96 Government Finance Statistics Manual 2014
transferred to the government. Fiscal monopolies are
public corporations, public quasi-corporations, or
government-owned unincorporated enterprises that
have been granted a legal monopoly over the produc-
tion or distribution of a particular kind of good or ser-
vice in order to raise revenue and not in order to further
the interests of public economic or social policy. Such
monopolies are typically engaged in the production of
goods or services that may be heavily taxed in other
countries—for example, alcoholic beverages, tobacco,
matches, petroleum products, salt, playing cards, lot-
teries, gambling, etc. Th e exercise of monopoly powers
is simply an alternative way for the government to raise
revenue instead of the more overt procedure of taxing
the private production of such products. In such cases
the sales prices of the monopolies are deemed to in-
clude implicit taxes on the products sold.
5.64 In principle, only the excess of the monopoly
profi ts over some notional “normal” profi ts should be
recorded as taxes, while the “normal” profi ts are re-
garded as dividends (1412) or withdrawals of income
from quasi-corporations (1413). However, it is recog-
nized that it may be diffi cult to estimate this amount,
and, in practice, the value of the taxes should be taken
as equal to the amount of the profi ts actually payable
from fi scal monopolies to government. Any reserves
retained by fi scal monopolies are excluded. Th is tax is
recorded when the payment takes place rather than
when the profi ts were earned.
5.65 When a public enterprise is granted monopoly
powers as a matter of deliberate economic or social
policy because of the special nature of the good or ser-
vice or the technology of production (e.g., public utili-
ties, post offi ces and telecommunications, railways), it
should not be treated as a fi scal monopoly. Property
income payable to government from such public en-
terprises is recorded as dividends (1412) or withdrawals
of income from quasi-corporations (1413). Export and
import monopoly profi ts receivable from marketing
boards or other enterprises dealing with international
trade are similar to fi scal monopoly profi ts, but are clas-
sifi ed as profi ts of export or import monopolies (1153).5.66 Th e treatment of lotteries and other gam-
bling activities deserves special mention. Th e con-
cept of fi scal monopoly applies to state lotteries and
other gambling to the extent that they are devices to
raise revenue rather than further the interests of pub-lic economic or social policy, even though they may
compete with other privately organized lotteries and
other gambling. As is the case with other fi scal mo-
nopolies (see paragraph 5.64), in principle, the “nor-
mal” profi ts should be regarded as dividends (1412) or
withdrawals of income from quasi-corporations (1413),
while the excess should be recorded as a tax classi-
fi ed as profi ts on fi scal monopolies (1143). However, in
practice it may be diffi cult to estimate the “normal”
profi ts, and the taxes should be taken as equal to the
amount of profi ts actually payable to government.
5.67 Governments that have monopoly powers
over lotteries and other gambling activities oft en del-
egate the organization of these activities to nonprofi t
institutions serving households, with a view to a fi nal
distribution of the profi ts earned, through social
transfers. Th is delegation of functions normally re-
quires the nonprofi t institution to organize those ac-
tivities through a specialized department. When such
departments have the attributes of an institutional
unit (as described in paragraph 2.22), they may be
classifi ed as public corporations (see paragraph 2.104)
that constitute a fi scal monopoly.
5.68 Depending on the administrative arrange-
ments, the distribution of the profi ts earned may be
done in two ways: (i) the fi scal monopoly transfers its
profi ts to a government unit (classifi ed as a tax in prof-
its of fi scal monopolies (1143)), and the government
unit then transfers the profi ts to the population; or
(ii) the fi scal monopoly transfers the profi ts directly
to the population (normally through criteria deter-
mined by law). In the latter case, a rerouting treatment
is required because the government does not appear
as a party to the transaction in the actual accounting
records. Rerouting means the transaction is recorded
as if the monopoly transferred its profi ts to govern-
ment as described in (i) (see paragraph 3.28).Taxes on specifi c services (1144).
5.69 Taxes on specifi c services (1144) are levied
on payments for specifi c services. Th ese taxes are
levied on services such as transportation (including
airport and other passenger taxes),^23 insurance, bank-
ing, entertainment, restaurants, and advertising. Also(^23) If these taxes are based exclusively on international travel, they
are classifi ed as other taxes on international trade and transactions
(1156) (see paragraph 5.92).