AEG recommendations on treatments of illegal activities Viet Vu UN Statistics Division

Illegal Activities in the 1993 SNA The 1993 SNA decides that all illegal and underground activities should be part of the SNA production boundary. This clearly includes: prostitution, production of illegal drugs and other underground activities. Since then, a number of changes has been recommended by the OECD’s Non-observed Economy Handbook. This requires a review of these recommendations.

Theft 1993 SNA records only production of stolen goods, but not in household final consumption even if the amount is large because theft is not a transaction (which requires mutual agreement). When the value of stolen goods is small, it is not counted as output. When the value of stolen goods is large, it is counted as output, put into inventory and taken out of the balance sheet as “other change in volume. OECD: Recurrent thefts of significant value should be treated as transactions. This means output is recorded: AEG rejects this recommendation. OECD: Recurrent thefts of significant value by employees should be treated as compensation of employees AEG rejects this recommendation. AEG agrees: Sales of stolen goods (fencing) should be recorded similar to the recording of second-hand goods.

Bribery The 1993 SNA does not provide guidance on how to treat bribery. AEG agrees: Bribery should be treated as a transaction as it can be assumed that individuals have a freedom of choice to enter into bribery. Rejects: In provision of market goods and services, bribes taken by employees as an additional margin on the “official” price should be recorded as an increase in the value of output of market production matched by an identical increase in the compensation of employees. Agrees: In the provision of non-market services that are not allowed or not publicly accepted, bribes should be recorded as current transfers. The same holds for payments to persons in privileged positions to obtain a contract.

Extortion AEG agrees: that extortion payment should be recorded as other change in the volume of assets.

Money laundering AEG splits: difference between the value of the illegal cash and the value of the legalized (laundered) cash should be looked upon as a provision of services.

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