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1 Finnish NTA and Consumption Taxes by Age Risto Vaittinen, Finnish Centre for Pensions Sixth Annual National Transfer Accounts Workshop, January 9-10. 2009, Berkeley, California FINNISH CENTRE FOR PENSIONS 2 Consumption and labour income per capita in Finland 2004 45000 40000 35000 26 v Euros 30000 61 v 25000 20000 15000 10000 5000 0 0 10 20 30 40 50 Labor income Private consumption 60 70 80 Total consumption Gross Pensions FINNISH CENTRE FOR PENSIONS 90 100+ Age 3 Financing per capita life-cycle deficit in Finland 2004 25000 20000 15000 10000 5000 0 -5000 -10000 -15000 -20000 On Average 0-19 Public Reallocation Private Transfers 20-29 30-49 Private Reallocation Total FINNISH CENTRE FOR PENSIONS 50-64 Public Transfers 65+ Public sector revenues and expenditures in Finland as a share of GDP in 2004 60 Per cent of GDP 50 40 30 20 10 0 1985 1990 1995 2000 Public consumption, collective Public transfers 2004 2005 2006 Public consumption, individual YearTax revenues FINNISH CENTRE FOR PENSIONS 4 Sources of Public Sector Income in Finland 2004 27 % 13 % 1% 32 % 39 % 20 % Earnings and property income tax Social Security taxes Other taxes Excise and other commodity taxes Vat Lähde: Tilastokeskus, Kansantalouden tilinpito FINNISH CENTRE FOR PENSIONS 6 Commodity taxes by Age • VAT – Tax on final consumption • • • • Excise taxes – Sinn taxes to regulate addictive behavior: alcohol, tobacco – Enviromental taxes: Fuels, electricity – Others: Vehicle tax among several other less significant tax items Taxes have direct and indirect component Direct impact of commodity taxation – Have immediate impact to the difference between user and producer prices in consumption commodities Indirect impact of commodity taxation – Taxes that has impact on the production costs of consumer commodities – Incidence to households estimated using input-output methods – About 80 % of the tax burden to households in commodity taxes FINNISH CENTRE FOR PENSIONS Taxes burden per capita by age in Finland 2004 10000 9000 Euro per capita 8000 7000 6000 5000 4000 3000 2000 1000 0 -24 25 29 30 34 35 39 40 44 45 49 50 54 55 59 Taxes on capital income 60 64 65 69 70 74 75 79 80 - Taxes on other earned income and transfers consumption taxes taxes FINNISH CENTRE FOR PENSIONS Age 7 8 Commodity Taxes Rates by Age in 2004 Tax rate % consumpion expenditure 32 30 Average tax-rate 28 26 24 22 20 18 16 14 80- 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 -24 Age group Tax rate on consumption by age Average tax rate on consumptioin Sources: Household Expenditure Survey 2001-2002, Statistics Finland. Own Calculations FINNISH CENTRE FOR PENSIONS 9 Commodity Taxes and Elderly (65+) Relative Consumption Per cent 0 50 100 150 Alcohol and tobacco Transport and communication Recreation and culture Miscellaneous consumption Food and beverages Health Housing and household appliances Tax Share of Purc. Price (%) 65+ Consumption relative to average (%) FINNISH CENTRE FOR PENSIONS 200 250 10 Structure of consumption by Age 100 11,1 11,3 11,3 10 80 15,4 16,2 16,5 8,9 3,8 70 5,8 5,3 6,6 14 26,1 20,6 Consumption share (%) 90 60 21,6 50 3,8 40 2,2 8,8 3,6 38,9 30 29,6 27,8 28,6 12,6 11,1 12,8 15,7 Population on average < 40 40-65 > 65 20 10 0 Age Food and beverages Housing and household appliances Health Miscellaneous consumption Alcohol and tobacco Transport and communication Recreation and culture Sources: Household Expenditure Survey 2001-2002, Statistics Finland. Own Calculations FINNISH CENTRE FOR PENSIONS 11 Relationship between the different types of prices in SNA • Purchasers’ prices (excluding any deductible VAT) - Non-deductible VAT - Trade and transport margins - Taxes on products (excl. VAT) + Subsidies on products = Basic prices FINNISH CENTRE FOR PENSIONS 12 Supply and Use Data at Basic Prices Absorption Matrix Domestic Flows Imported Flows Taxes and subsidies on products Labour Capital Production taxes and subsidies Size C C 1 1 TX Producers I Export Investors Household Government 1 1 1 1 USE(commodity,"dom",user) USE(commodity,"imp",user) C = Number of Commodities I = Number of Industries T = Number of taxes on subsidies on products TX = Number of taxes on subsidies on production FINNISH CENTRE FOR PENSIONS Total Sales 13 Classification Issue • CPC (central product classification) – The CPC (central product classification) is a classification based on the physical characteristics of goods or on the nature of the services rendered – defined in such a way that it is normally produced by only one activity as defined in ISIC (=United Nations International Standard Industrial Classification) – The CPA is the legally binding European version of the CPC • COICOP (classification of individual consumption by purpose) – is a classification used to identify the objectives of both individual consumption expenditure and actual individual consumption. FINNISH CENTRE FOR PENSIONS 14 CPA – COICOP Transformation COICOP CPA FINNISH CENTRE FOR PENSIONS