1. March 2007 AEG meeting Chapter 8 Main substantive comments

2. Comments Comments from: UNSD, OECD, Russia, Australia, ECB, Eurostat, IMF, Germany, Hong Kong, Netherlands, Czech Republic, Israel, Sweden, Denmark, USA 5 major substantive questions to the AEG 31 comments considered by the ISWGNA 97 comments considered by the editor

3. Question 1: delineation between social insurance/social assistance /social security The delineation between social insurance and social assistance is quite important: –It affects the classification of social benefits –it affects the future supplementary table on pensions In the SNA social security is part of social insurance and not social assistance. This difference could be made clearer in the SNA, because the terms « social security » are sometimes used in countries for social assistance schemes and there is thus confusion. The AEG has recommended (Frankfurt) that the borderline between employer schemes and social security be explored.

4. Questions 1. a: delineation between social insurance/social assistance Chapter 8 includes a long description of social insurance schemes but there is no paragraph in the beginning which explicitly makes the difference between social insurance and social assistance. In particular paragraph 8.59 which defines social insurance schemes does not define, by opposition, social assistance schemes.

5. Questions 1.a Does the AEG agree that a clear definition should be given in paragraph 8.59 of the difference between social insurance schemes and social assistance schemes?

6. Questions 1.b Paragraph 8.64 and old Annex IV gives a definition of social insurance based on three criteria: –Obligation of participation –The scheme is collective, participation is rectricted to the group –There is a contribution (by employer) Does the AEG confirm this definition?

7. Question 1.c Social assistance should be defined in opposition to this definition of social insurance. The main criterion seems to be the « participation » in the scheme Social insurance = explicit participation (by being a member of the scheme, by paying social contributions) Social assistance = no explicit participation : the benefits comes without prior participation (age, revenue threshhold).

8. Question 1.c Does the AEG agree that the definition of social assistance, in opposition to social insurance, should be based on this notion of « non participatory schemes. »?

9. Question 1.d The definition of social security in the old and the new proposed draft are the same: They are social insurance schemes that are: imposed Controlled Financed By government units.

10. Question 1.d Social security/social assistance However, the 93 SNA and the proposed new draft (8.67 (a)) adds this sentence for social security: « benefits under these schemes are often not related to levels of salary of the beneficiary or history of employment. » This is not true of many major social security schemes. So the term « often » seems unwelcome. This sentence tends to allow social assistance schemes to be included in social security.

11. Question 1.d Does the AEG agree that this sentence should be suppressed? The definition of social security would thus be limited to: social insurance schemes that are: Imposed Controlled Financed By government units.

12. Question 1.e delineation between employer schemes and social security –The editor has proposed to classify social insurance schemes in two categories: « social security » and « employment related schemes » –This last category is a change of the SNA, because there was previously three categories: (see paragraphs 8.63 of old SNA) Social security Private funded schemes Unfunded schemes –The new SNA does not any more make any difference in the treatment of funded/unfunded schemes. –This led the editor to propose only two categories: « social security » and « employment related schemes »

13. Question 1.e delineation between employer schemes and social security The problem is that this denomination tends to conclude that social security are not, by construction, employment related. Does the AEG agree that it would be preferable to name the two categories: –Social security –Other employement related schemes?

14. Question 2 Pension liabilities The AEG has decided that autonomous pension schemes have by definition a zero net worth (=> zero saving). =>When the scheme is underfunded, we record an asset of the scheme over the sponsor of the scheme (employer, government). Paragraph 8.70 says that this « asset » should be recorded as « other account receivable/payable ». This is possible but has the disadvantage of not notionally linking this asset with pension liabilities.

15. Question 2 Pension liabilities Does the AEG agree to classify this asset as a sub category of F6 Insurance, pension and standardised guarantee schemes? This would have the advantage to link this asset to pension liabilities, and to allow an easy consolidation of the accounts of the sponsor and the pension scheme.

16. Question 3 Treatment of uncollected social contributions Paragraph 8.54 discusses of what amount should be recorded for taxes when a large part of it are unlikly to be collected. First, this paragraph does not mention social contributions, while the same problem may affect social contributions (bankruptcy) Second, as for taxes (see future Chapter 21 on the public sector, paragraph 122) to: –Record only as tax or social contributions amounts that are likely to be collected –If any amount recorded as tax or social contribution is discovered to be uncollectible, to record a capital transfer from the government unit to the benefitor.

17. Question 3 Treatment of uncollected social contributions Does the AEG agree to introduce social contributions in addition to taxes in paragraph 8.54? Does the AEG agree to add a sentence explaining that if any social contribution remains recorded that is unlikely to be collected, then a capital transfer should be also recorded accordingly.

18. Question 4: Taxes payable by owner occupiers of dwellings. Owner occupiers act as producer of services. Taxes paid by owner-occupiers on dwellings and land should be classified as other taxes on production. This is indeed the recommendation of the ESA 95. SNA 93 classifies these taxes as « current taxes on capital » (see 8.57.a).

19. Question 4: Taxes payable by owner occupiers of dwellings. Does the AEG agree to change the SNA and classify taxes on dwellings and land payable by owner-occupiers as other taxes on production and not as taxes on capital?

20. Question 5 D631 social assistance in kind/ D632 transfers non market D63 Social transfers in kind corresponds to individual goods and services provided as transfers in kind to households by government and NPISH. In the « core accounts », D63 is included in the final consumption of government. D63 is only used in the alternative « Redistribution of income in kind account » D63 = Individual Consumption Expenditures of GG and NPISH

21. Question 5 social assistance in kind/social transfers D63 is broken down in: –D631 Social benefits in kind D6311 Social security reimbursements (medicine reimbursements) D6312 Other social security benefits in kind (free dental surgery) Social assistance benefits in kind ?? –D632 Transfers of individual non market goods and services (the rest, of which health education…)

22. Question 5 social assistance in kind/social transfers In the drafting of paragraphs 8.114 and 8.115, it is difficult to distinguish between –D6313 Social assistance benefits in kind –D632 Tranfers of individual non-market services 8.115 says for example that it includes education and health but also housing services, cultural and recreational services. Are not housing services « social assistance benefits in kind »?

23. Question 5 social assistance in kind/social transfers The ESA proposes to record all transfers in kind that are social in nature: social housing, dwelling allowance, day nurseries, professional training, reduction in transport prices for social reasons as D6313 social assitance benefits in kind. D632 is then obtained as the residual between total individual non market goods and services and D631.

24. Question 5 social assistance in kind/social transfers Does the AEG agree to make this clarification?