Jaroslav Sixta

1. Task Force on Goods in Processing, • 23-24 February 2012, Luxemburg Revision of Goods for Processing Jaroslav Sixta

2. Current Issues The concept of Intrastat/Extrastat caused a significant problems to the measurement of import and export The change of processing in National Accounts and Balance of Payments is not in line with Foreign Trade Statistics Merchanting is not fully solved in SNA 2008 (recording and „negative merchanting“)

3. Approximation of the change of ownership by the cross-border statistics has significant weaknesses • Intrastat/Extrastat work only when residents declare movement of goods • If a non-resident declares movement of goods the declared value significantly differs from residents‘ incomes / expenditures Intrastat / extrastat and National accounts

4. This concept combines Intrastat/Extrastat and VAT declarations • Residents’ figures declared in Intrastat/Extrastat are taken over to NA • Non-residents figures on import and export are estimated on the basis of VAT declaration • Intrastat/Extrastat is used for the structures for both residents and non-residents National concept of foreign trade (1)

5. Non-residents‘ purchases = export of domestic economy – based on VAT • Non-residents‘ sales = import of domestic economy • The problem of mixture of goods and services in VAT was solved. Due to the legislation only some services can be declared by non-residents in the country National concept of foreign trade (2)

6. Who is non-resident in the country? VAT register person (no physical presence) Domestic producer Foreign customer 100 200 DE CZ CH Company registered in Geneva (Switzerland) = profit 100

7. Impact of non-residents, 2011 f Net export by residents = -14 CZK bil(2 227 CZK bil - 2 241 CZK bil) Net export by non-residents = +206 CZK bil(642 CZK bil - 436 CZK bil) FTS Net export = +192 CZK bil(206-14 CZK bil)= +7,68EUR bil Non-residents purchases - sales = 32 CZK bil(547 - 514 CZK bil) Net export (national c.) = +18 mld. Kč(-14 + 32 CZK bil)=+0,72 EUR bil

8. Two STAGE COMPUTATION

9. ComparisonS of NET export National C

10. Non-residents may bias MS statistics but also EU and EMU aggregates because many companies with only VAT are settled in Switzerland. • The significance of this event is still rising (the discrepancy between financial flows and movements of goods) • Possible cuts in Intrastat/extrastat surveys may lead to the blindness in this issue. • This problem should be deeply investigated on the EU level (questionnaire), it concerns probably all EU countries Impact on eu aggregates ?

11. Do you take into account transactions carried out by non-residents registered for VAT in your country (so-called 'VAT-only' or 'foreign traders') when computing export and import captured in the National Accounts? • If YES, how do you reflect the transactions carried out by non-residents registered in your country reporting to the Intrastat and Extrastat in your country for the purposes of export and import in the NA? • What is the share of trade reported by non-residents (registered for VAT in your country) in Intrastat and Extrastat? Is the impact different on export and import side? Does it have an impact on the balance of trade (in community concept of the FTS)? Questionnaire: IMPACT OF „VAT-ONLY“ EFFECT (I.)

12. What data on export and import do you primarily use in the NA? • COMMUNITY CONCEPT OF THE FTS (data on foreign trade in goods according to the FTS are in fact the same as in the national accounts) • NATIONAL CONCEPT OF THE FTS (data on foreign trade in goods according to the FTS are adjusted for quasi-transit etc.) - we are aiming at significant conceptual adjustment in value • OTHER CONCEPT (for the NA purposes is computed entirely different set of data) - PLEASE DESCRIBE THE CONCEPT. DO YOU USE DATA OTHER THAN INTRASTAT AND EXTRASTAT? • If you register the „VAT only“ problem, how do you deal with it? • ADJUSTMENT OF THE FTS DATA (please specify) • IMPUTATION TO THE SERVICES (please specify) • OTHER (please specify) • Questionnaire: • IMPACT OF „VAT-ONLY“ EFFECT (II.)

13. Suppose that national concept of foreign trade is well defined! • Suppose that obtained figures for import for processing and export after processing are reliable. • FTS data are compared with PRODCOM (separately indentified services on customers‘ material) • Business accounting data will be in line with this concept, exported services will be confronted with the difference = EXPORT – (IMPORT + change of „INVENTORIES“) „inventories“ should express the time delay Processing

14. SNA 2008 recommends to record merchanting on Export side (purchases with negative sign) = Not friendly for SUT users • SNA 2008 omitted „negative merchanting“. If non-resident tradesin the country, it should be recorded as merchanting with (-). FTS can not record these data and survey on export/import of services, as well. • This happens in the Czech Republic when trading with fuels. Merchanting

15. SNA 2008 and ESA 2010 can not be successfully applied without deep investigation of VAT legislation influence on foreign trade • NA and BoP must be sure of total export (mainly net export) to ensure consistency between output and expenditure approach to GDP. • We recoomend that export and import for NA and BoP should be more harmonised. EU/EMU aggregates?? CONCLUSION

16. Thank you for your attention