supply and use tables (sut) module-i: pp3.1 training course material for e-library on system of...
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Supply and Use TablesSupply and Use Tables (SUT) (SUT)
Module-I: PP3.1
Training Course Material for e-Library on System of National Accounts
March 2009
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Supply and Use Tables Supply and Use Tables OutlineOutline
– Supply and Use of Goods and Services– Structure of Supply and Use Tables (SUT)– Trade Margins, VAT
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Supply and Use of Goods and Services
ProductionOutput
Intermediate consumption
Supply of goods and services
Final consumption
Gross capitalformation
Exports
Imports
Net exportsGross capital
formationFinal
consumptionValue added/GDP
-
=
= + +
-
=
+
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What Are Goods and Services?
They are output of production• Goods
– Tangible, can be stored, ownership can change,• Services
– Not tangible; Output is used up as delivered; Cannot be stored; Ownership cannot be transferred; Output results in change in goods, person or institutions
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• Goods – Goods can be transported stored and repackaged , as
such the production price may be different from purchase price by other producers or users
• Services– Services are used when produced, therefore the price at
production is same as price at use
What Are Goods and Services? (Contd.)
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What Are the Statistical Units?
Enterprise - an institutional unit engaged in production characterized by:– Natural person, legal or social entity – Can enter into contract on behalf of own – Has ownership rights of assets– Makes decisions on income, financial and other
assets– May have one or more economic activities
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What Are the Statistical Units? (Contd.)
• Kind of economic activity Unit – an enterprise or part of an enterprise which independently engages in one kind of economic activity or predominantly one kind of economic activity without restriction to the geographical area in which that activity is carried out
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What Are the Statistical Units? (Contd.)
• Establishment – an enterprise or part of enterprise which independently engages in one or predominantly one kind of economic activity – at one location or within a geographical area, – for which data are available, or can be meaningfully
compiled that allow the calculation of operating surplus
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Some Examples:
• Enterprise with one kind of activity and one establishment
Household operated activity engaged in
making rice cakes for sale
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Some Examples (Contd.)
• Enterprise with one kind of activity and several establishments
Bank with different branches(establishments) in different locations
Head office bank
TokyoTokyo branch
Kyoto branch
Osaka
branch
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Some Examples (Contd.)
• Enterprise with several kind of activities and several establishments which are vertically integrated
Region 2
Sugarcane plantation
Region 1
millingSugar
refining
Final output
Kind of activity
1.Agricultural crop
2.Manufacturing milling and sugar refining
Four establishments
E1
E2
E3 E4
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Some Examples (Contd.)
• Enterprise with several kind of activities and several establishments which are horizontally integrated
E1
E2E4
Head office
Manufacturing
E2
E3
Transport
E6
E7E5
Trading
7 establishments
3 economic activity
1 ancillary activity
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How to Classify Production Activities?
• Primary activity - production activity with highest share in output
• Secondary activity - other production activities for the market
• Ancillary activity - activity whose output is for internal use of the establishment or enterprise
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What Type of Producers?
• Market producers - produce market goods, that is, the price and output level is based on demand (price economically significant)
• Non market producers - produce non market goods, that is, price and output levels not based on demand ( price not economically significant)
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What are these Producers? (Contd.)
• Market producers - government corporations, private corporations, quasi-corporations, household unincorporated enterprises
• Non market producers - general government, non profit institutions, subsistence producer households
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Supply and Use Tables (SUT): GeneralSupply and Use Tables (SUT): General• An integrated part of SNA• Interrelationship of industries in an economy with
respect to the production and uses of their products as well as imports and exports
• Each industry listed across the top in Two tables – depicting outputs produced in the Supply table – depicting inputs that are consumed in the Use table
• A compilation tool: (a) data checking and reconciliation, and (b) gap filling
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SUT (Contd.)
• First and an important part of SNA• Can be used to derive Input-Output tables• SUT more often advocated as a compilation
tool for– data checking/reconciliation– data gaps filling
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A Simplified Supply Table
Supplies Industries Rest of the World Total
(1) (2) (3)
Products (1) Output by product and industry
Imports by products Total supply by product
Total (2) Total output by industry
Total imports Total supply
Structure of supply and use tables
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Structure of supply and use tablesA Simplified Use Table
Uses Industries Rest of the World
Final Consumption
Gross Capital Formation
Total
(1) (2) (3) (4) (5)
Products (1) Intermediate consumption by product and by industry
Exports by product
Final consumption expenditure by product
Gross capital formation by product
Total use by product
Components of value added
(2) Value added by component and by industry
Total (3) Total inputs by industry
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SUT (Contd.)
• Two identities hold– the identity by industry
output by industry = input by industry– the identity by product
total supply by product = total use by product
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SUT (Simple numerical Example for illustration)
• Farmer produces wheat 1000• Imports seed 600• Miller produces flour 1800• Uses wheat 1000• The miller sells flour to exports 500
– and to a retailer 1300• Retailer sells flour to households 1600• Sales tax on sales to household 100• Purchases for resale 1300
retail margin 200• Intermediate consumption 0
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Goods and services accountResources Uses
Output: Intermediate consumption
Wheat 1000 Seed 600
Flour 1800 Wheat 1000
Retail margin 200
Imports of goods and services Household consumption expenditure
Seed 600 Flour 1600
Product tax 100 Exports of goods and services
Flour 500
Total supply 3700 total use 3700
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Uses Resources
Intermediate consumption
Output
Seed 600 Wheat 1000
Wheat 1000 Flour 1800
Retail margin 200
Product tax 100
GDP 1500
Total 3100 Total 3100
Production Account
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Output at basic prices Adjustments
Product Farmer Miller Retailer Total Domestic
Imports Salestax
Trade margin
TotalSupply(purch)
Wheat 1000 1000 1000
Flour 1800 1800 100 200 2100
Retail trade
200 200 -200 -
Seed - 600 600
Totals 1000 1800 200 3000 600 100 - 3700
Supply Table
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Intermediate Usage Final Use
Product Farmer Miller Retailer Total Households Exports TotalUse
Wheat 1000 1000 1000
Flour - 1600 500 2100
Retail trade
- -
Seed 600 600 600
Totals 600 1000 1600 1600 500 3700
Use Table (Purchasers Prices)
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Valuation of transactions in SUT• Basic concepts and interrelationships
– Basic prices, – Producers’ prices, – Purchasers’ prices
• Valuation of product flows– Output– Use of goods and services– Exports and imports
• Trade and transport margins• Taxes and subsidies on products
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Equality of Supply and Use
Supply at basic prices +Taxes less subsidies on products
+Trade and transport margins= Supply at purchasers’ prices= Use at purchasers’ prices
Transition
Supply table: from basic prices to purchasers’ pricesUse table: from purchasers’ prices to basic prices
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Trade Margins
• A trade margin (wholesale or retail trade) applies only when there is a distribution service provided by the trader through buying and reselling a product
• A trade margin does not apply to direct sales by a producer, even when the sales are to households
• Trade margin is defined as the difference between the selling price of the good for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold
• The trade margin is the output of the distributor• As with other producers, value added is obtained by
subtracting intermediate consumption
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Trade Margins (Contd.)
• Broadly, the trade margin is calculated as:Sales
less purchases of goods for resale
plus change in inventories for resale• Note: purchases of goods for resale should exclude any
transport charges invoiced separately to the distributor; such transport charges are to be shown as intermediate consumption of the distributor
• The trade margin is part of the difference between the basic price of a good and its purchaser’s price
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Value Added Taxes (VAT)
• General Definition:A tax on goods and/or services collected in stages by enterprises and ultimately charged in full to the final purchasers. The tax rates may vary from products to products
• Invoiced VAT:The VAT payable on the sales of a product by a producer/trader; it is (often) shown separately on the invoice which the seller presents to the purchaser
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VAT (Contd.)
• Deductible VAT: The VAT payable on purchases of goods and services
intended for intermediate consumption, gross fixed capital formation or for resale which a producer/trader is permitted to deduct from his own VAT liability to the government in respect of VAT invoiced to its customers
• Non-deductible VAT:VAT payable by a purchasing producer/trader which is not deductible from his own VAT liability, if any (e.g. VAT on certain special category items such as restaurant services and alcohol)
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VAT (Contd.)
• Incoming VAT:VAT paid by a producer/trader on purchases of goods and services intended for intermediate consumption, gross fixed capital formation or for resale
• Outgoing VAT:VAT collected by a producer/trader on its sales of goods and services
• Net VAT accrued:Outgoing VAT less deductible incoming VAT
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VAT (Contd.)
•VAT exemption:–Production of some services. No VAT on the products, produced. Incoming VAT not refundable–Small producers irrespectively of type of products they produce. No VAT on the products produced even if VAT normally is levied on these products. Incoming VAT not refundable
•Zero ratedZero VAT rate on certain transactions (e.g.
exports)Deductible incoming VAT refundable
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Example: 20 percent Value added TaxVAT VAT
PCProducer
=>1000 + 200 => RetailStore
1900 + 380 =2280=> House-holds
Passing over of VAT to the governmentThe PC producer 200The retail store 380 - 200 = 180Total VAT accrued on this set of transactions: 380 Output of computers at basic prices 1000
+ taxes less subsidies on products other than VAT 0
= Output of computers at producers' prices excl. VAT 1000
+ Trade margin 900
+ Total VAT 380
= Purchasers' prices including VAT 2280
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Example: Deductible VAT
The retail storeReceipts
Total sales 2280of which VAT 380
ExpendituresGoods for resale 1200
of which VAT 200Intermediate consumption 120
of which VAT 20VAT passed over to the government:
Outgoing VAT less incoming VAT 380-200-20= 160
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Example: Deductible VAT....... The retail store
The production account
Uses Resources
Intermediate consumption, purchasers’ prices (net of deductible incoming VAT)
100 Output basic prices 900
Gross Value added 800
Accrued VAT trade 0.2*800 = 160
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Example: Zero rated VAT....... The PC producer
Incomes
Sales to the retail trade store 1200
of which VAT 200
Export 4000
of which VAT (zero rated) 0
Expenditures
Intermediate consumption of goods and services 3600
of which:
Deductible VAT 500
Non-deductible VAT 100
VAT passed over to the government:
Outgoing VAT less incoming deductible VAT 200-500 = -300
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Example: Zero rated VAT....... The PC producer
The production accountUses Resources
Intermediate consumption, purchasers’ prices (net of deductible incoming VAT)
3100 Output basic prices 5000
Gross Value added 1900
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Example: A producer exempted from VAT
Incomes
Sales/output 700of which VAT 0
Expenditures
Intermediate consumption of goods and services 550of which:
VAT (normally deductible) 40VAT (always non-deductible) 10
VAT passed over to the government: 0
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Example: A producer exempted from VATVAT passed over to the government
The production accountUses Resource
Intermediate consumption, purchasers’ prices (net of deductible incoming VAT)
550 Output basic prices 700
Gross Value added 150
VAT refunded 0
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Treatment of Imports
• Consistent with the Balance of Payments Manual in valuing imports of goods in total on a fob basis, and to show international transportation as a service
• However, in the Supply/Use framework, imports at the commodity level are valued on a cif basis (including international transportation)
• A cif/fob adjustment is made in the Supply table to accommodate these two valuation bases, and to ensure that domestic carriage of imports is not double counted
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Example of cif/fob adjustment
Assume imports cif = 1000 fob = 900International transportation = 100
Domestic carriers = 20Foreign carriers = 80
Also, assume domestic transportation to the user =30Therefore,
imports of goods = 900imports of services = 80Domestic services = 20 + 30 = 50Supply at purchasers’ prices = 1030
The cif / fob adjustment ensures that these values are reflected in the Supply table
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Supply TableDomesticSupply
cif/fob adjustment
Imports TotalSupply(basic)
Margin TotalSupply(purch)
Goods Services
Goods 1000 1000 +30 1030
Transport 50 -100 80 30 -30
cif / fob adjustment
+100 -100
Total 50 900 80 1030 - 1030
Note: the international transportation by domestic carriers is included in the purchasers’ price of the good through its impact on the cif value of imports
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Thanks