1. VALUATION AND METHODS OF ESTIMATING GDP
Leo Hiemstra
Statistics Netherlands, National accounts in practice

2. Basic identities (1) P + M = IC + C + I + E (2) Y = P - IC
(3) Y = C + I + E - M
(4) Y = W + OS/MI

3. Basic identities P + M IC + C + I + E P – IC C + I + E – M W + OS/MI ≠= ≠ = = ≠
Reason: differences in valuation

4. Valuation 1) Of domestic production: Basic prices = Producer prices
+ Taxes on products
- Subsidies on products
= Producer prices
+ Trade margins
+ Transport margins
= Purchasers prices excluding VAT
+ VAT
= Purchasers prices including VAT
Statistics Netherlands, National accounts in practice

5. Valuation 2) Of imports: CIF + import duties
+ Taxes on products
- Subsidies on products
= CIF + import duties + T-S
+ Trade margins
+ Transport margins
= Purchasers prices excluding VAT
+ VAT
= Purchasers prices including VAT
Statistics Netherlands, National accounts in practice

6. Valuation
Statistics Netherlands, National accounts in practice

7. Basic identities Pbp + Mcif <> ICpp + Cpp + Ipp + Efob
Pbp + Mcif + T/S = ICpp + Cpp + Ipp + Efob
or:
Pbp + Mcif = ICpp + Cpp + Ipp + Efob - T/S

8. Valuation

9. A. Taxes and subsidies on products
fixed amount per quantity or
percentage of value
e.g. import duties, excise duties, value added tax
B. Other taxes on production
taxes on the use of commodities
e.g. vehicles
taxes on the ownership of commodities
e.g. buildings
Statistics Netherlands, National accounts in practice

10. Statistics Netherlands, National accounts in practice

11. Statistics Netherlands, National accounts in practice

12. TREATMENT AND CALCULATION OF VALUE ADDED TAX (VAT)
In the Use table: valuation at purchasers price
Two possible ways of presenting the data:
Excl. VAT
Incl. VAT
To make a choice it is important to know what VAT represents and the consequences of the choice.
Statistics Netherlands, National accounts in practice

13. Value added tax VAT is a tax on the sale of commodities
Most countries have different rates
low tariff food
high tariff durables
zero tariff health services
Low = %
High = 17.5%
Zero = % (EXPORT)
future :Intrastat trade normal tariff
Outside EU 0%
Statistics Netherlands, National accounts in practice

14. Characteristic
Before producers/sellers pay off their VAT to the tax authorities they may deduct the VAT they paid themselves on their purchases
intermediate consumption
capital formation
tax burden is on the final user
Some producers are exempted from VAT: health care, banking, insurance companies.
The consequence of being exempt of VAT ( 0%) is that they do’nt pay VAT to the authoroty. But are also not permitted to deduct VAT on their purchases.
So VAT is a cost for them
In most cases it means that VAT is a burden for households and the exempted units.
NON-DEDUCTABLE VAT
Statistics Netherlands, National accounts in practice

15. Vat recording net
Uniform valuation of the use table: all entries exclude VAT
Non-deductible VAT as a separate row in the use table
Balancing transparent
Netherland prefers NET recording
Lets have a look at both systems and judge afterwards
Statistics Netherlands, National accounts in practice

16. Statistics Netherlands, National accounts in practice

17. Statistics Netherlands, National accounts in practice

18. Statistics Netherlands, National accounts in practice

19. Statistics Netherlands, National accounts in practice

20. Supply use tables: the framework
Statistics Netherlands, National accounts in practice

21. SUPPLY
Commodities
Dairy ind.
Other ind.
Import
Tax-Sub
on products
T&T
margins
Total
(pp)
Milk
Dairy prod.
Other goods+serv.
T+T margins
0,0
13,6
0,2
13,8
8,0
0,5
899,2
105,6
1013,3
0,0
4,6
261,9
266,5
0,0
-1,9
13,2
11,3
0,0
2,5
103,1
-105,6
8,0
19,3
1277,6
0,0
1304,9

22. USE
Commodities
Dairy ind
Other ind.
Export
Cons.
Invest.
Total use =
Tot. supply
Milk
Dairy prod
Other g+s
T+T margins
VAT
Other tax on prod
Comp. empl.
Op. surplus
Total
7,9
1,4
2,5
0,0
0,2
0,0
3,4
489,6
8,0
4,1
298,8
0,0
7,9
289,9
297,8
0,1
6,6
384,6
23,4
414,7
0,0
111,0
9,0
120,0
8,0
19,3
1277,6
0,0
40,4
4,3
300,2
209,8
0,4
209,4
13,8
1013,3

23. EXERCISE Calculate GDP in three different ways

24. Three methods for computing GDP and National income
A. Production method -> based on value added by industry
Y = P - IC
B. Expenditure method -> based on expenses
consumption
capital formation
exports - imports
Y = C + I + E - M
C. Income method -> based on information on
income by sector
Statistics Netherlands, National accounts in practice

25. Production method Output 1027,1 Intermediate consumption 512,8 -
Value added ,3

26. Expenditure method Final consumption 414,7
Fixed capital formation ,0
Export ,8 +
832,5
Import (cif) ,5 -
GDP ,0

27. Income method Compensation of employees 300,2
Operating surplus ,8 +
“Value added” 510,0

28. Basic identities P + M + T/S = IC + C + I + E Y = P – IC + T/S
Y = C + I + E – M
Y = W + OS/MI + taxes and subsidies on production and imports

29. GDP(mp) computed with Production method
Production at basic prices
- Intermediate consumption at purchasers value
Value added by industry (bp)
+ Taxes -/- subs. on products
= Gross Domestic Product (mp)

30. Production method Output 1027,1 Intermediate consumption 512,8 -
Value added ,3
VAT ,4
Other taxes minus
subs. on products ,3 +
GDP ,0

31. GDP computed with income method
+ Compensation of employees
+ Operating surplus and mixed income
Gross domestic product at factor costs
+ Taxes -/- subsidies on production
Gross domestic product at basic prices
+ Taxes -/- subsidies on products
Gross domestic product at market prices
Statistics Netherlands, National accounts in practice

32. Income method Compensation of employees 300,2
Operating surplus ,8 +
Value added at factor costs ,0
Other taxes on production ,3 +
Value added at basic prices ,3
VAT ,4
Other taxes minus
subs. on products ,3 +
GDP ,0

33. VALUATION AND METHODS OF ESTIMATING GDP
Statistics Netherlands, National accounts in practice