Economic Flows, Stock Positions, and Accounting Rules 51
be diffi cult for a government unit to know the full
amount of tax revenue to which it is entitled because
these amounts may depend on transactions and other
events to which the government is not a party.
Application of the accrual principles
3.76 As a general rule, a fl ow is recorded under the
accrual basis of recording when economic ownership
changes or another economic event has occurred.
More specifi c guidelines for the application of the ac-
crual recording basis are described in the following
paragraphs.
Time of recording and measurement of taxes and other compulsory transfers.
3.77 Th e general principle is that taxes and other
compulsory transfers should be recorded when the un-
derlying activities, transactions, or other events occur
that give rise to the liability to pay (i.e., the moment
when it creates the government’s unconditional claim
to the taxes or other payments) (see paragraphs 5.10–
5.20). Th is time is not necessarily the time at which the
event being taxed occurred. For example, the obliga-
tion to pay tax on capital gains normally occurs when
an asset is sold, not when the asset’s value appreciated.
3.78 Estimating the revenue from taxes and com-
pulsory social insurance contributions must take
many uncertainties into account. Th e primary uncer-
tainty is 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
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. In other words, only
those taxes and social insurance contributions that are
evidenced by tax assessments and declarations, cus-
toms declarations, and similar documents are consid-
ered to create revenue for government units.
3.79 In addition, it is typical that some of the taxes
and social insurance contributions that have been
assessed will never be collected. Uncollectable taxes
include amounts deemed uncollectable due to non-
compliance with tax laws or insolvency of taxpayers.
Taxes should also exclude contested tax assessments,
which are treated as contingencies. It would be inap-
propriate to accrue revenue for an amount that the
government unit does not realistically expect to col-
lect. Th us, the diff erence between assessments and
expected collections represents a claim that has no
real value and should not be recorded as revenue
(see paragraph 5.20). Th e amount of taxes and social
insurance contributions that is recorded as revenue
should be the amount that is realistically expected to
be collected. Th e actual collection, however, may be in
a later period, possibly much later.
3.80 To ensure that the amount of taxes and social
contributions recorded on an accrual basis is equiva-
lent to the corresponding amounts actually received
over a reasonable amount of time, the following pos-
sibilities for the accrual recording of taxes could be
considered:- Amounts to be recorded are assessed amounts
adjusted by coeffi cients refl ecting the assess-
ments not likely to be collected. Th e coeffi cients
are estimated on the basis of past experience
and current expectations in respect of assessed
amounts never collected. - Cash amounts are recorded in the accounts, but
they are time-adjusted so that they are attributed
to the period when the activity took place to gen-
erate the liability.
3.81 If taxes are imposed on specifi c transactions
or events, they are recorded at the time the underlying
transaction or event occurs, even though these times
may not coincide with the actual payment of the tax to
the government. Th is implies that taxes on products
and imports are recorded at the time the products in
question are produced, imported, or sold, depending
on the basis of the taxation. Examples include sales
taxes, value-added taxes, import duties, and estate
and gift taxes.
3.82 In principle, income taxes and social contri-
butions based on income should be attributed to the
period in which the income is earned, even though
there may be a signifi cant delay between the end of
the reporting period and the time at which it is fea-
sible to determine the actual liability. In practice,
however, some fl exibility is permitted. In particular,
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,