Transcript PowerPoint

Improving the SNA treatment of
Transactions within Multinationals
Author: Dylan Rassier, BEA
Discussant: Nadim Ahmad, OECD
IARIW-OECD Conference: W(h)ither the SNA
Paris, 16-17 2015
[email protected]
Accounting for MNEs - The problem
• A well known one….
– Proliferation of transactions within MNEs and their
‘accounting baggage’ – transfer pricing, SPEs,
intangibles ….
– …driving wedges between GDP and GNI and between
a comforting (archaic) view of production and the
classic factors of production – labour and tangible
capital.
– Creating interpretation difficulties for the accounts.
– In a nutshell, is the value-added always ‘real’.
• Without explicitly saying so, the paper sets outs
to tackle this issue to improve interpretability.
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‘Legal’ vs ‘economic’ residence
• Paper highlights one particular issue that may
drive part of this wedge:
– the allocation of some units to an economic
territory on the basis of ‘legal’ corporation:
# 4.15 (f): For entities such as many special purpose
entities, that have few if any attributes of location, the
location is determined by their place of incorporation
• And highlights the implication of this
recommendation on the accounts.
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A slight clarification
• Without detracting from the main issue at hand, and indeed
substance of the paper, the language in the paper mistakenly
gives the impression that #4.15(f) is a general underlying
principle rather than a pragmatic ‘exception’.
• A message reinforced in #26.28 and #26.30 (b):
– if the production does not involve physical presence, such as some
cases of banking, insurance, other financial services, ownership of
patents, merchanting and “virtual manufacturing”, the operations
should be recognized as being in the territory by virtue of the
registration or legal domicile of those operations in that territory.
• In other words the underlying principle in the SNA remains
‘economic residence’, aligning with
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The issue(s) – (i)
Problem
• The fact remains however that the
inclusion of ‘units with ‘no’ physical
presence’ can have a distortionary effect
on the accounts.
Solution
• To treat these outside of the economic
territory (core accounts) and provide
supplementary estimates.
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The issue(s) – (ii)
Transactions within MNEs:
– Attracts less attention in the paper but is equally
important
– Economic ownership vs legal ownership
• Perhaps key to driving the wedge and also to
distorting measures of productivity.
• Guidelines developed by the Task Force on
Global Production but this remains very
much a live issue.
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Apportionment
• A potential solution to ‘estimating’/’correcting’ intrafirm transactions
– Notwithstanding the contention, particularly in the tax
community.
• But some care is needed – most approaches work on
attributes such as turnover, employment and tangible
capital.
– So de facto, flows related to intangible capital (including
‘non-produced assets’) are allocated as a residual of sorts –
implying shared ownership (partitioning) by users of the
assets.
– And data requirements (requiring the whole of the MNE
view) may be onerous in many countries – but BEPS action
plan 13 may provide some light at the end of a (probably)
long tunnel.
– Not forgetting potential introduction of international
asymmetries
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Conclusions
• Clear that additional detailed guidance on
transactions within MNEs would be
welcome
• TFGP and Globalisation in the National
Accounts are setting the agenda but many
thorny issues remain.
• New Handbook on International
Integrated Economic Accounts should also
tackle the MNE issue.
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Current Solutions
• Generally adopt the supplemental
approach
– Either by removing entities from the core
accounts (economic territory) and including
them as supplemental items or retaining in the
core accounts and having ‘of-which’ items.
• Some complications arise with the first
option however, notably concerning:
– Taxes paid
– International asymmetries – which part of the
ROW should the excluded unit go?
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Finally
• Another welcome contribution to the
debate…..
• ….. that highlights considerable challenges
for the SNA (and GDP in particular) to
remain relevant
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