42 Government Finance Statistics Manual 2014
considered transfers. Th e amount of collective service
or benefi t that may eventually be receivable by an indi-
vidual unit is not proportional to the amount payable.
Taxes and nonlife insurance premiums are examples
of such transactions classifi ed as transfers due to the
collective nature of the benefi ts (see paragraphs 5.23
and 5.149, respectively).
3.13 Taxes are treated as transfers even though the
units making these payments may receive some ben-
efi ts from services provided by the government unit
receiving the taxes. For example, in principle, no one
can be excluded from sharing in the benefi ts provided
by collective services such as public safety. In addi-
tion, a taxpayer may even be able to consume certain
individual services provided by government units.
However, it is usually not possible to identify a direct
link between the tax payments and the benefi ts re-
ceived by individual units. Moreover, the value of the
services received by a unit usually bears no relation to
the amount of the taxes payable by the same unit.
3.14 Nonlife insurance premiums and claims are
also treated as transfers in GFS.^5 Th is type of premium
entitles the units making the payment to benefi ts only
if one of the events specifi ed in the insurance contract
occurs. Th at is, one unit pays a second unit for accept-
ing the risk that a specifi ed event may occur to the
fi rst unit. Th ese transactions are considered transfers^6
because in the nature of the insurance business, they
distribute income between policyholders to those who
claim, as opposed to all policyholders who contribute.
Th ere is uncertainty whether the contributing unit
will receive any benefi ts and, if it does receive benefi ts,
they may bear no relation to the amount of the premi-
ums previously paid. Nonlife insurance includes so-
cial security schemes and employer social insurance
schemes for government employees that do not pro-
vide retirement benefi ts. Th us, social security contri-
butions receivable and social security benefi ts payable
by government units, which are not for employment-
related pensions, are treated as transfers in GFS.
3.15 Transfers may be either current or capital. To
distinguish current transfers from capital transfers, it(^5) Th e prepayment of a premium is the acquisition of a fi nancial
asset by the insured (see paragraph A4.76), which reduces as
insurance coverage is provided.
(^6) In the 2008 SNA, nonlife insurance premiums are partitioned
into a sale of a service and a transfer. In GFS, the entire premium
is considered a transfer (see paragraph 5.149).
is preferable to focus on the special characteristics of
capital transfers.
3.16 Capital transfers are transfers in which the
ownership of an asset (other than cash or invento-
ries) changes from one party to another, or that oblige
one or both parties to acquire or dispose of an asset
(other than cash or inventories), or where a liability is
forgiven by the creditor. Cash transfers involving dis-
posals of noncash assets (other than inventories) or
acquisition of noncash assets (other than inventories)
are also capital transfers. A capital transfer results in
a commensurate change in the stock position of as-
sets of one or both parties to the transaction. Capital
transfers are typically large and infrequent, but capi-
tal transfers cannot be defi ned in terms of size or fre-
quency. A transfer in kind without a charge is a capital
transfer when it consists of: the transfer of ownership
of a nonfi nancial asset (other than inventories); and
the forgiveness of a liability by a creditor when no cor-
responding value is received in return. Major nonre-
current payments in compensation for accumulated
losses or extensive damages or serious injuries not
covered by insurance policies are also capital transfers.
A transfer of cash is a capital transfer when it is linked
to, or conditional on, the acquisition or disposal of an
asset by one or both parties to the transaction.
3.17 Current transfers consist of all transfers that
are not capital transfers. Current transfers directly aff ect
the level of disposable income and infl uence the con-
sumption of goods or services. Th at is, current transfers
reduce the income and consumption possibilities of the
donor and increase the income and consumption pos-
sibilities of the recipient. For example, social benefi ts,
subsidies, and food aid are current transfers.
3.18 It is possible that some cash transfers may be
regarded as capital by one party to the transaction and
as current by the other party. So that a donor and a re-
cipient do not treat the same transaction diff erently, a
transfer should be classifi ed as capital for both parties
even if it involves the acquisition or disposal of an asset,
or assets, by only one of the parties. When there is doubt
about whether a transfer should be treated as current or
capital, it should be treated as a current transfer.
Nonmonetary transactions
3.19 Nonmonetary transactions are transactions
that are not initially stated in units of currency. Th ese