Indirect tax expenses (taxes on production) of public corporations are treated as non-employee expenses

Indirect tax expenses (taxes on production) of public corporations are treated as non-employee expenses

2.156. Current transfers also include the direct tax expenses (taxes on income) of public corporations and general government units’ tax expenses such as State or Territory government payroll taxes and Commonwealth Government fringe benefits tax.

2.157. Capital transfers are unrequited payments of a capital nature (i.e. they relate to the acquisition of assets, other than inventories, that will be used in production for one year or more). Capital transfers are usually non-recurrent and irregular for donor or recipient. Capital transfers include government grants for capital purposes to private non-profit organisations serving households, capital grants made to foreign governments and organisations (including grants made for aid projects), and capital grants from one level of government to another (e.g. Commonwealth to State). Included are transfers for the purpose of compensating the recipient for damage or destruction of capital assets, or to increase the financial capital of the recipient. Compensation to primary industry marketing authorities for losses on overseas debts resulting from devaluations is included. Home savings grants are included as are grants to science laboratories and libraries in private schools, university residential colleges, etc.

2.158. Donations of capital assets are included as capital transfers by imputing the value of the assets from equivalent transactions. Such transfers are also recorded as acquisition of non-financial assets.

2.159. Payments made to finance the debt redemption of other bodies are included in capital transfers. In the SNA and in GFS, bad debts written off by mutual agreement between debtor and creditor are treated as capital transfers and bad debts written off unilaterally are treated as other changes in the volume of assets. Such bad debts may be written off from provisions for bad and doubtful debt accounts or directly without prior provisioning.

2.160. Property expenses are requited current transfers involving payment for the use of property rights. Included in property expenses are interest payable, dividends and other income transfers payable by public corporations, land rent payable and royalties.

Interest included in property expenses includes interest on advances, loans, overdrafts, bonds and bills, deposits and the interest component of finance lease repayments

2.162. As indicated, property expense includes income transferred by public corporations as dividends, transfer of profits or other transfers of income. The income transfers include those payable by public corporations to the parent governments, by subsidiary corporations to their parent corporation, and by parent and subsidiary corporations to minority shareholders. Also included are transfers, to their parent governments by State and Territory public corporations, of income tax and wholesale sales tax equivalents. These are amounts levied by parent governments on their corporations to place the corporations on an equivalent tax basis to private corporations. However, the transfers are recorded as property rather than tax expense, because the taxes to which the payments are equivalent are Commonwealth Government taxes whereas the payments are made to State and Territory governments.

Interest excludes cash settlements of interest swap contracts, which are treated as financial transactions in keeping with the revised SNA93 treatment (see SNA93, paragraph 2

2.163. Land rent and royalty expenses refer to the use of non-produced assets such as land and subsoil assets. Royalty payments are made for the right to exploit natural resources. Rentals on produced assets such buildings, copyrights, patents, trademarks, etc. are included with non-employee expenses.

2.164. Net acquisition of non-financial assets is defined as gross fixed capital formation less depreciation plus changes in inventories plus other transactions in non-financial assets. Any recoverable or deductible GST is excluded. As previously explained, GFS net operating balance plus net acquisition of non-financial assets is equal to GFS net lending(+)/borrowing(-).

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