Revenue 89
payroll and workforce; (iii) taxes on property; (iv) taxes
on goods and services; (v) taxes on international trade
and transactions; and (vi) other taxes. Th ese catego-
ries are described in the various sections on the re-
spective tax categories.
5.26 Th e classifi cation of taxes in this manual is
quite similar to the classifi cation employed in Revenue
Statistics, which is published annually by the Organ-
isation for Economic Co-operation and Develop-
ment. Th e two primary diff erences in the classifi cation
structure are that in Revenue Statistics, compulsory
social security contributions are treated as taxes and
the categories of taxes on goods and services, and
taxes on international trade and transactions are com-
bined into a single category. In addition, at a detailed
classifi cation level, Revenue Statistics diff ers in the fol-
lowing aspects: (i) payable tax credits are recorded as
negative taxes to the extent that the payable tax credit
off sets existing income tax receivable; (ii) imputed
taxes or subsidies resulting from the central bank im-
posing a rate of interest other than the market rate are
excluded from Revenue Statistics; and (iii) imputed taxes
or subsidies resulting from the operation of multiple
exchange rate systems are excluded from Revenue
Statistics.
Treatment of tax refunds and tax relief
5.27 Tax refunds are adjustments for overesti-
mation of taxes payable or the return of amounts to
taxpayers due to overpayments. Tax refunds gener-
ally are recorded as a reduction in the appropriate tax
category. When using the accrual basis of recording,
refunds are attributed to the period in which the event
occurred that generated the overassessments or over-
payments. However, in cases where it is not possible
to identify the time of the overestimation, the adjust-
ment is recorded at the time when the need for the
adjustment is identifi ed. When using the cash basis
of recording, such refunds should be recorded at the
time the payment occurs. In the case of a value-added
tax, taxpayers other than fi nal consumers normally
are allowed a refund of taxes paid on purchases. Even
if this refund exceeds the taxes payable by an individ-
ual taxpayer, the net refund is recorded as a reduction
in that category of tax.
5.28 Tax relief measures are incentives that reduce
the amount of tax owed by an institutional unit. Tax
relief can take the form of a tax allowance, an exemp-
tion, a deduction, or a tax credit. Tax allowances, ex-
emptions, and deductions are subtracted from the tax
base before the tax liability is computed—it reduces
the taxable amount before assessing the tax. Th ese tax
relief measures are also known as tax expenditures.
Tax expenditures are concessions or exemptions
from a “normal” tax structure that reduce govern-
ment revenue collection. No tax expenditures are
recorded as fl ows in the GFS. However, because the
government policy objectives could be achieved al-
ternatively through a subsidy or other direct outlays,
for fi scal transparency purposes, all tax expenditures
should be reported in supplementary reports.
5.29 A tax credit is an amount subtracted directly
from the tax liability due by the benefi ciary household
or corporation aft er the liability has been computed.
Tax credits can be payable or nonpayable. Tax credits
can be payable, in the sense that any amount of the
credit that exceeds the tax liability is paid to the ben-
efi ciary. Under a payable tax credit system, the credits
payable can be awarded to nontaxpayer benefi ciaries,
as well as taxpayers. In contrast, tax credits that are
nonpayable (sometimes called “wastable”) are limited
at most to the size of the tax liability of the taxpayer.
5.30 Tax relief that is embedded in the tax system
reduces the taxes receivable from the taxpayer and
therefore reduces government tax revenue. Th is is the
case for tax allowances, exemptions, and deductions
because they enter directly into the calculation of the
tax liability. Tax relief granted in this form of nonpay-
able tax credits should also be recorded as a reduction
in the relevant tax category.
5.31 However, when tax relief is granted in the
form of payable tax credits, it should be recorded on a
gross basis: the total amount of tax receivable should
be recorded as tax revenue of government and the
total amounts due as payable tax credits should be re-
corded as expense. Payable tax credits are oft en not
connected with the assessment of the taxable event,
and should be shown as a current transfer classifi ed
according to the purpose of the credit and the nature
of the recipient:- Th e transfer is a subsidy (25) if receivable by an
enterprise on the basis of the level of its produc-
tion activities or the quantities or values of the
goods or services it produces, sells, exports, or
imports (see paragraph 6.84).