Inventory of National Practices in Estimating Hidden and Informal Economic Activities for National Accounts
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\ Economie Commission for Europe Statistical Division CONFERENCE OF EUROPEAN STATISTICIANS INVENTORY OF NATIONAL PRACTICES IN ESTIMATING HIDDEN AND INFORMAL ECONOMIC ACTIVITIES FOR NATIONAL ACCOUNTS UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE Statistical Division CONFERENCE OF EUROPEAN STATISTICIANS INVENTORY OF NATIONAL PRACTICES IN ESTIMATING HIDDEN AND INFORMAL ECONOMIC ACTIVITIES FOR NATIONAL ACCOUNTS UNITED NATIONS Geneva, 1993 INVENTORY OF NATIONAL PRACTICES IN ESTIMATING HIDDEN AND INFORMAL ECONOMIC ACTIVITIES FOR NATIONAL ACCOUNTS Table of contents 1. Introduction 2 2. Estimates of hidden and informal activities in the Austrian National Accounts 3 - 19 3. Pratiques nationales en matière d'économie souterraine dans la comptabilité nationale de la Belgique 20 - 40 4. Estimates of hidden economic activities and other imputations in the Finnish National Accounts 41 - 50 5. Estimates of hidden and informal economic activities in the Hungarian National Accounts 51 - 52 6. A summary of adjustments madî in the Irish estimation for hidden and informal economic activities 53 - 54 7. Compiling Dutch Gross National Product (GNP): Summary report on the final estimates after the revision in 1992 55-76 8. Problems in covering hidden and informal economic activities in Romanian statistics 77 - IS 9. Estimates of the hidden and informal economy in Turkey 79 - 81 10. "Evasion adjustment" in United Kingdom National Accounts 82-96 Introduction The Work Session on Statistics of the Hidden and Informal Economy, held by the United Nations Economic Commission for Europe (UN/ECE) in Geneva on 16-18 September 1991, decided to carry out an inventory of national practices in the collection and compilation of statistics on the hidden and informal economy for GNP purposes in ECE-member countries. Accordingly, on 4 February 1992 the Director of the ECE Statistical Division wrote to the Statistical Offices in member countries requesting detailed explanations of how the hidden and informal economic activities are reflected in the countries' national accounts. The EC-member countries were asked to provide the secretariat with the relevant parts of the Eurostat inventory of sources and methods of GNP calculations relating to adjustments made for the hidden and informal economy. The replies of the countries, received by the ECE secretariat and published in the present volume, do not relate exclusively to the hidden and informal activities. They cover a broader area of the estimates and imputations made in national accounts for those components for which existing statistical systems provide insufficient information. Estimates of hidden and informal activities in tlie Austrian National Accounts Introduction This paper presents the methcxis and techniques which allow, although partially and implicitly, to take account of hidden and informal activities in compiling National Accounts for Austria. It also describes the methods of imputing those components of national accounts which are not measured directly by the statistical system. The paper provides first a general overview of the Austrian National Accounts. It then gives a detailed description of the estimation of GDP by the output, expenditure and income approaches. Attached are tíie methodological summary published in the United Nations National Accounts Yearbook (Appendix 1), and the note on statistical surveys of small and medium-size enterprises (SME) prepared in response to the request of EUROSTAT (Appendix 2). General overview 1. The official annual estimates of the Austrian National Accounts (ANA) are prepared by the Austrian Central Statistical Office (ACSO). Based on the most recent ANA, the quarterly accounts and the first quick estimates are compiled and published by the Austrian Institute of Economic Research (WIFO) in close cooperation with ACSO. 2. The ANA follow the SNA definitions and standards in principle and in almost all relevant details. This is particularly so for the classifications used. National accounts tables for Austria are regularly published by national and international agencies (UN, OECD). A summary methodological description is provided in the United Nations National Accounts Yearbook; further details are available in the national publications. 3. Statistical data base in Austria is well developed as regards production statistics. A system of quiquennial benchmark surveys (economic censuses) covers the whole of the business sector. Annual census-type or sample surveys cover manufacturing, construction, utilities (electricity, gas and water), wholesale and retail trade, and some parts of the business and personal market-type services. In addition, there is a range of monthly and quarterly commodity statistics in manufacturing, monthly statistics in foreign trade, statistics from company reports, tax statistics etc. VAT statistics have a particular importance for ANA. The statistical unit addressed is establishment rather than enterprise. This explains a number of peculiarities of ANA. 4. In view of the existing statistical data base, the primary method of calculating GDP/GNP draws on activity data (GDP by output approach). A full complementary set of estimates is prepared using the expenditure approach. The income approach is also applied. However, because of the relatively poor data base on income, other than wages and salaries, it has no significant impact on the level of GDP. 5. The reconciliation of the output and expenditure estimates of GDP results in a statistical discrepancy which is reduced, to the extent possible, using the data on changes in stocks. GNP is derived from GDP by referring to the balance of net property and entrepreneurial income with the rest of the world in the balance of payments (BOP). The similar balance of wages and salaries is assumed to be zero. 6. No comprehensive statistical framework has been developed so far to quantify the hidden and informal activities in the ANA. Tentative investigations made in the past showed the relative importance of the hidden activities in some branches of the economy. It should be noted that the existing statistical methodology in Austria covers, although implicitly and to a cenain extent only, some hidden economic activities. More details of conceptual character are provided below, particularly in the section on manufacturing. 7. The present document takes into account the recommendations contained in the Eurostat Inventory Guide (document EUROSTAT/Bl/CPNB/002-e) and consists of three major parts: A. Output estimates of GDP (origin of GDP) B. Expenditure estimates of GDP (final use of GDP) C. Income estimates of GDP (distribution of national income) In each of the pans the description is further split into five sections: (1) general description of the existing problems and the applicability of the concepts of the hidden and informal economy to the area under consideration; (2) statistical sources; they are described to the extent necessary to understand the methodology of dealing with the current topic in various contexts; (3) ANA methods of estimating the hidden and informal economy activities; (4) expected revisions; (5) outlook. Cross refences are made in the text to avoid overlapping descriptions. For more information see Diagram 1 below. Diagram 1. Presentation of Present Situation Outlook information in the paper (5) General Sources Methods Revision description (completeness, (2) (3) (4) applicability) (1) Origin of GDP (output approach) 1 m Specific questions (according to Inventory 2.2) Distribution of National Income - Answers are standardized and combined (Income at^roach) where possible 1 - Level of detail as suitable (i.e. n GNP/GDP more detailed if necessary SpeciTic questions (according to Inventory 2.4) for the purpose) Fmal use of GDP (expenditure approach) 1 0 Specific questions (according to Inventory 2.3) A. OUTPUT ESTIMATE OF GDP Agriculture and Forestry 1. The estimation of output in monetary terms has always been difficult in agriculture and forestry, if possible at all. ТЪе distinction between formal and informal/hidden economy in this branch is problematic for conceptual reasons. On the other hand, some of the physical indicators used in agricultural statistics allow to overcome omissions from the stan. This is particularly relevant for agricultural area under cultivation and for crops. It is much more difficult to fully cover ouфut in the livestock sector. It should also be pointed out that such measures of agricultural policy as favorable lump-sum or zero taxation of agricultural income and exemptions from the value added tax (VAT) create almost no incentives to hide revenues originated in this part of the economy. Of course, there are some special cases like vine-growing, for example. In the compilation of the value added of farms, explicit provisions for the elements of the informal economy are made only for the farmers' own-account production (production for own use). This is also done for own-account production of fruits and vegetables by non-agricultural households. 2. No explicit estimates are made for the informal production of crops and vegetables. Rough estimates are made for own use of animal products (milk, eggs and meat) and for farm sales outside the market. The MZ' occasionally includes additional questions about certain types of own-account production of private households (fruits, vegetables, etc.). 3. The estimates are based on physical indicators. Standardized market prices of agricultural products, of milk and grain in particular, are used for valuing output.