1. Michael Connolly – National Accounts, CSO Ireland 9 December 2009
The CSO Consistency Unit and its impact on the quality of National Accounts
I am MC FROM CSO Ireland – National Accounts - responsible for treatment of MNCs in the Irish National Accounts
Michael Connolly – National Accounts, CSO Ireland
9 December 2009

2. Outline of Presentation
Irish Economy – Rationale for Consistency Unit
Activities of MNCs in Ireland
The scope of the data analysed by the consistency Unit .
The Institutional framework in Ireland
How the survey areas, administrative data centre and consistency unit work together
Our plans for a Large Cases Unit - commencing operation in January 2010
9 December 2009

3. Globalisation in the Irish Economy
Irish economy developed into highly Globalised Economy
For MNCs in Ireland top 10 account for 34% of value of exports and 33% of imports
Exports %GDP
Imports %GDP
Goods 44 30
Services 38 40
Total 82 70
Ireland is one of the most Globalised economies in the World.
Want to continue by looking at the impact on some Macro economic aggregates of MNCs activities in Ireland
Totasl exports are 82% of GDP IN 2008
Total importsd were 70% of GDP IN 2008
Total MNC EXPORTSD ACCOUNT FOR 51% OF EXPORTS (61% OF TOTAL)
Total MNC imports accounts for 33% of GDP (46%)
9 December 2009

4. Exports & Imports of Goods and Services as % GDP - 2006
An index of globalisation is the combination of imports and exports as a % of GDP
When we compare these countries we can see how globalised the Irish
Economy is
Want to continue and consider the impact on Macro economic aggregates of these MNCs
9 December 2009

5. Manufacturing Output - by ownership 1985 - 2005
Very different story when we come to output Output from MNCs has increased dramatically by a factor of almost 10 over the period
Output of Irish owned has almost doubled over the 20 year period

6. Irelands International Balance Sheet 2008
Foreign Assets €bn
Foreign Liabilities
€bn
Net IIP
FDI
123.4
121.0
2.4
Portfolio Investment
1,169.0
1,183.7
-14.7
Other Investment
901.0
995.7
-94.7
Reserves
0.8
Total
2,194.2
2,300.3
-106.2
9 December 2009

7. Activities of MNCs
9 December 2009

8. General Issues with MNCs
National frontiers and MNCs
Valuation of flows in a particular country
Frequent changes in structure
Apportionment of Value Added to a particular country
9 December 2009

9. Relationship MNC Parent - Affiliate
Local enterprise have incomplete information – particularly financial
Guided by overall MNC tax planning or liquidity management
For example - a €100m payment to the parent is it
Royalty
Dividend
Loan
DO THEY KNOW - IMPACT IS VERY DIFFERENT ON THE ACCOUNTS
We have discussed the problems how do we deal with them?
CSO ESTABLISHED A CONSISTENCY Unit in the early 1990s
Globalisation –Impact on economic statistics STCPM 51
18 August 2009

10. Special Trading Activities of MNCs
Goods For Processing/Tolling – value of service not value of cross border movements of goods
Merchanting – value of net export of goods/services which don’t cross border of compiler
Price Setting - Adjustments to prices not captured at the time of export
Commissionaire Trading – value of service provided - included in total price of exports
9 December 2009

11. CONSISTENCY UNIT
9 December 2009

12. Company Records Office
Consistency Network
Industry
Business Register
Services
Tax Records
Balance of Payments
International Trade
Company Records Office
Consistency
Unit
Data is analysed and compared on a company by company basis for different frequencies
Trads data - monthly turnovers
The statisticians meet by video link or face to face regularly
9 December 2009

13. Consistency Analysis - Simplified
COMPONENT
Consistency Test
€mn
Total Exports
Exports = Turnovers (MIP,Tax Data,CIP, Services, BOP, Trade) 92
Total imports
Imports = Purchases (ASI, CIP, Monthly services, BOP, Trade
-60
Balance 32
Profits
Profits = Taxable Profit (Tax data)
= Entrepreneurial income (BOP) 20
Difference
Compensation of employees, (Earnings data) 12
TYPICAL ANALYSIS COULD BE X-M – Profits view the difference
Cost of Goods bn
COE BN
Deprec bn
Other costs bn
TAX BN
INT PAY BN
9 December 2009

14. Consistency Unit (Large Cases Unit)
Facilitated by the following
CSO compile and publish merchandise trade and Balance of Payments data
Access to Tax Authorities files comparison with Survey returns
Compare data for top individual MNCs incl. Exports, monthly turnovers, annual turnovers, purchases, stocks, imports, exports, value added, service exports and imports, Balance of Payments profit variables
9 December 2009

15. National Accounts Income
Responsible organisation for the statistical domain – ERG Document 2009
Country
Inwards FATS
Outward FATS
FDI
Trade in goods
Trade in services
Business Register* AT
NSI
NCB BE BG CY CZ DE DK EE EL ES
Customs FI FR HU IE IT LT LU MT NL PL PT RO SE
Growth SI SK NO CH IS ? LI
n.a.
National Accounts Income
9 December 2009

16. Globalisation –Impact on economic statistics STCPM 51
How do we do it?
Use of indicators to link data
Central Business Register Identifier
Enterprise Number
Local Unit Number
VAT Number
Corporation Tax number
Company Registration Office (CRO)
PREM Number - Employer Tax registration Number
Globalisation –Impact on economic statistics STCPM 51
18 August 2009

17. Quality Framework
Monthly/Quarterly and Annual meetings with survey areas (Industry Services, BOP) and Consistency Unit
Confront the data received for largest MNCs
Assess consistency or quality of the data
Micro level analysis
9 December 2009

18. Consistency Unit - Transfer Pricing
No unilateral adjustments for transfer pricing other than for consistency purposes
Ensures that International asymmetries are not created by ad-hoc adjustments
Through consistency work we ensure that value added of MNCs is outflowed through Net Factor Incomes
Result that GDP may be overstated and productivity measures similarly (but GNP understates).
9 December 2009

19. Large Cases Unit – How and Why
Broaden the coverage of consistency work
Take control of the data – survey data is edited by LCU
Single point of contact with company
Generic forms - monthly, quarterly and annual instead of numerous separate surveys at each frequency
Use of XML etc. facilitate transmission between CSO and Companies
9 December 2009

20. International Initiatives
Coordinated Direct Investment Survey
Euro Groups Register - Eurostat
9 December 2009

21. Summary and Conclusions
Difficulties caused by large concentration of MNC activity in a small open economy
Distortions to Macro economic variables
GDP/ GNI
Productivity
Strategy for dealing with MNC statistics through Consistency Unit
9 December 2009