Taxes less subsidies on production and imports 

Concept

11.36    Taxes payable on production and imports are part of primary income receivable by the general government sector (and, where applicable, non-resident governments) and are payable by other sectors and non-residents. All other current taxes are included in secondary income.

11.37    Taxes on production and imports are disaggregated into two components:

  1. Taxes on products, which include:
    • taxes that are payable on goods and services when they are produced, delivered, sold, transferred or otherwise disposed of by their producers; and
    • taxes and duties on imports payable when goods enter the economic territory or when services are delivered to residents by non-residents.
  2. Other taxes on production, which include
    • taxes related to the payroll or workforce numbers excluding compulsory social security contributions paid by employers and any taxes paid by the employees themselves out of their wages or salaries; recurrent taxes on land, buildings or other structures; some business and professional licences where no service is provided by the Government in return; taxes on the use of fixed assets or other activities; taxes on pollution; and taxes on international financial transactions.

11.38    These two components are required to define the relationships between three important income aggregates: total factor income; gross value added at basic prices; and gross domestic product at market prices. Total factor income plus other taxes less subsidies on production equals gross value added at basic prices, while gross value added at basic prices plus taxes less subsidies on products equals gross domestic product at market prices. For individual units and sectors, taxes on products are not recorded with income when output is valued at basic prices. However, the taxes are recorded with income for the economy as a whole to derive GDP at purchasers' prices.

11.39    GST (from 1 July 2000), wholesale sales taxes (prior to 1 July 2000), customs duties, excise taxes and taxes on financial and capital transactions are examples of taxes on products. On the other hand, local government rates, land taxes, payroll taxes, motor vehicle registration charges paid by businesses and taxes on pollution are examples of other taxes on production.

11.40    One of the functions of government is to issue a licence or other certificate for which a fee is payable in order for some activity to be undertaken or for the ownership or use of certain goods to be allowed. If the issue of such licences involves little or no work by the government, and the licence is being granted automatically on payment of the amount due, then it is likely the licence is simply a mechanism to raise revenue and therefore a tax. If the government exercises some proper regulatory function, payments are treated as purchases of services rather than payment of taxes, unless the payments are clearly out of all proportion to the costs of providing the services. Examples of regulatory functions are checking the competence, or qualifications, or the person concerned; checking the efficient and safe functioning of equipment; or carrying out some other form of control that it would otherwise not be obliged to do.

11.41    Subsidies are unrequited payments that government units (including, if applicable, non-resident government units) make to resident producers or importers on the basis of the levels of their production activities or the quantities or values of the goods or services which they produce, sell or import. Examples include export incentive grants, dairy industry stabilisation payments, the phosphate fertiliser bounty, and the Tasmanian freight equalisation scheme. Subsidies are paid to influence producers' level of output, the prices at which outputs are sold or the remuneration of the producers. Subsidies can be thought of as negative taxes because their impact on producers' incomes is the opposite of taxes on production.

11.42    Subsidies are not payable to households. Current transfers in cash that governments make directly to households and where households have the discretion on how to the use the transfer are treated as social assistance benefits in cash (e.g. old age pensions). Expenditures by government on goods and services produced by market producers that are provided directly to households, individually as consumers, without any further processing, constitute final consumption expenditure by general government and also social benefits in kind. Subsidies also do not include grants that governments make to enterprises to finance their capital formation, or to compensate them for damage to their capital assets, such grants being treated as capital transfers.

11.43    Consistent with taxes, subsidies on production are disaggregated into two components:

  1. Subsidies on products
  2. Other subsidies on production.

11.44    Subsidies on products are usually payable when the goods or services are produced, sold or imported, although they may also be payable in other circumstances, such as when goods are transferred, leased, delivered or used for own consumption or own capital formation. Subsidies on products may be a specific amount of money per unit of a good or service or they may be calculated ad valorem as a specified percentage of the price per unit. Other subsidies on production consist of subsidies other than those on products, including subsidies on the payroll or workforce, and may relate to the total salary bill or the employment of particular types of persons, such as handicapped persons and the long-term unemployed. Examples of Other subsidies on production include the JobKeeper and Boosting cash flow for employers’ policies.

Sources and methods - Annual

Benchmark years

11.45    The table below outlines the data sources and methods used in the estimation of annual taxes and subsidies on production and imports in current prices.

Table 11.24 Annual taxes less subsidies on production and imports - By type of tax
ItemComment
Taxes less subsidies on production and imports
  

Data from Government Finance Statistics from the ABS publication, Government Finance Statistics, Annual is the main source used to compile taxes and subsidies for all levels of government.

Government Finance Statistics – classified by tax type and purpose – are used to compile taxes and subsidies. Each tax type and purpose category are defined as relating to either taxes and subsidies on products or other taxes and subsidies on production.

 Taxes and subsidies on products
  Taxes and subsidies on products are allocated to specific products using a number of methods. These include household final consumption expenditure proportions in the case of the Goods and Services Tax (GST) and supply proportions for other taxes on products. Subsidies are allocated according to the product which best fits the specific purpose category.
 Other taxes and subsidies on production and imports
  Other taxes and subsidies on production are also allocated to specific industries. Land taxes and rates are allocated using proportions from EAS data, while payroll taxes are allocated on the basis of compensation of employees’ proportions. JobKeeper and Boosting cash flow for employers’ policies are allocated using administrative data from the ATO. Other taxes and subsidies on production are allocated to industry based on historical input and output proportions.

Latest year

11.46    Annual estimates of the latest financial year for production taxes and subsidies are derived by summing the four quarterly estimates using data from Government Finance Statistics.

11.47    Other taxes and subsidies on production are allocated to specific industries based on proportions calculated from various indicator series. These include:

  • Payroll taxes are allocated to specific industries based on payroll tax by industry data from the ABS publication, Labour Costs, Australia.
  • Land taxes and municipal and metropolitan improvement rates are allocated to the Ownership of Dwellings industry based on the proportion of the value of residential land to the total value of land. The remaining Land taxes and Municipal and metropolitan improvement rates are allocated equally amongst the other industries.
  • Motor vehicle taxes (not including those paid by households) are allocated to specific industries based on the proportion of the capital stock of motor vehicles.
  • Carbon tax, Taxes on renewable energy certificates, Carbon subsidies and Subsidies on renewable energy certificates are allocated to specific industries based on their emissions of greenhouse gases and relevant acquisitions of electricity respectively.
  • From 1 July 2017, the Major Bank Levy is allocated to Finance (ANZSIC subdivision 62).
  • From 1 April 2020, COVID-19 related other subsidies on production, such as the JobKeeper and Boosting cash flow for employers’ policies, are allocated to industries using ATO administrative data.

Sources and methods - Quarterly

11.48    The table below outlines the data sources and methods used in the estimation of quarterly taxes and subsidies on production and imports in current prices.

Table 11.25 Quarterly taxes less subsidies on production and imports
Item Comment
Taxes less subsidies on production and imports

 

 

Information about Commonwealth and State general government production taxes and subsidies is received from Government Finance Statistics, which are obtained from administrative sources such as the Commonwealth Department of Finance quarterly ledger, and State government quarterly statements of receipts and expenditure. Quarterly data for local government rates are collected from a sample of local government authorities.

For those production taxes and subsidies where an adjustment to a payable basis is made, the accrual figure is estimated by allocating cash receipts and payments (or estimated cash receipts and payments) to quarters according to the proportion of production or activity occurring in each quarter. For example, the quarterly Goods and Services Tax (GST) is extrapolated using expenditure on goods and services that attract GST. Household final consumption expenditure, gross fixed capital formation, lawyer and real estate fees and intermediate consumption by financial corporations are used for this allocation.

 Other taxes less subsidies on production and imports

 

 

Total other taxes and subsidies on production are sourced from quarterly GFS data. Other taxes and subsidies on production are also allocated to specific industries quarterly where the same proportions used to establish the latest year estimates by industry are applied.

The data are split into industries for known other taxes and subsidies on production using various sources, including GFS, ATO, Survey of Major Labour Costs, motor vehicle capital stock data and the proportion of residential land to the total value of land. 

Known other taxes on production are those taxes for which quarterly estimates are available. These include payroll tax, taxes on capital and financial transactions, motor vehicle tax, land tax and municipal rates, carbon tax and the surrender of Renewable Energy Certificates from energy generators and use of ATO data.

Known other subsidies on production are those subsidies for which quarterly estimates are available. These include Renewable Energy Certificates, carbon credits, and the COVID-19 specific subsidies including JobKeeper, Boosting cash flow for employers, Supporting apprentices and trainees, Aged care preparedness, and the Early childhood education and care relief packages.

Industry estimates are obtained by extrapolating off the latest Supply-Use benchmarks using the indicator series described above.

See paragraph 11.47 for further details.