4. Revision 2021: more detailed interpretation of international guidelines

No new international guidelines have been introduced since the 2010 revision. However, in a few instances, a changed interpretation of the methods and concepts used did lead to adjustments in the 2021 revision. This chapter further clarifies these changes relating to how transactions are recorded.

4.1 Energy tax credit

Households and companies pay energy tax on electricity consumption. A tax credit is applied per electricity connection when calculating this tax. As a result, when energy consumption is low, the tax credit may be higher than the energy tax that was initially payable and the taxpayer will receive money instead of having to pay tax. The increasing number of solar panels installed at households and companies has resulted in this situation occurring ever more often.

Until now, tax credits have been netted against tax revenue in the national accounts. This results in negative energy taxes for the relevant taxpayers. However, ESA 2010 prescribes that such netting is only permitted if the credit does not exceed the tax due, which means that the tax cannot become negative. Whether the tax actually becomes negative does not matter. If it is possible that the tax becomes negative, the credit should not be netted. Under the current rules and for all taxpayers, it is possible that the credit is negative, and therefore netting is not permitted. For this reason and starting from this revision, such netting is no longer applied, resulting in government tax receipts increasing by €3.8 billion, of which €3.4 billion are paid by households.

The energy tax credit for households is currently recorded as an income transfer. For companies, this is recorded as a non-product-related subsidy. Recording the household tax credit as income transfer has had a positive impact of €3.4 billion on GDP, as the energy tax and the non-product-related subsidy are part of GDP while income transfers are not. The changes to the way in which this credit is recorded for companies has no effect on GDP.

4.2 Privately owned solar power

Many households use solar panels to generate solar power for their own consumption. If they generate more solar power than they consume themselves, they supply this power to their electricity company. On a year-on-year basis, households may net this supply against the electricity they consume. This means that, on an annual basis, households only need to pay for the energy they consume above the energy they generate. If they generate more on an annual basis than they consume, the power company pays them for this extra energy.

The value of the additional output for which the energy companies pay, is clear. This output is valued in the national accounts at the price households receive for it. Until recently, the valuation of own use of solar power, both direct and netted consumption, was less straightforward. This could be both valued against the price that energy companies receive for the sale of electricity (the base price) as well as against the price that households would have paid if they had purchased this electricity from the energy company (the market price). As a large proportion of the electricity price comprises taxes, there are major differences between these two valuations. Taxes are not part of the base price, but they are part of the market price.

The increasing use of solar panels by households has resulted in Eurostat increasing its focus on this. Additional European guidelines have been developed regarding how to interpret ESA 2010 on this point. The guidelines stipulate that generation for own use should be valued at base prices. These guidelines were adhered to during the preparation of this revision. Until now, the electricity generated was valued against market prices. This has had a negative impact on GDP of €1.0 billion.

4.3 Drug production and trafficking

According to ESA 2010, drug production and trafficking should be included in the national accounts, along with several other illegal activities. Estimating this is fraught with many uncertainties, as few reliable sources are available. During the revisions, extensive research is conducted regarding the extent of illegal activities in the Netherlands. New sources and insights have become available since the previous revision on reporting year 2015. One of these insights, which relates to accounting for the income of non-resident drug barons, has led to a changes in how drug production and trafficking are recorded.

Much of the production and trafficking of drugs is in the hands of internationally operating criminal organisations. This concerns in particular international cocaine shipments and the production and export of synthetic drugs. The leaders of these criminal organisations almost always live outside the Netherlands in countries where the chances of being caught are lower and where it is easier to spend the money they make. For the purpose of the national accounts, this means they should be considered as being residents of a country other than the Netherlands, even if they have Dutch nationality.

For this reason and starting from this revision, drug barons’ activities are no longer classified as part of the Dutch economy. These activities are classified as part of the economy of the (often unknown) country in which the leader of the organisation is resident. Only the earnings of members of criminal organisations who are resident in the Netherlands are still counted as part of the Dutch economy. For example, for cocaine trafficking, this means that cocaine imports and re-exports are no longer included in the national accounts. Only trafficking within the Netherlands and the services provided by residents for re-export, such as the unloading of cocaine in the Port of Rotterdam, are still included. The earnings of resident drug barons, for example from the production of cannabis, are still classified as part of the Dutch economy.

This change in recording coincides with other changes to methods and sources for estimating drug production and trafficking, which are based in part on consultations with the Netherlands Police regarding the nature of this international crime. This means that is not possible to determine the impact of only recording the drug process differently. The change in the way that activities are recorded together with the new methods and sources have had a negative impact on GDP of €0.5 billion.

Further information about the methods and sources for drug production and trafficking can be found in this article. The article also discusses how illegal activities in the Dutch economy are estimated.

4.4 Commuting by public transport

Some employees commute to work by public transport. Employers often compensate many of these employees for the costs incurred. According to ESA 2010, reimbursements for commuting fall under employee remuneration as long as the journey was made in the employee’s own time. This can be reimbursed in two ways. An employee can be reimbursed in cash for the costs incurred, for example to cover the purchase of a public transport season ticket. This reimbursement was recorded as salary both before and after the revision.

Alternatively, an employer can pay for the transport directly by making a public transport season ticket or a public transport ticket available. These costs were modest during the previous revision, which is why, until now, the way they were recorded in the company accounts provided a good reflection of reality, and they were recorded as the employer’s intermediate costs.

The increasing provision of public transport season tickets has resulted in adjustments to how this is accounted for, and to better reflect ESA 2010 guidelines. For this reason and from this revision, these costs are now recorded as salary (wages in kind). This has a positive impact on GDP of €0.5 billion.

4.5 Waste management contribution

The government expects manufacturers of products that are packaged to contribute financially to the recycling or processing of packaging waste. The contributions are then used for such things as funding waste collection and processing in the Netherlands. The government has delegated the implementation of this mandatory scheme to the business community. Until now, these payments were recorded as intermediate costs for the companies and institutions that pay this contribution.

This revision investigated how this recording takes place in more detail and the decision was taken to record the contribution in the national accounts as a non-product-related tax. The reason for this change is that the contribution has the characteristics of a tax: it is mandatory and is imposed by the government, even though the contribution is not collected by the government itself. In the new recording procedure, the government receives the tax from the companies that pay this, before paying it out as a revenue transfer to the sector in which the costs of implementation are incurred. This new recording procedure has had a positive impact on GDP of €0.3 billion.

4.6 Energie Beheer Nederland production activities

Energie Beheer Nederland (EBN) is a company contracted by the Dutch State to engage in the extraction of natural gas and petroleum. In the national accounts, this company is classified within the government sector. Until this revision, the actual extraction of natural gas and petroleum were registered within the non-financial corporations’ (NFCs) sector. EBN’s revenues were mainly considered as income for making the gas fields available, or income from assets. As a result of the EDP verification, the recording procedure was changed in this revision.

Starting from this revision, in cases where EBN participates as partner with extraction companies to extract natural gas and petroleum, this will be incorporated partly as a production activity within the government sector. Output within the government sector will be incorporated based on EBN’s share in the partnership. The new recording procedure enables a better description of the economic developments that have taken place in recent years, such as the winding down of natural gas extraction, the rising cost of earthquake damage and EBN’s new role in the energy transition. The change was also needed as the previous recording procedure was unable to account for a situation in which expenditure was higher than income.

Extraction is a market activity and this is first time that a market producer has been included within the government sector. This means that the government sector can now record a profit or loss in the national accounts, in the form of a positive or negative net operating surplus. In reporting year 2021 the government sector’s net operating surplus was €1.8 billion. This change to how EBN’s production activities are recorded has had no effect on GDP nor on the government balance.

4.7 Tourist tax

When recording taxes a distinction is drawn between product-related taxes linked to the volume or value of goods and services sold, and non-product-related taxes that are usually linked to the use of production resources. Tourist tax is usually levied based on the number of overnight stays and therefore has the characteristic of a product-related tax. However, until this revision, tourist tax was recorded as a non-product-related tax paid by the accommodation service provider, which passes on these costs to the customer in its service fees.

The way in which tourist tax is booked was changed in this revision. From now on, this tax will be booked as a product-related tax paid by the customer of the relevant accommodation service provider. This change leads to a lower volume of production and value added (at base prices) in the respective sectors. The effect on GDP (at market prices) is zero.

4.8 Student travel product

The student travel product (formerly student public transport card) is part of the student grant. With effect from this revision, this will be recorded as a social benefit in cash and the associated household consumption will be recorded as government consumption. This has no effect on GDP.