1. Government Transactions with Public Corporations (earnings and funding) (issue 34) UNSD/NA/GS 1 UN STATISTICS DIVISION Economic Statistics Branch National Accounts Section

2. Background and main reasons for change It is commonly agreed that 1993 SNA does not provide sufficient guidance to record, in a consistent way, some transactions of government with its public corporations, like : Dividends Withdrawal of equity Capital transfers, and Acquisitions of equity

3. Payments from Public Corporations to Govt 1993 SNA Guidelines: Regular Payments From To Recorded as Public Corporation  Govt. => Dividend Quasi-Corporation  Govt. => Withdrawal from entrepreneurial income (conceptually equivalent to dividends – needs to be identified separately in order to be able to distinguish the income of the QCs from that of its owner)

4. Exceptional Payments 1993 SNA Guidelines: From To Recorded as Public Corp  Govt. => Dividend (as are regular payments) Pub Quasi-Corp  Govt. => Withdrawal from Equity (recognising that payment is not made from current entrepreneurial income but from accumulated reserves or sales of assets) Drawing from the parallel of corporate dividends with QCs withdrawal from income, one can infer that dividends are from the current profits, and dividends from profits accumulated in previous periods are withdrawal of equity

5. Payments from Govt to Public Corpns 1993 SNA Guidelines: Regular Payments (intended to compensate for persistent losses on their productive activities) From ToRecorded as Government  Public Corp => Subsidies Government  Quasi-Corp => Subsidies

6. Payments from Govt to Public Corpns 1993 SNA Guidelines: Exceptional Payments (“Capital injections” –term not used in the SNA- covers large and exceptional payments by Govt to Public corporations. Treatment is less clear) From To Recorded as Government  Public Corp => Capital transfers (intended to cover accumulated losses) Government  Quasi-Corp => Addition to equity (intended for acquiring assets or reducing its liabilities) Exceptional payments from Government to  Public corporations may be for commercial reasons  Public QCs may be intended to cover accumulated losses. Clarifications needed in updated 1993 SNA to maintain symmetry in the treatment

7. AEG Recommendations Exceptional payments by public corporations to government, funded from accumulated reserves or sale of assets should be recorded as withdrawals of equity. Exceptional payments by government to public corporations and to public quasi-corporations intended to offset accumulated losses should be recorded as capital transfers. Exceptional payments by government to public corporations and to public quasi-corporations in a commercial context, that is it has a valid expectation of a return in the form of property income, the payment should be recorded as additions to equity. The option to follow the same principle for public corporations as for non-resident units in recording “reinvested earnings” exactly matching current entrepreneurial income is recommended an item for research agenda

8. Thank You