Income distribution of households; National Accounts

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Description topics

Total amount

Gross operating surplus

The surplus that remains after compensation of employees and taxes less subsidies on production and imports have been subtracted from the sum of value added at basic prices. For the self-employed (who are part of the sector households) the surplus is called mixed income, because it is partly a reward for their entrepreneurship compensation of labour.
The operating surplus of households equals housing services produced for own consumption by owner-occupiers.

In the system of national accounts gross means that consumption of fixed capital (depreciation) has not been subtracted. When it has, net is used.

Gross mixed income

Mixed income is for households mainly equal to the income earned by sole proprietors and other entrepreneurs personally liable for all gains and losses from their activities. The income earned has both an element of wage income as well as profit since the entrepreneur is both rewarded for the provided labour input as well as the undertaken risks. Included in mixed income are rentals received from letting real estate and income earned from black and illegal activities.
In the system of national accounts gross means that consumption of fixed capital (depreciation) has not been subtracted. When it has, net is used.

Gross primary income

Total primary income received by resident institutional units: compensation of employees, operating surplus / mixed income (gross), net property income and net taxes on production and imports less subsidies. Incomes flowing from one domestic sector to another have no effect on net national income. Gross national income (at market prices) equals GDP minus primary income paid by resident institutional units to non-resident institutional units plus primary income received by resident institutional units from the rest of the world. The division of payments by member states to the European Union is largely based upon differences in gross national income.

National income is not a production concept but an income concept, which is more significant if expressed in net terms, i.e. after deduction of consumption of fixed capital.

Gross disposable income

The sum of the gross disposable incomes of the institutional sectors. Gross national disposable income equals gross national income (at market prices) minus current transfers (current taxes on income, wealth et cetera, social contributions, social benefits and other current transfers) paid to non-resident units, plus current transfers received by resident units from the rest of the world. Because disposable national income is not a production concept but an income concept, it is usually expressed in net terms, i.e. after deduction of depreciation (consumption of fixed capital).

Gross adjusted disposable income

Adjusted disposable income is equal to disposable income of households including any income transfers in kind provided to households free of charge by general government or non-profit institutions serving households. This variable facilitates comparisons over time and across countries when there are differences or changes in economic and social conditions.

In the system of national accounts gross means that consumption of fixed capital (depreciation) has not been subtracted. When it has, net is used.

Gross saving

The portion of disposable income that has not been used for final consumption expenditure.

Resources

Resources are transactions which add to the economic value of sectors.

Total

Compensation of employees

The compensation of employees is the total remuneration, in cash or in kind, payable by an employer to an employee in return for work done by the latter during an accounting period. The compensation of employees is equal to the sum of wages and salaries and employers' social contributions.

Total

Wages and salaries

Wages and salaries are the remunerations an employee receives in return for work done during an accounting period. Wages and salaries include social contributions, income taxes and other payments payable by the employee, including those withheld by the employer and paid directly to social insurance schemes, tax authorities etc. on behalf of the employee. The most important form of wages and salaries is wages in cash (including withheld income taxes and social contributions). Wages in cash are composed of regular gross wages, standard extra allowances (for instance for hazardous work), bonuses, overtime pay, tips and compensation for costs related to employment (for instance refunds of fares to and from work). Bonuses include holiday pay, tantième, gratifications, profit shares and a thirteenth or fourteenth month. Wages in kind occur if an employee benefits from his or her job besides being paid wages. Examples of payment in kind are private use of a company car, free housing, free food, lower interest rates on mortgages, free or cheap use of the company's products or services, and company supplied or subsidized child care.

Employers' social contributions

Employers' social contributions are social contributions payable by employers to social security schemes or other employment-related social insurance schemes to secure social benefits for their employees. Employer's social contributions may be either actual or imputed. As set out by the ESA 2010, pay over periods in which no work is done due to illness or bad weather is registered as part of employers' social contributions.

Property income

Property income is the income receivable by the owner of a financial asset or a tangible non-produced asset in return for providing funds to, or putting the tangible non-produced asset at the deposal of, another institutional unit. Dividends are part of the property income.

Total

Interest

Interest is imputed to the period for which the underlying claim or debt exists. The actual interest payments or receipts are corrected for imputed bank services. Therefore there is a shift from actual interest payments and receipts to the production or the consumption of bank services. For producers of imputed bank services this means a decrease of the received interest and an increase of the paid interest with respect to the actual interest flows. For the consumers of imputed bank services this means an increase of received interest and a decrease of paid interest, compared with the actual interest flows.

Distributed income of corporations

Distributed income of corporations consists of dividends and withdrawals from income of quasi-corporations.
Dividends are a form of property income received by owners of shares to which they become entitled as a result of placing funds at the disposal of corporations. Dividends are recorded gross, before deduction of dividend tax. This applies also for the taxes on dividends to and from the rest of the world. Dividends are recorded at the moment they are made payable.
Quasi-corporations have no independent legal status. However, they have an economic and financial behavior that is different from that of their owners and similar to that of corporations. Therefore they are classified as non-financial or financial corporations.

Other investment income

Other investment income consists of:
- investment income attributable to insurance policy holders
- investment income payable on pension entitlements
- investment income attributable to collective investment fund shareholders

Rent

Rent is the income receivable by the owner of a natural resource for putting the natural resource at the disposal of another institutional unit.
There are two different types of resource rents: rent on land, and rent on subsoil resources. Resource rents on other natural resources such as radio spectra follow the same pattern. Examples are rents received by landowners from tenants and royalties for the permission to explore or to extract minerals or fossil fuels (received by owners of such deposits).

Social contributions and benefits

Social contributions and benefits are transfers to households, in cash or in kind, intended to relieve them from the financial burden of a number of risks or needs, made through collectively organized schemes, or outside such schemes by government units and NPISHs; they include payments from general government to producers which individually benefit households and which are made in the context of social risks or needs.
Social benefits are transfers to households, intended to relieve them from the financial burden of a number of risks or needs, such as sickness, invalidity, disability, old age, survivors and unemployment.

Total

Employers' imputed social contributions

Imputed social contributions represent the counterpart to the 'unfunded employee social benefits' (less any employees' social contributions) paid directly by employers to their (former) employees. It is necessary to introduce this imputation because the direct payments are recorded twice. Firstly they are recorded as employers' social contributions (part of the compensation of employees). Secondly they are recorded as social benefits.

Social benefits in cash

Social benefits other than social transfers in kind is made up of three sub-headings:
- social security benefits in cash
- other social insurance benefits
- social assistance benefits in cash.

Total

Social sec. non-pension benefits in cash

Social security non-pension benefits in cash.

Other social insurance benefits

Other private social insurance benefits are benefits paid by employers out of special reserves, which are segregated from their other reserves.

Social assistance benefits in cash

Social assistance benefits are payments of the central and local government to households, for which no quid pro quo by the beneficiary is expected. These benefits are based on a number of Dutch laws, such as the Act on Labor and Social Assistance.

Other current transfers

Other current transfers consist of non-life insurance premiums, non-life insurance claims, current transfers within general government, current international co-operation and miscellaneous current transfers.

Social transfers in kind

Social transfers in kind consist of individual goods and services provided for free or at prices that are not economically significant to individual households by government units and NPISHs, whether purchased on the market or produced as non-market output by government units or NPISHs. They are financed out of taxation, other government income or social security contributions, or out of donations and property income in the case of NPISHs.

Capital transfers

Capital transfers are payments for which no quid pro quo by the beneficiary is expected. They burden the wealth of the payer, or are meant to finance fixed capital formation or other long-term expenditures of the receiver. Capital transfers can be classified into capital taxes, investment grants, imputed capital transfers and other capital transfers.

Uses

Uses are transactions appear which deduces the economic value of sectors.

Total

Property income

Property income is the income receivable by the owner of a financial asset or a tangible non-produced asset in return for providing funds to, or putting the tangible non-produced asset at the deposal of, another institutional unit.

Current taxes on income and wealth

Current taxes on income and wealth of corporations consist of corporation tax and dividend tax. These taxes are based on the profits of corporations.
Current taxes on income and wealth of households include all taxes, which are periodically imposed on income and wealth, such as the income tax, the wage tax and the tax on net wealth of individuals. Non-periodical levies, such as inheritance tax are defined as capital transfers. Several types of taxes are simultaneously seen as taxes on production and imports when imposed on producers and as taxes on income and wealth when imposed on consumers. For instance, motor vehicle tax is a tax on production when it is imposed on company cars and it is a tax on income and wealth and imports when it is imposed on cars for private use.
The treatment of dividend tax results from the recording of dividends. Because dividends are recorded gross, i.e. before deduction of dividend tax, dividend tax is in all cases recorded at the receiving sector. The same applies for the dividend tax to and from the rest of the world.

Total

Current taxes on income

Tax levied on income. These include: corporate income tax, payroll tax, income tax, dividend tax, gambling tax and one-time revenue in connection with the liquidation of holding companies.

Other current taxes

Tax levied on capital (such as bank balances, savings and investments). The amount to be paid depends on the volume of the capital.

Social contributions and benefits

Social contributions and benefits are transfers to households, in cash or in kind, intended to relieve them from the financial burden of a number of risks or needs, made through collectively organized schemes, or outside such schemes by government units and NPISHs; they include payments from general government to producers which individually benefit households and which are made in the context of social risks or needs.
Social benefits are transfers to households, intended to relieve them from the financial burden of a number of risks or needs, such as sickness, invalidity, disability, old age, survivors and unemployment.

Total

Net social contributions

Social contributions include social security contributions, private social contributions (among which contributions to pension schemes) and imputed social contributions. Employers, employees, self-employed persons and non-active persons pay these contributions. Actually, the employers' part is paid directly to the insurers. However, in the national accounts, the employers' contributions are supposed to be part of primary income of households (i.e. the income from direct participation in the production process). Therefore, in first instance these contributions are treated as payments by employers to households as compensation of employees, who are deemed to pay them to the insurers in the income account.

Total

Employers' actual social contributions

Payments by employers, enforced by laws or (collective) labor agreement, in order to make social benefits possible.

Employers' imputed social contributions

Imputed social contributions represent the counterpart to the 'unfunded employee social benefits' (less any employees' social contributions) paid directly by employers to their (former) employees. It is necessary to introduce this imputation because the direct payments are recorded twice. Firstly they are recorded as employers' social contributions (part of the compensation of employees). Secondly they are recorded as social benefits.

Households' actual social contributions

Households' actual social contributions are social contributions payable on their own behalf by employees, self-employed or non-employed persons to social insurance schemes.

Households' social contrib. supplements

Households' social contribution supplements consist of the property income earned during the accounting period on the stock of pension and non-pension entitlements.

The social insur. scheme service charges

The social insurance scheme service charges are the service fees charged by the units administering the schemes. They appear here as part of the calculation for net social contributions; they are not redistributive transactions but part of output and consumption expenditure.

Other social insurance benefits

Other private social insurance benefits are benefits paid by employers out of special reserves, which are segregated from their other reserves.

Other current transfers

Other current transfers consist of non-life insurance premiums, non-life insurance claims, current transfers within general government, current international co-operation and miscellaneous current transfers.

Capital transfers

Capital transfers are payments for which no quid pro quo by the beneficiary is expected. They burden the wealth of the payer, or are meant to finance fixed capital formation or other long-term expenditures of the receiver. Capital transfers can be classified into capital taxes, investment grants, imputed capital transfers and other capital transfers.

Consumption of fixed capital

The decline in value of fixed assets owned, as a result of normal wear and tear and obsolescence.

For the estimation of the consumption of fixed capital the perpetual inventory method (PIM) is applied. The capital stock at the beginning of the year is brought to replacement value because of price changes. The fixed capital formation during the year is added to this capital stock. Next it is diminished with the value of capital goods discarded. This gives to value of capital stock at the end of the year. The consumption of fixed obtained by applying a depreciation percentage.
This method may differ considerably from the method used to calculate depreciation in business accounts, which is based on historical costs or fiscal life span.

Adjustm. change in pension entitlements

Since households are treated in the financial accounts as owners of the pension entitlements an adjustment item is necessary to ensure that any excess of contributions to pension schemes over pension benefits does not affect household savings. This adjustment is equal to the difference between net pension contributions (including imputed contributions) and pension benefits.