86 Government Finance Statistics Manual 2014
systems oft en record revenue only on a cash basis. Th is
is especially the case for taxes. Further, even when ac-
crued taxes are estimated from assessments of taxes
due, there may be a risk of over- or understatement
of tax revenue. Th e remainder of this section provides
additional practical guidance on the appropriate time
of recording for taxes.
5.15 As a practical deviation from the general
principle, income taxes deducted at source, such as
pay-as-you-earn taxes, and regular prepayments of
income taxes may be recorded in the periods in which
they are paid and any fi nal tax liability on income
may be recorded in the period in which the liability
is determined.
5.16 It is also possible that governments receive
cash amounts before having an unconditional claim
on them.^8 Such circumstances include advances for
provision of goods and services to be delivered in the
future, and grants for the construction of fi xed assets
over several periods. When using the accrual basis of
recording, these cash receipts cannot be recognized
as revenue until such time as the government ac-
quires the unconditional claim on the amount. How-
ever, when using the cash basis of recording, the full
amount of revenue will be recognized in the period in
which the cash amounts were received, irrespective of
whether the service, delivery, or compliance with the
conditions were met in the past or will be met in the
future.
5.17 With the exception of taxes and social contri-
butions, the amount of revenue to be recorded on the
accrual basis is the entire amount to which the general
government unit has an unconditional claim. In the
case of taxes and social insurance contributions, only
those amounts that are evidenced by assessments and
declarations, customs declarations, and similar docu-
ments are considered to constitute revenue for gov-
ernment units.
5.18 As indicated in paragraph 3.78, the amount of
taxes and social contributions recorded must take into
account that the government unit receiving the rev-
enue is usually not a party to the transaction or other
event that creates the obligation to pay the taxes or
social insurance contributions. Consequently, many(^8) Th ese receipts are also referred to as “deferred revenue” or “ad-
vances” (see also paragraph 7.225).
of these transactions and events permanently escape
the attention of the tax authorities. Th e amount of rev-
enue from taxes and social insurance contributions
should exclude the amounts that possibly could have
been received from such unreported events had the
government learned about them, but instead perma-
nently escape the attention of the tax authorities.
5.19 Furthermore, in some countries, and for some
taxes, the amounts of taxes eventually paid may diverge
substantially and systematically from the amounts
due to be paid. It would be inappropriate to accrue
revenue for an amount that the government unit does
not realistically expect to collect. Th e amount that is
realistically expected to be collected may sometimes
be infl uenced by tax amnesties. Governments use tax
amnesties to capture some of the taxes accrued but
unpaid, to speed up payment of taxes, and to capture
revenue from transactions or events that have previ-
ously escaped the attention of the tax authorities. Th e
time of recording and measurement of revenue aris-
ing from such tax amnesties depends on the exact na-
ture of the amnesty granted and whether the revenue
has been previously accrued. Th e case of adjusting for
underestimation or overestimation of tax revenue is
discussed later.
5.20 It is typical that some of the taxes and social
insurance contributions that have been assessed and
accrued will never be collected. Th us, the diff erence
between estimates based on these assessments and
expected collections represents a claim that has no
real value and should not be recorded as revenue. If
transactions are recorded for such taxes (and other
revenue) that overestimate the amount of revenue re-
ceivable, a correction should be recorded in the GFS
framework. Th is requires an adjustment that allows
the excessive increase in net worth previously recorded
to be corrected.^9 In keeping with the accrual basis of
recording (see paragraph 3.79), such an adjustment
should occur in the period in which the overestima-
tion of receivables occurred. However, in cases where
it is not possible to identify the time of the overes-
timation, the adjustment is recorded when the need
for the adjustment is identifi ed. As such, a correction
to reduce revenue, with a corresponding correction
(^9) Th ese corrections in transactions recorded for revenue receiv-
ables should be distinguished from the case where a specifi c
debtor is deemed bankrupt and amounts receivable are deemed to
be uncollectable (see paragraph 10.57).