Gross Domestic Products by cost components

1. Regional Seminar on Developing a Program for the Implementation of the 2008 SNA and Supporting Statistics Leyla BAYRAK NEVES DE ALMEIDA11-13 September2013 Ankara - Turkey

2. Gross Domestic Products by cost components Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey

3. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey In the Turkish national accounts system, estimate of GDP is not made independently from the income perspective. The income approach denotes calculation of GDP as the addition of its various components, consisting of compensation of employees , gross operating surplus, including consumption of fixed capital, and other taxes on production less other subsidies on production . The sum of operating surplus and gross mixed income is obtained as a residual item, reduced by known values for the other income components.

4. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey The revising of GDP by income approach according to ESA95 is currently ongoing and near its completion. In the revision, annual benchmark year is 2002 based on supply and use tables (SUT) which were the first table compiled by the concepts, definitions and classifications of the ESA-95, resulting in relatively a more integrated and consistent GDP estimates. GDP series are being backcasted and extrapolated from the new 2002 benchmarks.

5. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey • In the context of compliance of ESA 95, the quarterly estimation of GDP by income approach also is planning to be estimated. Further efforts are also required to achieve full compliance with the methodological requirements of ESA-95. • Thus far GDP estimates by income approach for a reference year are available at the end of June of the following year. Annual GDP results are sum of the quarters.

6. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey • The cost approach to the estimation of gross domestic product involves adding up the cost components of value added for all producing establishments in the country. • The formula for GDP measured using the income approach may be summarized as in the table below: GDP by cost components + Compensation of employees + Gross operating surplus and mixed income + Taxes on production and imports - Subsidies on product and production GDP

7. Compensation of employees Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey • Compensation of employees is defined as "the total remuneration, in cash or in kind, payable by an employer to an employee in return for work done by the latter during the accounting period". The compensation of employees is calculated per economic activities. Compensation of employees has two main components: • Wages and salaries in cash and in kind • wages and salaries in cash • wages and salaries in kind  The value of the social contributions payable by employers. • employers’ actual social contributions • employers’ imputed social contributions

8. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Compensation of employees as a component of value added may be paid to residents or to non residents by resident producers. Wages and salaries in cash include all payments including commissions, tips, special or recurrent bonuses. The amounts are recorded before deductions for the employees own contributions to social security, payment of income taxes etc. The payments of retirement pensions and of severance allowances are excluded from compensation of employees. For compensation of employees different data sources are used for each kind of activities.

9. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Basic data sources are Household Labour Force Survey, which is carried out quarterly and annually, Business Surveys for the different industries (it is called “structural business statistics”); like manufacturing, mining and quarrying, electricity, gas and water supply, wholesale and retail trade, hotels and restaurants, transport, storage and communication, financial intermediation, The Report of Supreme Audit Board, Social Security Institution and Ministry of Finance. All data including wages and salaries in kind are surveyed in monetary terms and processed in this form. A supplementary source is Turkish electricity administration and private electricity companies. A social security contribution which is actual and imputed is taken from additional sources. Social contributions laid down by law are calculated with the aid of data from The Social Security Institution.

10. Taxes on production and imports (D2) Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Taxes on production and imports are compulsory, unrequited payments, in cash or in kind made by establishments to the general government units or, to the European Institutions related to the production and imports regardless of the fact on whether the producer has any profits or not. Taxes on production and imports are divided into: • a) taxes on products (D.21): • (1) value added type taxes (VAT) (D.211); • (2) taxes and duties on imports excluding VAT (D.212): • – import duties (D.2121); – taxes on imports excluding VAT and import duties (D.2122); (3) taxes on products, except VAT and import taxes (D.214). • b) other taxes on production (D.29)

11. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey D2 is available from the general government. Data source is Ministry of Finance and data used for estimates are based on an accrual basis. The information is available monthly. The data is the basic information for compiling taxes on production and imports. Also for D3 estimation data source used is Ministry of Finance same as D2.

12. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Subsidies (D3) Subsidies are classified into subsidies on products and other subsidies on production. Subsidies are current unrequited payments by general government to resident, with the objective of influencing their levels of production, their prices or the remuneration of the factors of production. Subsidies on products (D.31) are subsidies payable per unit of a good or service produced or imported. The subsidy may be a specific amount of money per unit of quantity of a good or service, or it may be calculated ad valorem as a specified percentage of the price per unit. Subsidies on products include also subsidies to public corporations and quasi-corporations to compensate for persistent losses which they incur on their productive activities as a result of charging prices which are lower than their average costs of production as a matter of deliberate governmenteconomic and social policy.

13. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Other subsidies on production (D.39) consist of subsidies except subsidies on products that resident producer units may receive because of engaging in production. Subsidies are recorded when actual payments are paid, because the main source of information is the government accounts and transfers are recorded when the payments are realized in these accounts. Main data source is Ministry of Finance to calculate subsidies.

14. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Consumption of fixed capital In SNA, consumption of fixed capital is defined in general terms as the decline, during the course of the accounting period, in the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration. Estimates of consumption of fixed capital is obtained by the PIM method. Estimates are derived using a delayed linear function. This survival function shows that the surviving assets are reduced by a constant amount

15. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Average service life of construction investment, currently used for PIM estimates, is 33 years and it is 18 years, which is the same of OECD average, for machinery and equipment. Data on fixed capital formation series, beginning from 1948, at 1987 constant prices are used to produce estimates of consumption of fixed capital at constant prices. Estimates at current replacement cost are obtained by reflating the constant price estimates.

16. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Gross operating surplus and gross mixed income (B2g/B3g) Operating surplus is balance sheet of generation of income accounts. It is defined residually as value added (net) minus compensation of employees payable, minus taxes on production payable, plus subsidies receivable. By definition, only establishments whose output is valued at market prices have operating surplus, where output is valued at cost, as for government services, operating surplus is necessarily zero. Mixed income was estimated from LFS and social security institutions data. As an independent estimation of operating surplus and mixed income (B2g/B3g) is not possible because of lack of data.

17. Planned Studies Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey To publish the result of GDP by income approach at the same time with GDP by production and expenditure methods’ results, To estimate primary distribution, secondary distribution of income accounts, To estimate use of disposable income account To estimate consumption of fixed capital by kind of activities