holding gains/losses, recorded as financial transactions as withdrawal of equity akin to a partial liquidation of the enterprise, rather than as government revenue.

• 20.123Transactions in other accounts receivable (F.8) capture the impact of the accrual principle applicable in the ESA of recording transactions when the obligation to pay arises, not when the payment is actually made, even though public accounts or budget recordings have long been cash-based in most countries. The impact on the financing needs of government does not directly arise from the deficit, as government revenue can be cashed, or government expenditure can be settled, at accounting periods different from the economic transaction itself. Other receivables include receivables of taxes and social contributions as well as amounts concerning EU transactions (amounts paid by government on behalf of the EU but not yet reimbursed by the EU), trade credits or advances for expenditure, such as military equipment or rare occasions of wages or benefits paid one month in advance, etc. Whereas, in concept, such assets are temporary in nature, and they necessary individually disappear after a lapse of time, the flow reported for a sector, such as general government, do usually average above zero even over a period of time, because the stock of receivables tends to grow with rest of the economy.

• 20.124In most countries, monetary gold and SDRs are managed by the central bank. When they are managed by government, they are recorded in the financial account of government.

• 20.125Financial transactions are recorded at the transaction values, that is, the values in national currency at which the financial assets and/or liabilities involved are created, liquidated, exchanged or assumed between institutional units, on the basis of commercial considerations only.

• 20.126The transaction value refers to a specific financial transaction and its counterpart transaction. In concept, the transaction value is to be distinguished from a value based on a price quoted in the market, a fair market price, or any price that is intended to express the generality of prices for a class of similar or even identical financial assets and/or liabilities. The value to report in the financial accounts for a loan sold on the secondary market is the value for which the loan was sold, and not the nominal value, and the reconciliation with the balance is entered in the other changes in assets accounts.

• 20.127However, in cases where the counterpart transaction of a financial transaction is, for example, a transfer and therefore the financial transaction is undertaken other than for purely commercial considerations, the transaction value is identified with the current market value of the financial assets and/or liabilities involved. Thus, a loan purchased by a government at its nominal value, rather than at its fair or written-down value, is partitioned between an entry as a loan in the financial accounts at the fair value and a capital transfer, in recognition of a transfer of wealth by the government.

• 20.128The transaction value does not include service charges, fees, commissions, and similar payments for services provided in carrying out the transactions; such items are to be recorded as payments for services. Taxes on financial transactions are also excluded and treated as taxes on services within taxes on products. When a financial transaction involves a new issue of liabilities, the transaction value is equal to the amount of the liability incurred exclusive of any prepaid interest. Similarly, when a liability is extinguished, the transaction value for both creditor and debtor must correspond to the reduction of the liability.

Transactions in liabilities

• 20.129Transactions in liabilities are recorded at the value at which the liabilities are issued, or redeemed. This value may not be the nominal value. A transaction in liabilities includes the impact of interest accrued.

• 20.130The repurchase by a unit of a liability is recorded as redemption in liabilities and not as an acquisition of assets. Likewise, at a subsector or sector level, the purchase by a government unit of a liability issued by another unit of the subsector in question will be presented in the consolidated presentation, as redemption of liability by that subsector or sector.

• 20.131Financial leasing and public-private partnerships (PPP) contracts when the asset is on government balance sheet imply recognising a debt of the lessee or grantor. Payments on such leases or PPP contracts are not expenditure for the full amounts, but debt servicing: redemption of a loan and interest expenditure.

• 20.132Financing presented as long-term trade credits or accounts receivable/payable arrangements are to be classified as loans, because these involve the provision of long-term financing to the benefit of the borrowing party that is distinguished from a treasury facility that sellers commonly provide buyers with short-term trade-credit. In extending the maturity of the payment obligation considerably, the constructor assumes a financial role that is separate from its other activity of producer.

• 20.133Lump sums exchanged at inception on off-market swaps are classified as loans (AF.4) when the lump sum is received by government. Off-market swaps are partitioned in the balance sheet into a loan component and a regular, 'at-the-money' swap component.

• 20.134Similarly to receivables, transactions in other accounts payable reflect the time impact of the accrual principle, but on the liability side: when expenditure is incurred but not yet paid, or when payments are made in advance of the revenue recording. In addition to trade credit when they are short-term, payables include sums received from the EU but not yet paid out by government to the final beneficiary, prepayments in taxes or tax refunds not yet paid out.

Other economic flows

• 20.135Both the other changes in volume of assets account and the revaluation account of the ESA GFS are identical to the accounts described in Chapter 6. All changes in assets and changes in liabilities arising from events other than economic transactions are recorded in one of these accounts.

Revaluation account

• 20.136Revaluations are the same as described in Chapter 6. Additional relevant information as memoranda items, for example, revaluations in the equity of public corporations held by government units, are likely to be particularly important and, at the same time, difficult to measure because it is unlikely that there will be any market prices.

• 20.137In the ESA, balance sheets entries are ideally at market value, apart from one or two specific instruments, and movements in interest rates reflected in stock market indices lead to noticeable changes in value of stock as well as in the net worth of institutional units. Such changes are not income in the ESA, and so they are not government revenue or expenditure, and do not affect government deficit/surplus. The changes are recorded in the revaluation account, which leads to changes in net worth due to nominal holding gains/losses (B.103). The changes in net financial worth of government during an accounting period are substantially affected by revaluations. The main sources of revaluations affecting net financial worth are, apart from the impact of foreign exchange denominated assets and liabilities, as follows:

• (a) real estate assets of government;

• (b) equity of government;

• (c) security liabilities.

• 20.138When a capital injection by government into a public corporation is considered a capital transfer, the equity valuation of the government stake in the beneficiary will generally increase, with entries in the revaluation account and not the financial account.

• 20.139When an existing loan or trade credit is sold to another institutional unit the difference between the redemption price and the transaction price is recorded in the revaluation account of the seller and the purchaser at the time of transaction.

Other changes in volume of assets account

• 20.140The other changes in volume of assets accounts include flows that are neither economic transactions nor revaluations. For example, it captures the impact of a change in sector classification of units.

• 20.141Loans write-off which do not reflect a debt cancellation with an explicit or implicit bilateral agreement are not transactions and are recorded in the other changes in the volume of assets account, with no impact on net lending/net borrowing.

Balance sheets

• 20.142The same definition of an asset is used in the GFS general government accounts as in Chapter 7. The classification and value of assets and liabilities are identical in the ESA and the ESA-based GFS.

• 20.143The sum of liabilities may be considered as a stock of debt. However, the definition of government debt in the context of fiscal surveillance departs from the total stock of liabilities in the ESA and in the GFS, both in terms of scope of liabilities accounted for and in terms of valuation.

• 20.144Some assets are more specific to government: heritage assets, like historic monuments; infrastructure assets, such as roads and communications facilities; and equity stakes in public corporations that are without private equivalent.

• 20.145On the liability side, equity liability (AF.5) will not normally be recorded for government units. However at a more aggregated level of government subsectors, equity liability can appear if entities have been classified inside the general government sector, as a result of the market/non-market test.

• 20.146Net worth is the balancing item (B.90) of the balance sheet:

Net worth	=		Total assets
		minus	Total liabilities

• 20.147Own funds are the sum of net worth (B.90) and equity (AF.5) issued. Thus, in the ESA, own funds of units is defined as assets less liabilities excluding equity liabilities, while net worth is defined as assets less liabilities including equity liabilities. The ESA net worth is not the same as business accounting shareholders' equity or net worth. Business accounting net worth is closer in concept to the ESA own funds.

• 20.148Where the net worth (B.90) of the general government sector cannot be calculated — due to the lack of information for measuring the stock of non-financial assets — the financial net worth (BF.90) is presented, showing the difference between the total financial assets and the total liabilities.

• 20.149The ESA values balance sheet at market value, except for three specific instruments: currency and deposits (AF.2), loans (AF.4) and other accounts receivable/payable (AF.8). For those three instruments, the values recorded in the balance sheets of both creditors and debtors are the amounts of principal that the debtors are contractually obliged to repay to the creditors, even in cases where the loan was traded at a discount or premium, including interest accrued.

• 20.150Security liabilities are valued at market value. Even though the debtor is only obligated for the value of the principal, the market value is significant because the debtor is obligated to pay a stream of future cash flows, for which the present value varies according to market yield, and the market value reflects the price that government would have to pay if it redeemed the instrument by purchasing it back on the market.

• 20.151Quoted equity is valued using the most recent quotation price when drawing up the balance sheet. Unquoted equity can be valued by comparing ratios such as own funds at book value to the market value of equity, in similar classes of quoted companies. Other approaches can be used for valuing unquoted equity, such as using the own funds of the corporation, thus setting the net worth to zero. This approach can be used for public corporations that have unique types of activities such as when government has equity stakes in central banks. However, it is not recommended to use the own funds at book value, without adjustments, no more than using the nominal value of the issued equity.

Consolidation

• 20.152Consolidation is a method of presenting the accounts for a set of units as if they constituted one single entity (unit, sector, or subsector). It involves eliminating transactions and reciprocal stock positions and associated other economic flows among the units being consolidated.

• 20.153Consolidation is important for the general government sector and its subsectors. For example, assessing the overall impact of government operations on the total economy or the sustainability of government operations is more effective when the measure of government operations is a set of consolidated statistics. To relate government aggregates to the economy as a whole as in revenue or expenditure to GDP ratios, it is better to eliminate the internal churning of funds and include only those transactions that cross the boundaries with other domestic sectors and with the rest of the world sector. This is of particular relevance for the following transactions:

• (a) property income such as interest;

• (b) current and capital transfers;

• (c) transactions in financial assets and liabilities.

• 20.154Consolidation does not affect balancing items because the consolidated items appear symmetrically within each account. For example, a grant from a central government to a local government unit is consolidated by eliminating the expenditure from central government and the revenue from the local government, thus leaving unchanged the net lending/net borrowing of general government.

• 20.155Conceptually, the nature of consolidation is to eliminate all flows among the consolidated units, but practicality should be kept in mind. In concept, transactions in the production account, such as sales and purchases of goods and services, may not or cannot be consolidated. The decision about the level of detail employed in consolidation should be based on the policy usefulness of the consolidated data and the relative importance of the various types of transactions or stocks.

• 20.156When drawing up the consolidated accounts of government, the ESA prescribes consolidating the following major transactions (in order of importance):

• (a) current and capital transfers, such as central governments grants to lower levels of government;

• (b) interest arising on intergovernmental holdings of financial assets and liabilities;

• (c) transactions, other economic flows and stocks in financial assets and liabilities, such as loans to other governments or acquisitions of government securities by social security units.

• 20.157Purchases/sales of goods and services between government units are not consolidated in the ESA. This is because the accounts show sales on an output basis, and not on a disposal basis so that it is difficult to decide who is the counterpart transactor for this output. In addition, intermediate consumption and output follow two different valuation rules, basic prices and purchasers' prices, which creates additional difficulties.

• 20.158Taxes or subsidies paid by one government unit or entity to another are not to be consolidated. Taxes or subsidies on products cannot be consolidated in the system because there is no counterpart sector transactor in the ESA for such transactions; the relevant amounts are not separately recognised as expenditure and revenue (respectively) and are instead included in, or excluded from, the value of the intermediate consumption or of the sales.

• 20.159Acquisitions/disposals of non-financial assets, including intergovernmental transactions in land, buildings, and equipment are not consolidated, because they already appear on a net basis in the account: acquisitions less disposals. Non-consolidated and consolidated accounts always show equal amounts for those items.

• 20.160Some types of transactions that appear to take place between two government units are never consolidated because they are rerouted in the system to other units. For instance: employer social contributions, whether paid to social security or to government pension funds, are treated as being paid to the employee as part of compensation and then paid by the employee to the fund. Taxes withheld by government units from the compensation of their employees, such as pay-as-you-earn (PAYE) taxes, and paid to other government subsectors are treated as being paid directly by the employees. The government employer is simply the collecting agent in this case for the second government unit.

• 20.161Practical difficulties arise with consolidation. For example, when a transaction to be consolidated is identified in the records of one unit, it is expected that the corresponding transaction will be found in the accounts of the counterparty; but it may not show there, as it may be recorded in a different period, it may have a different value, or it may be classified as a different type of transaction due to different accounting practices. These difficulties are inherent in the quadruple system of recording used in the ESA, but they may be more obvious with inter-governmental transactions.

ACCOUNTING ISSUES RELATING TO GENERAL GOVERNMENT

• 20.162National accounts principles apply to the general government sector in the same way as to other sectors of the economy. However, due to the economic nature of the activities of government units or due to practical considerations, additional rules are given in this section.

• 20.163Similarly, the national accounts principles apply in the same way to the measurement of government revenue and government expenditure. However, these principles, including notably the accrual principle, are applied given that the creditworthiness and liquidity constraints of government are fundamentally different from other measures. If expenditure is recorded in the government accounts when incurred by each government unit, irrespective of long lags of payment, revenue should be recorded in the accounts only when there is a high expectation and sufficient certainty that the respective cash flows will effectively take place.

• 20.164When classifying a transaction, national accountants are not constrained by the designation of the transaction in the public accounts of government or in the bookkeeping of a corporation. As an example, a large payment to government made out of the corporation's reserves or from sales of assets and called 'dividend' in the public accounts is categorised as a super-dividend and recorded as a financial transaction in the national accounts — it is a withdrawal of equity. Reporting the economic reality where it is different from the legal form is a fundamental accounting principle to give consistency and to make sure that transactions of a similar type will produce similar effects on the macroeconomic accounts, irrespectively of the legal arrangements. This is of particular importance for transactions involving the general government.

Tax revenue

Character of tax revenue

• 20.165Taxes are compulsory unrequited payments, in cash or in kind, made by institutional units to general government or supranational bodies exercising their sovereign or other powers. They usually constitute the major part of government revenue. Taxes are viewed in the system as transactions, as they are deemed to be interactions between units carried out by mutual agreement. Taxes are described as unrequited because the government provides nothing commensurate with the payment in exchange to the individual unit making the payment.

• 20.166However, there are cases where the government provides something to the individual unit against the payment, in the form of the direct granting of a permit or authorisation. In this case, the payment is part of a mandatory process that ensures proper ownership recognition and performance of activities by law. The categorisation of such payments as a tax, or as the sale of a service, or the sale of an asset by the government, requires additional rules. Those rules are set out in Chapter 4.

Tax credits

• 20.167Tax relief can take the form of a tax allowance, exemption, or deduction — which is subtracted from the tax base — or of a tax credit — which is subtracted directly from the tax liability otherwise due by the beneficiary household or corporation. Tax credits can be payable, in the sense that any amount of the credit that exceeds the tax liability will be paid to the beneficiary. In contrast, some tax credits are non-payable, and described as 'wastable'. They are limited to the size of the tax liability.

• 20.168In national accounts, a tax relief that is embedded in the tax system is recorded as reducing the tax liability and therefore as reducing government tax revenue. This is the case of tax allowances, exemptions, and deductions, as they enter directly into the calculation of the tax liability. This will also be the case for non-payable tax credits as their value to the taxpayer is limited to the size of their tax liability. In contrast, this is not the case for payable tax credits, which by definition can affect non-taxpayers as well as taxpayers. As they are payable, payable tax credits are classified as expenditure and recorded as such for their total amount. The government tax revenue will, therefore, be that liable, with no reduction for payable tax credits awarded, and government expenditure will include all payable tax credits awarded. This has no impact on the net borrowing/net lending of the general government, but does have an impact on both the tax burden and the government expenditure, and on the corresponding ratios to GDP. The presentation of statistics shall permit the derivation of tax credits on a net basis.

Amounts to record

• 20.169Appropriately recording tax revenue is essential for the measurement of government activities and performance. The amounts to record should correspond to amounts likely to be actually collected by government: this implies that amounts declared but deemed uncollectible should not be recorded as revenue.

Amounts uncollectible

• 20.170In all cases, only amounts that government realistically expects to collect should be recorded. Uncollectible taxes should not be accounted for in the net lending/net borrowing of the general government and generally not in the total revenue. Accordingly, the impact on general government net lending/borrowing of taxes and social contributions recorded in the system on an accrual basis shall be equivalent over a reasonable amount of time to the corresponding amounts actually received. The rules for the recording of taxes and social contributions are explained in Chapter 4.

Time of recording

Accrual recording

• 20.171Accrual accounting records flows at the time economic value is created, transformed, exchanged, transferred or extinguished. It is different from cash recording and, in principle, from due-for-payment recording, defined as the latest time payments can be made without additional charges or penalties. Any period of time between the moment a payment accrues and the moment it is actually made is accounted for by recording a receivable or a payable in the financial accounts. The ESA recording is on an accrual basis. For some transactions such as payment of dividends or some specific transfers, the due for payment time is used.

Accrual recording of taxes

• 20.172For government, recording revenue and claims at the time of the underlying event is particularly difficult, since often government records, for tax for example, are on a cash basis. When accrued taxes are calculated from assessments of taxes due, there is a risk of over-recording the tax revenue, a crucial government finance aggregate.

• 20.173The period of time between the moment a transaction is recorded as accruing in the non-financial accounts, and the moment the payment is actually made, is bridged by recording an account receivable in the financial account in the accounts of one party and an account payable in the accounts of the other party. In cases where a prepayment, covering two or more accounting periods, is made to government, an account payable, which is a form of borrowing, is recorded in the financial account of government for the amounts due in future periods. This liability is extinguished when recording the due amounts of the transaction in the future periods. However, recording such a liability occurs only when the government has, legally or by means of a constructive obligation, the obligation to make a refund to the payer for the pre-paid amounts if the taxable event does not occur.

• 20.174In accordance with accrual recording, taxes should be recorded when the activities, transactions or other events occur which create the liability to pay tax — in other words when the taxable events occur — and not when the payments are due to be made or are actually made. This time is usually when income is earned or when a transaction (such as the purchase of goods and services) generating the liability occurs, to the extent that the tax liability can reliably be measured. The different institutional arrangements for taxation (existence or not of assessments, like tax rolls) may lead in practice to using different recording methods, according to the characteristic of the tax. Thus, notably when there are no reliable assessments available or amounts unlikely to be collected cannot be reliably estimated, the time-adjusted cash method is considered an acceptable proxy for accruals.

• 20.175In practice, when taxes are based on assessments, some flexibility is permitted concerning the time of recording where the measurement cannot be made in a reliable way before the time of assessment. In particular, for taxes on income, tax systems may require the development of a tax roll or another form of tax assessment before the amounts of tax due will be known in a reliable way, taking into account the changes in tax rates and final settlements. This moment, which might be the one where the economic behaviour of households is affected, is an acceptable time of recording. It is not necessarily the accounting period in which the payment is received.

Interest

• 20.176Interest is an expenditure incurred by a debtor for the use of another unit's funds. Under the terms of the financial instrument agreed between them, interest (D.41) is the amount that the debtor becomes liable to pay to the creditor over a given period of time without reducing the amount of principal outstanding.

• 20.177Interest is classified within property income (D.4). Differently to dividends (D.421), interest (D.41) entitles the holder/the lender to a fixed and predetermined income (or according to an agreed reference in the case of a floating interest rate). Interest is usually a major expense item of general government, since governments are often structural borrowers on the market.

• 20.178In the system, interest is recorded on an accrual basis, i.e. interest is recorded as accruing continuously over time to the creditor on the amount of principal outstanding.

• 20.179There are two ways in which the value of a discounted security can be determined during its life when the prevailing interest rate is different from the rate prevailing when the security was initiated. The debtor approach is from the perspective of the unit issuing the security and the creditor approach is from the perspective of the unit holding the security. From the debtor approach, the interest rate agreed on initiation is used throughout the life of the security. From the creditor approach, the current interest rate is used to value the interest between any two points in the life of the security.

• 20.180Accrual interest is recorded according to the debtor approach, that is: based on the rate or yield prevailing at the time of creation of the financial instrument. Thus, interest expenditure to be recorded on fixed-rate debt securities does not vary over time in sympathy with market fluctuations, despite the fact that the market value of the securities fluctuates and that, accordingly, the opportunity costs of carrying this debt vary. In that way, interest expenditure avoids the volatility that the creditor approach entails. The repurchase of securities on the market, at a premium or at a discount to the principal outstanding, does not lead to any entry in revenue or expenditure at time of purchase or later on. Instead, any repurchase premium or discount reflects the settlement, recorded in the financial accounts, of a holding gain or loss that accrued in the past and was recorded in the revaluation accounts at that time.

• 20.181Recording interest as accruing continuously has the consequence, on a security for instance, that the accrued interest charge is recorded starting from the time the security has been issued, not waiting for the time of the first coupon payment (often in the following year, in the classic case of a security with a yearly coupon payment). It means also that accrued interest on securities starts appearing as a liability as soon as issued interest is reinvested under the financial asset bearing it. As a result, the stock of accrued interest outstanding is always to be added to the value of the principal of the underlying instrument, and, subsequently, any interest payments reduce the debtor's liability. This basic principle covers all financial instruments bearing interest.

• 20.182In many countries, government bonds or notes are issued in fungible tranches, over several years, with the same conditions concerning the nominal rate of interest. Because the market yield at time of further sale of tranches varies, each tranche is actually sold at a premium or at a discount. Thus, the rate of interest agreed on at time of issuing the bond is used for calculating interest, which will vary for each tranche, reflecting different amortisations of premium or discounts at issue, in a manner similar to amortisation of discounts on zero coupon bonds.

• 20.183The issue price of bonds and notes issued in fungible tranches, and carrying coupons, includes an amount for coupons accrued to date, which are in effect 'sold' upon issuance. Such sold coupons are neither government revenue at time of sale nor treated as a premium. They are instead seen as a financial advance.

Discounted and zero-coupon bonds

• 20.184Zero-coupon bonds are instruments where the debtor has no obligation to make any payments to the creditor until the redemption of the bond. The amount of the principal borrowed is lower than the value of the bond that will be repaid by the debtor. In effect, the debtor's liability is discharged by a single payment at maturity covering both the amounts of the principal and the interest accrued over the life of the instrument. The difference between the amount repaid at the end of the contract and the amount initially borrowed is interest and is allocated over the accounting periods between the beginning and the end of the contract. The interest accruing each period is treated as if paid by the debtor and then reinvested as an additional amount of the same liability. Interest expenditure and increases in the liability are then simultaneously recorded each period.

• 20.185The gradual increase in the market value of a bond that is attributable to the accumulation of accrued and reinvested interest reflects a growth in the principal outstanding, that is, in the size of the asset.

• 20.186The same principle applies to discounted bonds or bonds issued at a premium. In this case, the interest expenditure to be recorded is the amount of accrued coupon interest as specified in the contract, plus the amount accruing each period attributable to the difference between the redemption price and the issue price.

Index-linked securities

• 20.187Index-linked securities are financial instruments, usually long-term bonds, for which the amounts of the periodic payments and/or the principal are linked to a price index or other index. Any additional payments to creditors due to changes in the index are considered as interest, including the uplift of the principal, to be recorded as accruing continuously. When the value of the principal is index linked, the difference between the eventual redemption price and the issue price is treated as interest accruing over the life of the asset, in addition to any interest due in that period.

Financial derivatives

• 20.188Settlements on swap transactions are not considered as property income in the ESA. The settlements related to financial derivatives are financial transactions, to be recorded at the time of the effective exchange of financial instrument.

Court decisions

• 20.189When a court of justice rules that compensation must be paid, or a transaction reversed, resulting from or related to past events, the time of recording of the expenditure or revenue is when the claimants have an automatic and incontrovertible right for a given amount that can be individually determined, and when it is unlikely that claimants will fail requesting their due. When a court of justice merely sets a principle of compensation, or when the claims must be reviewed for eligibility and in relation to determination of the amount by administrative services, expenditure or revenue is recorded as soon as the value of the obligation is reliably determined.

Military expenditure

• 20.190Military weapon systems, comprising vehicles and other equipment such as warships, submarines, military aircrafts, tanks, missile carriers and launchers etc. are used continuously in the production of defence services. They are fixed assets, like those used continuously for more than one year in civilian production. Their acquisition is recorded as gross fixed capital formation, i.e. as capital expenditure. Single-use items, such as ammunition, missiles, rockets and bombs are treated as military inventories. However, some types of ballistic missiles are regarded as providing an on-going service of deterrence and therefore meet the general criteria for classification as fixed assets.

• 20.191The time of recording of asset acquisition is the time of the transfer of the ownership of the asset. In case of long-term contracts involving complex systems, the time of recording of the transfer of assets should be upon actual delivery of the assets, not the time of cash payments. If some long-term contracts cover in addition the provision of services, government expenditure should be recorded at the time of the provision of services, recorded separately from the provision of assets.

• 20.192If military equipment is leased, the transaction is invariably recorded as a finance lease and not as an operating lease. This implies that the recording of an acquisition of military asset is matched by the incurrence of an imputed loan by the government lessee. As a result, payments by government are recorded as debt servicing, a part as repayment of the loan, another part as interest.

Relations of general government with public corporations

Equity investment in public corporations and distribution of earnings

• 20.193Government units have a close relationship with public corporations and quasi-corporations that they own. Despite this close relationship, flows between a government unit and its controlled corporation or quasi-corporation related to its equity investment are treated in the same way as flows between any corporation and its owners: equity investments from the investor into the unit invested in; distributions of earnings by the unit invested in, to the investor.

Equity investment

• 20.194An equity investment occurs when economic agents place funds at the disposal of corporations, in exchange for a promise of future dividends or other types of return. The amount invested is known as equity capital, and is part of the own funds of the corporation and the corporation has a large degree of freedom in the way of using them. In exchange, the owners receive shares or some other form of equity. These represent property rights on corporations and quasi-corporations and entitle the holders to:

• (a) a share of any dividends (or withdrawals of income from quasi-corporations) paid at the choice of the corporation but not to a fixed and predetermined income; and

• (b) a share in the net assets of the corporation in the event of its liquidation

• and, as such, the shares are financial assets.

• 20.195It is important to distinguish between the withdrawal of equity by the corporation to its owner and the return on equity investment, notably the income earned in the form of dividends. Only regular distributions from the entrepreneurial income are recorded as dividends by corporations or withdrawals of income from quasi-corporations. Large and irregular payments to the owner are recorded as a withdrawal of equity.

• 20.196It is necessary to determine when payments of government into public corporations are government expenditure or acquisition of an asset and so a financial transaction, and conversely when distributions to government by public corporations are government revenue or a financial transaction.

Capital injections

Subsidies and capital injections

• 20.197Subsidies are current transfers, usually made on a regular basis, from government, or occasionally from the rest of the world, to producers designed to influence their levels of production, the prices at which their outputs are sold or the remuneration of factors of production.