REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT the application of the Council Directive on the compilation of gross national product at market prices
Date: 1996-03-27
Institutions: European Commission
Subjects: evaluation of resources, gross national product, market prices, national accounts, statistics

COMMISSION OF THE EUROPEAN  COMMUNITIES 

Brussels,  27.03.1996 
COM(96)124 final 

REPORT FROM THE COMMISSION  TO THE COUNCIL 
AND THE EUROPEAN  PARLIAMENT 

THE APPLICATION  OF THE COUNCIL DIRECTIVE ON THE COMPILATION 
OF GROSS NATIONAL PRODUCT AT MARKET PRICES 

1.  Introduction 

The  GNP  Directive  (Council  Directive  89/130/EEC,  Euratom  of  13 February  1989)  established  the 
procedures to facilitate  the verification,  and  where  necessary  the  improvement,  of the  comparability, 
reliability  and  exhaustiveness  of  Member  States'  estimates  of  GNP.  The  adoption  of  the  GNP 
Directive  followed  the  creation  of the  fourth  own  resource  of the  European  Communities  (the  GNP 
Resource). 

This  report  summarises  the  progress  made  by  the  Commission  and  the  GNP  Committee  since  the 
adoption  of  the  GNP  Directive.  This  document  has  been  produced  in  response  to  the  Council's 
Declaration  made  with  respect  to  Article  8,  paragraph  2  of  the  Council  Decision  on  the  system  of 
own resources  94/728/EC, Euratom  of 31 October  1994. 

The  GNP  Directive  itself  noted  in  Article  7  that  special  attention  needed  be  paid  to  verifying  and 
improving the exhaustiveness  of the GNP estimates. That  is to say, in particular,  the coverage of  the 
hidden  economy.  Exhaustiveness  has  thus  been  a  top  priority  for  the  GNP  Committee.  The 
milestone  in  the  work  done  so  far  was  the  publication  of  the  Commission  Decision  on 
exhaustiveness  (94/168/EC, Euratom  of 22 February  1994). 

Reflecting  this  priority,  this  report  has  been  organised  as  follows:  Section  2  summarises  the  most 
important  work  done  on  exhaustiveness.  Progress  on  the  so-called  transversal  themes  and  on 
country-specific  matters is described  in section  3. Conclusions  are drawn  in section 4. 

This  report  focuses  on  the  verification  and  improvement  of  the  national  accounts  of  the  twelve 
Member  States as of the end  of  1994.  The GNP  estimates  of  the  new  Member  States  from  1 January 
1995 (Austria,  Finland  and  Sweden)  will  be assessed  for  the  first  lime during  1996, as  will  those  of 
Norway  and  Iceland  as signatories  to the  European  Economic  Area  Treaty. 

The  Commission  has  identified  a  number  of  points  on  which  it  has  formally  noted  its  reservations 
with  the  Member  States.  These  reservations  identify  parts  of  the  process  of  compilation  of  GNP 
where  further  efforts  are  needed  to verify  and  if  necessary  improve  the  statistics.  Foremost  amongst 
the  reservations  is one  concerning  the exhaustiveness  of each  country'  GNP  estimates.  In addition  a 
range  of  transversal  reservations  exists  (themes  which  need  further  verification  or  improvement  in 
all  Member  States) and  a variety  of country-specific  reservations. 

A 

2.  Exhaustiveness 

The  Commission  Decision  on  exhaustiveness  of  February  1994  was  adopted  after  a  great  deal  of 
effort  to  identify  the  best  approaches  to  this  very  difficult  matter.  The  Decision  required  Member 
States  to  submit  reports  on  four  aspects  of  exhaustiveness  by  the  end  of  June  1994,  and  in  some 
cases to carry-out  substantial  research  in support  of those reports. The four  reports  were as  follows: 

A detailed description  of all of the explicit and  implicit adjustments  already  made by the 
Member  State to produce  exhaustive  GNP  estimates. 

A  report  describing  the  results  of  a  specified  piece  of  research  into  the  use  of 
employment data to validate the GNP estimates. 

A  report  detailing  the  coverage  of  income  in  kind  and  tips  or  gratuities  in the  accounts, 
with proposals  for  improvements  where  necessary. 

A report  on the feasibility  of using  the  fiscal  authorities' audit  information  for  improving 
the exhaustiveness  of the national  accounts. 

The main conclusions  from  these exercises were as  follows: 

Concerning  the  existing  calculations  and  adjustments  made  to  ensure  the  exhaustiveness  of  each 
Member  State's  GNP  estimates,  it  was  clear  that  the  need  for  and  adequacy  of  any  adjustments  and 
calculations  made  for  exhaustiveness  could  only  be  assessed  in  the  light  of  the  quality  of  the  basic 
statistics  and  general  methods  used. The  Member  States' estimates  are  not  all based  on  good  quality 
data  sources  for  all  parts  of  the  economy.  For  example,  several  Member  States  do  not  have  good 
statistics  for  all  services,  and  some  do  not  have  good  quality  business  registers  or  do  not  maximise 
the  use  of the  cross-checks  inherent  in the  system  of  national  accounts.  Most  of the  Member  States 
in  this  position  already  have  concrete  plans  for  improving  the  situation  in  the  near  future.  Various 
Community  initiatives  support  the  Member  States'  efforts  in  respect  of  business  registers  and 
service  statistics,  in particular  the  Council  Regulation  on  Business  Registers  (93/2186/EC,  Euratom 
of 22 July  1993). 

Furthermore,  not  all  Member  States  make  explicit  adjustments  for  evasion  (that  is  purposeful  mis-
reporting  to  the  authorities)  outside  the  construction  industry,  and  the  methods  that  are  used  vary 
widely.  Further work  needs to be done  by nearly  all  Member  States. 

Concerning  the  use of employment  data  to validate  GNP. the current  situation  on  this  work  can  only 
be fully  assessed  on a country  by country  basis.  For  some countries  the exercise  gave re-assurance  to 
the existing GNP  estimates.  For others, the message  was less clear.  One  general  conclusion  however 
was  that  the  results  from  this  exercise  could  and  should  be  integrated  in  the  GNP  estimates  as  part 
oi  each  country's  next general  revision  of their  national  accounts. The  general  revisions  are  linked  to 
the  introduction  of  the  new  edition  of  the  ESA  ("ESA-95",  the  ESA  being  the  set  of  national 
accounting  guidelines  in use  for  all  of this work), which  will  take place during  the next  few  years  in 
each country.  The deadline  for the  integration  of the  results  is October  1998. 

Concerning  the  coverage  of  incomes  in  kind  and  tips  or  gratuities,  the  main  conclusion  was  that 
the  extent  to  which  adjustments  are  made  differs  substantially  between  Member  States.  These 

differences  reflect  differences  in  the  tax  rules  and  regulations,  in  the  importance  of  such  income  in 
the Member  States, and  in the  interpretation  of the  accounting  guidelines  (the  ESA).  However  there 
are  also  some  unwarranted  differences  between  the  Member  States.  Thus  further  work  in  some 
Member  States will be  necessary. 

Concerning  the  feasibility  of  using  information  from  fiscal  audits  to  improve  the  exhaustiveness  of 
the  GNP  estimates,  it was  clear  that  the  need  to  use  such  information  depends  on  the  availability  of 
other possibilities  to allow  for  evasion; and this differs  for  each Member  State  and  for  each  industry. 
It  was  also  clear  that  while  some  countries  can  and  do  use  fiscal  audit  information,  to  varying 
extents,  other  countries  are unable  to do  so, either  for  reasons  of data  confidentiality  or  because  the 
non-random  nature of the data makes  its use in a statistical  situation  impossible. 

To  complete  the  work  on  exhaustiveness  the  Commission  is  using  two  approaches.  It  is  working 
bilaterally  with  the  Member  States  on  the  issues  specific  to  each  of  them  in  turn  arising  from  the 
reports  noted  above.  In  1996  missions  to the  Member  States  are planned  in order  to  discuss  detailed 
plans for the work  still to be done to help to ensure that this work  is completed. 

The Commission  has  also established  four  task  forces  in support  of the  GNP  Committee  targeted  on 
those  subjects  for  further  investigation  concerning  all  countries  which  have  arisen  from  the  reports 
in  respect  of  the  Decision.  These  task  forces  will  advise  the  Commission,  and  hence  in  due  course 
the  GNP  Committee,  on  the  best  methodologies  to  be  used  for  construction,  for  distribution,  on  the 
use of households  budget  surveys  and  on estimating  imports and  exports  under  the  Intrastat  system. 
All  four  task  forces  will  report by  June  1996. 

All  the  work  on  exhaustiveness  currently  under  way  should  be  complete  and  all  the  Commission 
reservations  on the Member  States' GNP estimates  lifted  by October  1998. 

A more complete description  of the work  done following  the Decision on exhaustiveness,  and of the 
conclusions  so far,  is given  in Annex  A to this report. 

3. The  transversal  and  country-specific  themes 

The  Commission  has  also  been  putting  much  effort  into  the  verification  of  the  comparability, 
reliability and completeness  of Member  States' GNP  estimates  with  respect  to a series  of  transversal 
themes (issues which  concern  all of the countries)  and  a large number of country-specific  issues. 

The  transversal  themes  identified  as  being  the  most  important  for  the  Member  States'  GNP 
estimates are as  follows: 

the definition  of the economic  territory 
the  recording  of taxes and  subsidies 
the comparability  and  reliability  of the estimates  for dwelling  services 
the comparability  of estimates at the borderline  between  intermediate  and 
final  consumption. 
the completeness  and  recording  of the activity  of  financial  institutions 
the quality  of the estimates  for  government  and  non-profit  institutions 
the completeness  of the estimates  for  agriculture 
the quality  of the estimates  for  the transition  from  GDP  to  GNP 
the completeness  of the estimates  oi' VAT as a component  of  GNP 

Progress  has  been  made  on  all  of  these  transversal  themes.  For  some,  the  basis  for  reliable  and 
complete  estimates  is  now  in  place  and  some  corrections  to  GNP  have  already  been  made.  For 
others, the Commission  is currently  at the  stage  of collecting  the very  detailed  information  required 
before  the need for  any corrective  action can be fully  specified. 

The  current  situation  on  each  of  the  transversal  themes,  in  outline,  is  noted  below.  More  detailed 
information  on each theme  may  be  found  in Annex  A. 

The economic territories  for  which  GNP  is to be reported  for  the  GNP  Resource  were delimited  in a 
Commission  Decision  in  1991. 

The  conceptual  work  needed  to  ensure  the  comparability  of  the  Member  States  recording  of  taxes 
and  subsidies  was  completed  by  the  publication  of  three  Commission  Decisions  in  1993.  Work  to 
ensure compliance  in practice  with the new provisions  by some Member  States is still  necessary. 

To  ensure  the  comparability  and  reliability  of  the  estimates  for  dwelling  services, «a Commission 
Decision  was  adopted  in  1995.  Member  States  arc  to  provide  GNP  estimates  compiled  using  a 
common  and  objective  methodology  by  October  1996.  In  practice  some  countries  may  need  a 
derogation to allow them to complete  the work  by October  1997. 

The  comparability  and  reliability  of  the  estimates  at  the  borderline  between  intermediate  and  final 
uses  and  for  financial  institutions  have  been  pursued  using  extensive  questionnaires  seeking  very 
detailed  information.  Reports  setting-out  any  necessary  improvements  in  the  Member  States  will 
follow  in  1996. 

Concerning  both  government  and  non-profit  institutions  and  agriculture,  documents  identifying  the 
most  important  issues  were  discussed  by  the  GNP  Committee  in  1994.  More  recently  other  more 
important  work,  for  example  on  exhaustiveness,  has  taken  priority,  but  these  subjects  will  be  taken 
up again  in  1996. 

The comparability  and  reliability  of data  for  the  transition  from  GDP  to GNP  has  been  discussed  in 
a  series  of reports  for  the  GNP  Committee.  Bilateral  discussions  have  been  held  with  each  Member 
State  and  a  list  of  points  for  improvement  is  being  followcd-up.  An  important  difficulty  in  the 
recording  of  the  activities  of  mutual  investment  funds  has  been  identified.  A  Commission  proposal 
setting-out  a  recommended  common  treatment  of  these  funds,  based  on  the  work  of  a  special  Task 
Force, will be presented  to the GNP  Committee  in March  1996. 

The estimates  of the VAT  component  of GNP  , in particular  with  respect  to the  differences  between 
the  amounts  of  VAT  collected  by  the  fiscal  authorities  and  the  amounts  theoretically  payable 
according  to  the  national  accounts,  has  been  discussed  thoroughly  by  the  GNP  Committee.  The 
potential  impact  on  GNP  of  the  different  approaches  being  used  by  the  countries  to  account  for 
VAT within their national  accounts  will  be assessed  in bilateral  discussions  in  1996. 

The  work  on  all  of  the  transversal  subjects  is  scheduled  to  be  completed  by  October  1997,  though 
for  dwellings  results  are  expected  in  September  1996.  Derogations  may  be  necessary  for  some 
countries to allow some  of the  work  to be completed  by October  1998. 

It  should  also  be  noted  that  the  introduction  of  the  new  edition  of  ESA  ("ESA-95")  will  change 
Member  States' GNP  estimates.  Article  8.3  of the draft  Council  Regulation  on  the  ESA-95,  recently 
approved  by  the  Council  and  expected  to  be  adopted  shortly,  requires  the  GNP  Committee  to 
establish  by the  end  of  1996  methods  for  converting  GNP  estimates  compiled  according  to  ESA-95 
into ones  consistent  with the current  edition  of the  ESA, which  will  still  be needed  for  own  resource 
purposes.  A  first  paper  detailing  how  and  where  ESA-95  affects  estimates  of  GNP  was  presented  to 
the October  1995 meeting of the GNP  Committee. 

Concerning  the  country-specific  issues  which  are  important  for  GNP,  a great  deal  of  progress  may 
also be noted. The most  important  improvements  made can be summarised  as  follows: 

Great  efforts  have  been  made  to  fundamentally  redevelop  the  national  accounts  of  those 
Member  States  which  were  seen  as  having  the  weaker  based  GNP  estimates.  These 
redevelopments  have  already  seen  large  changes  to  the  GNP  estimates  for  Greece, 
Luxembourg  and  Portugal  (changes  of  the  order  of  +20%,  +15%  and  +10%, 
respectively).  Similarly  important  developments  arc  underway  in  Belgium  and  Ireland, 
though  that  is  not  to  say  that  equally  large  changes  to  the  GNP  estimates  ©f those  two 
countries  can be  expected. 

All  of  the  Member  States  have  done  important  work  in  response  to  the  Commission's 
country-specific  reservations  on  aspects  of  their  GNP  compilation  methods.  In  many 
cases this work  has enabled  the Commission  to  lift  its reservations  on them.  In the  other 
cases  the  work  in  hand  is expected  to  enable  the  Commission  to  lift  the  reservations  by 
the target  date  of  October  1997 (though,  again,  in  some  individual  cases  a derogation  to 
allow a deadline of October  1998 may be necessary). 

All  of  the  Member  States  also  have  their  own  important  national  accounts  development 
projects.  These  projects  are  not  directly  the  consequence  of  work  programmes 
emanating  from  the Commission  and the GNP  Committee  but they are nevertheless  very 
important  and  they complement  them. 

More  detailed  information  on  the  county-specific  improvements  already  completed  by  Member 
States or currently  being  implemented  by them  is given  at Annex  A. 

The  impact  of  all  of  the  improvements  made  so  far  by  the  Member  States'  on  their  estimates  of 
GNP  where  they  are  subject  to reservation  is given  in a summary  table  at Annex  B. 

Concerning  the  new  Member  States, and  Iceland  and  Norway,  the  Commission  carried  out  a first 
visit  to  each  of  these  countries  during  the  second  half  of  1994,  and  duly  reported  to  the  GNP 
Committee  on  the main sources and  methods used  to calculate  GNP. 

4.  Conclusions 

From  the  above  summary  it can  be  seen  that  much  progress  has  been  made  (for  example  in  Greece, 
Luxembourg  and  Portugal)  and  that  further  important  improvements  are  underway  (for  example  in 
Belgium  and  Ireland). For  most  Member  States, improvements  have  been  made  in many  parts of the 
compilation  process, although  the  net. effects  on  GNP  estimates  have  sometimes  been  small  because 
adjustments  have cancelled  out. 

As  a  consequence  of  the  work  carried-out  the  most  important  deficiencies  in  the  Member  States' 
GNP  estimates  have  either  already  been  addressed  or  will  soon  be  subject  to  improvements.  The 
Member  States' GNP  estimates  are therefore  substantially  more  exhaustive,  reliable  and  comparable 
than  they have ever  been. 

However  the  work  remaining  on  exhaustiveness,  on  some  transversal  themes  and  on  some  country-
specific  issues  is considerable  and  important.  A large part  of that  work  is scheduled  to be  completed 
by  October  1997,  with  all  work  including  that  on  exhaustiveness  due  to  be  completed  by  October 
1998. 
It  is impossible,  at this  stage, to estimate  the  likely  impact  on  the  GNP  estimates  of the  work  which 
remains to be  completed. 
During the next few  years  it will  be necessary  to ensure that the newest  Member  States  (Austria, 
Finland and  Sweden) and the European  Economic  Area countries (Norway  and  Iceland) also  have 
reliable and exhaustive  GNP  estimates. 

Introduction 

ANNEX A 

This  annex  to  the  report  explains  in  more  detail  the  extent  of  the  work  already  completed  or 
currently  in  progress  to  assure  the  comparability,  reliability  and  exhaustiveness  of  the  Member 
States'  GNP  estimates.  The  work  is  by  its  nature  highly  technical.  This  annex  describes  only  the 
main  themes  and  achievements.  A  discussion  of  the  more  technical  matters  is  considered  to  be 
outside  its scope. 

Reflecting  the  importance  of the  work  on exhaustiveness,  this annex  has been  organised  as  follows: 
Section  1 of  this  report  summarises  very  briefly  the  most  important  work  done  by  the  Commission 
with  the  assistance  of  the  GNP  Committee  in  the  years  leading  up  to  the  publication  of  the 
Commission  Decision  on  exhaustiveness.  The  work  done  since  the publication  of the  Decision,  and 
the work that  is planned  up to  1997/1998, is described  in more detail  in section  2. 

-  «. 

1. Tasks  undertaken  between  1989 and  1993 

1.1 

Preparatory  work 

The  GNP  Committee  met  for  the  first  time  in June  1989. The  most  important  first  steps were  some 
essential  preparatory  work: 

Member  States  had  to  submit  inventories  describing  the  data  sources  and  compilation 
methods  they  use  to .calculate  GNP.  These  inventories  had  to  be  examined  by  Eurostat, 
with  the  assistance  of  the  other  Member  States  via  the  GNP  Committee.  Eurostat's 
reports  on  these  inventories  were  discussed  during  1992.  These  reports  were  also  the 
basis  the  Commission's  country-specific  reservations  on  parts  of  the  compilation 
process. 

A  work  programme  had  to  be  set  up.  A  number  of  issues  were  selected  for  transversal 
investigation:  taxes  and  subsidies,  dwelling  services,  financial  institutions,  government 
and  non-profit  institutions,  the  distinction  between  intermediate  and  final  uses,  the 
transition  from  GDP  to  GNP  and,  of  course,  exhaustiveness.  For  all  Member  States  a 
reservation  was  put  on  all  of  these  aspects  of  their  GNP  estimates.  In  addition  to  the 
transversal  reservation  issues  listed  above,  also  several  other  issues  were  chosen  for 
further  transversal  investigation  by  the  GNP  Committee,  in  particular:  the  definition  of 
economic territories, agriculture, VAT, balancing  procedures  and  the use of  fiscal  data. 

Progress  could  be  made  quickly  on  one  of  the  transversal  issues.  A  Commission  Decision  defining 
the  economic  territories  of  the  Member  States  for  GNP  fourth  resource  purposes  was  adopted 
(91/450/EEC,  Euratom  of  26  July  1991), completing  the  work  needed  from  the  Committee  on  this 
subject.  For  example,  it  was  agreed  that  the  Canary  Islands,  Ceuta  and  Melilla  are  part  of  the 
Spanish  economic  territory,  that  Madeira  and  the  Azores  are  part  of  the  Portuguese  economic 
territory  and  that  the  overseas  départements  not  included  in  Annex  IV  to  the  EC  Treaty  are  part  of 
the  economic  territory  of  France.  It  should  also  be  noted  that  the  economic  territory  of  Germany 
changed  in  1990 to  include  the  new  Lander. 

1.2 

Direction  of GNP  work 

At  the  meeting  of  the  GNP  Committee  in  October  1990,  the  Commission  presented  a paper  on  the 
future  direction  of  GNP  work.  This  paper  proposed  the  dual  approach  consisting  of  a  transversal 
approach  for  a number  of selected  issues accompanied  by a country-specific  approach  to  some  other 
issues.  The  paper  also  contained  an  overview  of  general  approaches  to  improving  exhaustiveness, 
setting  out  a  range  of  approaches  that  might  be  follow-up  by  the  Commission  and  the  GNP 
Committee. 

At  the  GNP  Committee  Meeting  in  October  1991, the  Commission  presented  an  overview  of  the 
explicit  adjustments  already  made  by  Member  States  to  give  exhaustiveness,  based  on  a  first 
assessment  of the  inventories  submitted  by the  Member  States. The  descriptions  of  the  adjustments 
made  by  each  Member  State  varied  in  detail;  reflecting  the  heterogeneity  of  the  inventories.  The 
Member  States  expressed  their  opinions  about  the  various  statistical  tools  and  data  sources  used  to 
ensure  exhaustiveness  (e.g.  business  registers,  commodity-flow  methods,  Labour  Force  Surveys) 
and about  the possibilities  for  both  transversal  and  country-specific  approaches  to this-work. 

1.3 

First assessments  of the Member States'  estimates 

A major  part  of  1992 was devoted  to the discussion  of the  Commission's  reports  on  the  compilation 
methods  of each of the Member  States. During the GNP  Committee  meetings  of July and  September 
1992,  reports  on  the  general  sources  and  methods  used  in  all  Member  States  with  the  exception  of 
Luxembourg  were  discussed.  These  reports  included  some  description  and  assessment  of  the 
exhaustiveness  of the GNP  figures  for the individual  Member  States. 

1.4 

Direction  of the work on  exhaustiveness 

Also  at  the  GNP  meeting  of  July  1992,  the  Commission  presented  a  short  document  noting  the 
following  criteria  for  the  assessment  of  exhaustiveness:  the  existence  of  a  well-defined  reference 
universe  of  production  units;  the  ability  to  ascertain  absence;  the  ability  to  correct  for  absence;  the 
existence  of general  and  systematic  adjustments  for  evasion;  the existence  of general  and  systematic 
adjustments  for  hidden  labour. 

At  the  GNP  meeting  of  September  1992,  the  Commission  presented  a  detailed  proposal  for  a 
uniform  work  programme  on  exhaustiveness  in  the  form  of  a  draft  Commission  Decision.  This 
proposal  already  distinguished  the  four  main  titles  of  the  Commission  Decision  that  would  be 
published  in  February  1994. 

During  most  of  the  GNP  Committee  meetings  from  September  1992  to  September  1993,  this  work 
programme  on  exhaustiveness  was  the subject  of  long, detailed  and  intensive  discussions  before  the 
Commission  Decision  was duly  published  in February  1994. 

At  the  December  1993  meeting  of  the  GNP  Committee,  the  Commission  presented  a  paper 
complementing  Title  IV  of  the  Commission  Decision.  It  described  how  the  comparison  of 
employment  figures  required  by  Title  IV  might  influence  the  Member  States'  GNP  estimates.  It 
demonstrated  that  this  influence  is not  mechanical,  nor  is it  the  same  for  all  countries,  but  rather  that 
the  effect  of  the  employment  comparison  on  GNP  estimates depends  on  national  circumstances  and 
the particular  data  sources and  estimation  methods  used  to compile  GNP. 

1.5 

Progress  on the transversal  themes 

The  work  programme  on  exhaustiveness  took  a  major  part  of  the  time  of  the  GNP  Committee  in 
1993. Nevertheless, progress was also be made on many  other  issues. 

The conceptual  work  on the transversal  issue taxes  and subsidies  was completed  by the  publication 
of  three  Commission  Decisions  concerning  the  guidance  given  in  the  ESA:  one  on  production  and 
imports  subsidies  (93/475/EEC,  Euratom  of  22  July  1993),  another  on  taxes  linked  to  production 
and  imports  (93/454/EEC,  Euratom  of  22  July  1993)  and  the  third  on  the  distinction  between 
intermediate  consumption  and  other  taxes  linked  to  production  (93/570/EEC,  Euratom  of 4  October 
1993). Work to ensure compliance  with this guidance  in practice was of course still  necessary. 

The  work  on  dwelling  services  was  taken  forward  by discussion  of a Eurostat  paper  containing  the 
results  of  a  special  questionnaire  to  Member  States.  It  was  agreed  that  the  so-called  stratification 
method  should  be  used  to  estimate  imputed  dwelling  services  (that  is  to  impute  for  the  production 
and  consumption  of  services  which  is  implicit  in  the  owner-occupation  of  dwellings)  and  that  this 
method  had  to be used  progressively  in  all  Member  States. A  task  force  consisting  of  both  national 
accountants  and  housing  statisticians  was  established  to  work  out  solutions  to  various  conceptual 
and  statistical  difficulties  (e.g.  the  treatment  of  garages  and  rent-free  dwellings  and  the  absence  of 
rented  dwellings that are comparable  to some types of owner-occupied  dwellings). 

The  most  important  issues  concerning  the  transition  from  GDP  to  GNP  were  identified  in  a 
document  for  the GNP  Committee's  meeting of October  1991. Consultants  undertook  bilateral  visits 
to each of the Member  States during  1993 (and in one case  1994) to study  these problems. 

1.6 

Progress  on country-specific  issues 

Reports  of  GNP  control  missions  to  five  Member  States  were  presented  at  the  meeting  of  October 
1993.  Many  other  such  reports  have  been  presented  since.  Furthermore,  a  Eurostat  report  on  the 
estimates  for the French  overseas provinces  was also  discussed. 

Individual  Member  States  also  made  sizeable  efforts  to  improve  their  GNP  estimates  during  this 
period, in particular  with respect  to their  exhaustiveness. 

For  some  Member  States  (Portugal,  Greece  and  Luxembourg),  special  support 
programmes  were  set  up  by  Eurostat  in  order  to  revise  and  upgrade  their  national 
accounts. 

Other  Member  States  had  already  planned  a  revision  of  their  national  accounts  (United 
Kingdom  and  the Netherlands). 

Ireland  made  substantial  efforts  to  improve  the  reliability  of  its  estimates  from  the 
income approach  for  both wages and the operating  surplus. 

Germany  was  in a special  situation,  since  from  1990 it had  also  to provide  figures  on  the 
new  Lander.  Setting  up  a  totally  new  statistical  system  for  the  new  Lander  required  a 
massive  extra effort  from  the Statistisches  Bundesamt. 

For  some  other  Member  States,  estimates  had  to  be  produced  or  included  for  specific 
areas,  e.g.  France  had  to  include  estimates  for  its  overseas  départements.  Furthermore, 
many  Member  States  have  introduced  other  improvements  which  may  have  been  less 
visible but which  have nevertheless  contributed  substantially  to the quality  of their  GNP 
estimates. 

2. Tasks  undertaken  since the publication  of the Commission  Decision 

on exhaustiveness  in  February  1994 

2.1 

The scope of the decision  on  exhaustiveness 

According to the Commission  Decision of February  1994, Member  States were to  submit  reports  on 
four  titles of the  Decision  by the end of June  1994. In practice  several  of the reports  were  submitted 
some  months  late,  as  some  countries  found  it  impossible  to  complete  the  large  amount  of  work 
required while continuing  to meet the other demands  put on  them. 

At the December  1994 meeting  of the  GNP  Committee,  Eurostat  presented  two  overview  papers  on 
the  reports  submitted  by  the  Member  States.  These  overview  papers  covered  the  work  done  under 
Title IV, on the validation  of employment  underlying  GNP, and  Title VI on the  feasibility  of the  use 
of fiscal  audit  information  for  improving  exhaustiveness. 

At the April  1995 meeting of the GNP  Committee, Eurostat presented  a paper  summarising  for  each 
Member  State  the  work  still  to  be  done  on  Title  IV,  the  validation  of  employment  underlying  GNP 
estimates. This paper  was  based  on the results of special  missions  to most  Member  States judged  to 
be necessary  following  the December  1994 meeting. 

At  the  June  1995  meeting  of  the  GNP  Committee,  Eurostat  presented  overview  papers  on  the  two 
remaining  titles  of  the  Decision,  that  is  on  Title  III,  concerning  the  existing  calculations  and 
adjustments  made  to  ensure  exhaustiveness  of  the  GNP  estimates,  and  on  Title  V,  income  in  kind 
and  tips  The  former  paper  was  backed  by  a  whole  set  of  detailed  reports  on  each  of  the  Member 
States. 

2.2 

Title III: Descriptions  of the existing  calculations  and  adjustments 
made to ensure the exhaustiveness  of Member States' GNP  estimates 

The  purpose  of  this  part  of  the  Decision  was  to  gather  additional  information  from  the  Member 
States to clarify  where and how they  make calculations  or adjustments  which  either 

make  explicit  allowance  for  units  registered  with  the  public  authorities  but  not  covered 
in statistical  surveys and  units exempted  from  registration  or otherwise  not registered,  or 
which otherwise  mis-report  or do not report part of their activities. 

or,  make  implicit  allowance  for  such  omissions 

Eurostat's  summary  of  Member  States'  replies  was  presented  to  the  June  1995  meeting  of  the  GNP 
Committee.  That  document  emphasises  one  very  important  point:  the  need  for  and  adequacy  of  any 
adjustments  and  calculations  made  for  exhaustiveness  can  only  be assessed  in the  light  of the  quality 
of the basic  statistics of that  country. 

10 

The  main  conclusions  of the document  were as  follows: 

The  Member  States' estimates  are not all  based  on good  quality  data sources  for  all  parts 
of  the  economy.  For  example,  several  Member  States  do  not  have  good  statistics  for 
parts  of  market  services.  However  most  of  the  Member  States  in  this  position  already 
have concrete  plans  for  setting-up  such  statistics  in the near  future. 

Member  States  make  many  efforts  to  adjust  for  units  not  covered  by  the  basic  data 
sources. In order  to make  systematic  adjustments  for  such  units, a good  business  register 
with  a  wide  coverage  is  indispensable.  Such  a  business  register  is  also  crucial  for  the 
good  linkage  of  various  types  of  data  sources.  Such  a  business  register  is  missing  in 
several  Member  States,  but  most  countries  in  that  position  already  have  concrete  plans 
for  setting-up  such  a  business  register  in  the  near  future  or  are  working  to  improve  or 
extend  their existing  business  registers. 

Some  Member  States  do  not  exploit  all  the  possibilities  that  exist  for  cross-checking 
their  data,  by  comparing  it  with  alternative  data  sources  and  by  reconciling  it  in  a 
systematic  framework  such  as  a  supply  and  use  table.  However  several  of  the  Member 
States  which  are  most  deficient  in  this  respect  are  already  working  on  improving  the 
situation or  have plans to do so. 

Only  some  Member  States  make  explicit  adjustments  for  evasion  (that  is  purposeful 
mis-reporting  to  fiscal  or  other  public  authorities)  in  industries  other  than  construction. 
Furthermore,  for  construction  the  methodologies,  data  sources  and  assumptions  vary 
widely.  Further  work  needs  to  be  done  by  nearly  all  Member  States.  Two  Task  Forces, 
on  construction  and  distribution,  where  evasion  is  most  common  in  most  Member 
States,  would  be  set-up  up  to  look  into  all  aspects  of  the  estimation  methods  used  for 
v  these  industries,  including evasion  allowances.  Part 3.6 of this report explains  the role of 

these Task  Forces  in more  detail. 

These  conclusions  summarise  in  general  terms  the  strengths  and  the  limitations  of  the  Member 
States' current  estimates with respect  to  exhaustiveness. 

However  in  order  to  see  the  wider  picture  the  following  examples  of  explicit  and  implicit 
adjustments  for  exhaustiveness  already  made  by  the  Member  States  should  also  be  noted.  The 
examples  which  follow  are  not  a  complete  listing  of  all  of  the  adjustments  made  during  the 
processes  oi' compilation,  nor  are  the  figures  for  each  country  comparable  for  the  reasons  noted 
above,  but  they  do give a  flavour  of the efforts  made. 

Belgium  makes  a  large  number  of  detailed  implicit  and  explicit  adjustments  for  exhaustiveness. 
However,  despite  these  adjustments,  the  lack  of  good  quality  and  up-to-date  basic  statistics  for 
many  parts  of  the  Belgian  economy  means  that  the  estimates  of  GNP  even  alter  adjustment  cannot 
yet be confirmed  as necessarily  exhaustive. 

Denmark  makes  a  range  of  implicit  adjustments  (and  some  explicit  adjustments)  to  its  estimates 
from  the  production  approach,  for  example  by  using  functionally  derived  estimates  for  a  large  part 
of construction  activity  and  expenditure estimates  for  some  service  activities. 

11 

France  makes  systematic  adjustments  to  what  is  in  general  already  high  quality  basic  data  to  make 
allowances  for  the  absence  of  units,  fiscal  fraud  and  evasion  including  VAT  fraud  and  hidden 
labour. Altogether  these adjustments  result  in an addition  to GNP of some  12%. 

Germany  estimates  GDP  from  both  the  output  and  expenditure  approaches,  with  various 
adjustments  made  during  the  compilation  process  adding  some  6%  to  GNP,  and  then  chooses  the 
higher  of  the  resulting  output  and  expenditure  estimates  as  the  definitive  figure.  A  further  positive 
adjustment  is then  made  to  allow  for  any  incompleteness  which  might  remain.  Together  these  two 
last procedures  add  over 0.5% to GNP. 

Greece  has  undertaken  a  major  development  of  its  national  accounts  with  the  aim  of  making  them 
more  complete.  The  more  reliable  methods  now  used,  and  more  complete  coverage  of  economic 
activity,  resulted  in  an  increase  of  some  20%  to  the  previous  estimate  of  GNP  for  1988,  with 
similarly  large increases  for  other years. 

Ireland  uses  data  from  the  Census  of  Population  to  adjust  and  supplement  other  data  received  on 
numbers  in  employment  and  self-employment  and  hence  the  income  of  these  groups.* A  separate 
substantial  adjustment  to  allow  for  the  possible  under-reporting  of  income  by  the  self-employed  is 
also made. 

Italy  uses  employment  statistics  to  make  systematic  adjustments  to  its  data  from  enterprises  to 
allow  for  unreported  and  hidden  employment  and  for  the  likely  under-reporting  of  activity.  Use  is 
also made  of indirect  methods  for  ensuring  exhaustivity  such  as functional  estimation  methods.  The 
adjustments  for  irregular  labour  add  some  8%  to  GDP,  and  those  for  under-reported  income  add 
around another 3%. 

Luxembourg  completed  a  major  revision  of  its  national  accounts  in  1994,  making  them  more 
reliable  and  complete  in  several  respects  and  adding  some  10%  to  GNP.  Luxembourg  makes 
allowances  for  activity  not  captured  in  its basic  statistics.  However,  with  the  exception  of  domestic 
services, adjustments  are not made  for  hidden  labour or purposefully  under-reported  activity. 

The  Netherlands  has  a  strong  set  of  basic  statistics  underlying  its  national  accounts,  notably 
incorporating  data  from  the  VAT  system  and  its  system  of  labour  accounts  to  help  to  ensure  the 
exhaustiveness  of  its estimates.  In  addition  explicit  adjustments  are  made  for  the  under-reporting  of 
activity  in  a  range  of  branches.  The  explicit  adjustments  are  based  mainly  on  data  from  the  fiscal 
authorities  and  add  about  1% to GNP. 

Portugal  completed  a  major  revision  of  its  national  accounts  system  in  1993  with  the  aim  of 
making  them  more  complete  and  reliable.  In  the  new  system  data  on  the  demand  for  products  is 
used  to  add  some  5%  to  the  basic  data  on  production,  and  comparisons  with  the  Labour  Force 
Survey  add  about  2% more. The  revision  itself added  some  15% to GDP. 

Spain  makes  valuable  cross-checks  between  its data  to ensure  that  they  are  as complete  as  possible, 
for  example  using  employment  data,  and  makes  an  explicit  adjustment  for  unreported  construction 
activity. 

\  '?. 

The  United  Kingdom  has  introduced  a  supply  and  use  framework  to  improve  the  cross-checks 
between  its  data,  and  has  undertaken  a  major  redevelopment  of  its  business  register.  Explicit 
adjustments  are  made  for  construction  activity  and  a  further  general  adjustment  is  made  for 
exhaustiveness  based  on the  historic  under-estimation  of the  income  approach  when  compared  with 
the expenditure  approach. 

2.3 

Title  IV: Validation  of the estimates  of employment  underlying  the  present  GNP 
estimates 

Title  IV  of  the  Decision  required  comparisons  of  the  employment  data  according  to  demographic 
involved 
data  sources  with  the  employment  estimates  underlying  the  GNP  estimates.  This 
standardising  the  definition  of  employment  for  the  comparison  on  that  of  the  domestic  occupied 
population.  The  demographic  data  sources  to  be  used  were  the  Labour  Force  Survey  and  the 
Population  Census  or  its  national  equivalent  if  no  Population  Census  existed.  The  Decision  sought 
the  comparison  at  a  specified  level  of  detail  by  branch  (NACE-CLIO  R44  for  services  and  NACE-
CLIO R25  for  the  other  branches). The  format  for  the  tables  to  be  provided  was  set  out  in  an  annex 
to the Decision. 

.  « 

This part of the  Decision  was inspired  by the Italian approach  to using employment  as a key  variable 
for  ensuring  the  exhaustiveness  of  the  national  accounts.  If  the  same  statistical  sources  used  to 
estimate  production  and/or  value  added  for  the  national  accounts  can  also  be  used  to  yield  an 
estimate  of  employment,  then  that  employment  estimate  can  also  be  assessed  for  completeness 
against  the  estimates  of  employment  available  from  demographic  sources.  If the  comparison  should 
show  a  deficiency  in  the  employment  estimates  underlying  the  national  accounts,  then  there  may 
well  be  grounds  for  believing  that  production  and  value  added  are  also  understated  in  the  national 
accounts. If the comparison  shows  no such deficiency  then one  likely conclusion  is that  the  national 
accounts cover at least employment  exhaustively. 

The  first  results  of the  exercise  were  set  out  in  a  Eurostat  paper  for  the  December  1994  meeting  of 
the GNP  Committee. This paper  focused  on: 

Clarifying 
the  concept  of  employment  underlying  GNP.  There  had  been  some 
confusion  in  some  Member  States  where  various  employment  estimates  were  linked  to 
the national  accounts. 

Describing  what  had  thus  far  been  achieved  by the  Member  States.  Some  had  completed 
the work  as required  while others had  not. 

Presenting  the first results. 

It was clear  from  the paper that two steps were required  immediately: 

Bilateral  discussions  were  required  with  most  Member  States  in  the  very  short-term. 
These  discussions  were  required  to  clear  up  any  remaining  difficulties  concerning  the 
identification  of  the  work  still  required  according  to  the  Commission  Decision  and  to 
agree  how and  when this work  should  be  completed. 

i .i 

Task Forces should need to be set-up to look at all aspects of the quality of the  different 
estimation  methods  for  certain  branches,  for  example  construction  and  distribution, 
including the subject of employment comparisons for these industries. 

The further  discussions with Member States on employment comparisons took place during the first 
quarter of  1995. In eight cases special missions to Member  States were undertaken.  At the meeting 
of  the  GNP  Committee  in  April  1995  a  second  paper  on  this  subject  was  presented,  giving  an 
overview of the work still to be done. 

The  current  situation  on this  work  can  only  be  fully  summed-up  on  a country  by country  basis. 
One  general  conclusion  however  was  that  the  Member  States  agreed  that  the  results  from  this 
validation  exercise  could  only  be  integrated  in their  GNP  estimates  as part  of  each  country's  next 
general revision of the national accounts. This was thought to be the only feasible option because: 

A revision  is already  necessary  to  introduce  the new concepts  and  classifications  from 
the new ESA, the NACE(') and the CPA("). 

•  « 

A revision  is already necessary for taking account  of new data  sources and  compilation 
methods such as the new services statistics and improved business registers. 

Employment  statistics  can  best  be  reconciled  and  integrated  by  using  all  the  other 
information  available,  including  the  new  data  sources  and  classifications  to  be 
introduced as part of the next general revisions. 

One  general  revision  instead  of  several  successive  ones  limits  the  disruption  to  the 
national accounts. This is an advantage to both data compilers and most data users. 

2.4 

Title V: Description of the regulations and statistical adjustments  pertaining  to 
income in kind and tips or gratuities 

Under Title V of the Decision Member States were asked to: 

draw-up a survey of the tax rules on a list oï incomes in kind and describe for each type 
of  income  in kind  the procedures  used  to ensure  that  they are  correctly  recorded  in the 
national accounts; 

describe the calculations made in respect of tips or gratuities. 

(*) 

NACE: Classification  of activities 

(**)  CPA: Classification  of products by activity 

14 

The point of interest  for  Eurostat  and  the GNP  Committee  is to ensure that these types of income are 
not omitted  from  value  added  and  hence  from  GNP, either  by being  omitted  from  the  statistical  data 
system  altogether  or  by  being  recorded  incorrectly  as  the  intermediate  consumption  of  enterprises. 
Some  types  of income  in kind  and  tipping  are thought  to  be  important  components  of  total  incomes 
in some Member  States 

Eurostat  presented  a  report  on  the  studies  made  by  the  Member  States  to  the  meeting  of  the  GNP 
Committee  held  in June  1995. 

The main  conclusions  were as  follows: 

Firstly,  the  reports  themselves  were  rather  heterogeneous  in  length,  detail,  clarity  and 
completeness.  Eurostat  would  hold  bilateral  discussions  with  each  of the  Member  States 
to ensure that  clarifications  or additional  information  were provided  as  necessary. 

Secondly,  the  extent  to  which  adjustments  are  made  for  income  in  kind  and  tips  differs 
substantially  between  Member  States.  These  differences  reflect  differences  in  the  tax 
rules  and  regulations,  differences  in  the  importance  of  the  various  types  of  income  in 
kind  in  the  Member  States  and  differences  in  the  interpretation  of  the  ESA.  However 
they also  seem  to reflect  differences  between  the  Member  States  which  are  unwarranted. 
Thus  further  work  in some Member  States will  be  necessary. 

2.5 

Title  VI:  Investigation  into  the  feasibility  of  the  use  of  information  from  fiscal 
audits for  improving  the exhaustiveness  of the GNP  estimates 

At  Title  VI  of  the  Decision  Member  States  were  asked  to  report  on  the  feasibility  of  using  audit 
information  from  the  fiscal  authorities  to  improve  the  exhaustiveness  of  GNP  estimates.  Personal 
and  corporate  income  tax  and  value  added  tax  systems,  together  with  the  corresponding  audit 
mechanisms,  exist  in all  Member  States.  In  some  Member  States,  notably  France,  information  from 
fiscal  audits  is already  used to  improve  the exhaustiveness  of GNP  estimates. 

Eurostat  presented  a paper  summarising  the  Member  States'  reports  to  the  December  1994  meeting 
of the GNP  Committee. 

The  main  conclusions  from  these reports  were as  follows: 

The need  to use  fiscal  audit  information  depends  on  whether  there  are other  possibilities 
to  make  adjustments  for  evasion;  this  differs  for  each  Member  State  and  each  industry. 
Similarly  the  likely  size  of  evasion  will  differ  between  Member  States  and  between 
industries. 

The  results  of  fiscal  audits  are taken  into the  national  accounts  in  some  countries  by the 
use  of  statistics  inclusive  of  the  results  of  fraud  control  exercises.  This  is  the  case  for 
example  with  the  use of  VAT statistics  by  Denmark, Germany  and  the  United  Kingdom. 

The  results  of  fiscal  audits  are  used  by  some  other  Member  States  to  make  separate 
adjustments  for  evasion.  This  is  the  case  in  France,  where  the  adjustments  made  cover 
the whole economy,  and  in the Netherlands  for  certain  service  industries. 

In  the  near  future  the  use  of  fiscal  data  inclusive  of  fiscal  audit  information  will  be 
extended  in the Netherlands  and  Italy  and, perhaps,  Belgium. 

Several  Member  States  intend  to use fiscal  audit  results  to make  separate  adjustments  or 
to verify  adjustments  already  made  on  the  basis of other  data  sources.  This  is the case  in 
the Netherlands, the United  Kingdom  and  Portugal. 

The  use of  fiscal  audit  information  to  make  separate  adjustments  does  not  seem  feasible 
for  various  reasons  in  Belgium,  Germany,  Ireland,  Italy,  Luxembourg  and  Spain  (and 
perhaps  Greece,  but  the  position  in  Greece  needs  to  be  clarified).  Two  main  stumbling 
blocks  were  cited:  data  confidentiality  and  the  difficulty  of  applying  the  results  for  the 
non-random  selection  of enterprises  subject  to audit  to  the  universe  of  all  enterprises.  It 
is  usually  the  case  that  fiscal  audits  are  targeted  on  enterprises  thought.most  likely  to 
fraud.  Thus  it cannot  simply  be  assumed  that  enterprises  which  are  not  audited  have  the 
same characteristics  as those that are. 

2.6 

The follow-up  to the Commission  Decision on  exhaustiveness 

In  order  to  take  forward  the  work  on  exhaustiveness  the  Commission  established  task  forces  in 
support  of  the  GNP  Committee  targeted  on  some  specific  topics.  These  task  forces  will  advise  the 
Commission,  and  hence  in  due  course  the  GNP  Committee,  on  the  best  methodologies  to  be  used 
for  construction,  distribution,  on  the  use  of  households  budget  surveys  and  on  estimating  imports 
and exports under the Intrastat  system. 

The Task  Force  on  Construction  will  give  an overview  of the  most  important  data  and  estimation 
problems  for  that  industry  (e.g.  the  problems  of  subcontracting,  seasonal  work,  evasion  of  output 
and  income)  and  suggest  ways  in  which  they  can  be  best  overcome  (which  types  of  data  are  most 
useful,  how to combine  the  figures  from  various data  sources, etc.). 

The  Task  Force  on  Distribution  will  do  the  same  for  the  wholesale  and  retail  industries  (e.g.  the 
determination  of  trade  margins,  the  separation  of  sales  into  those  to  final  users  and  those  to 
business)  and  for  cafes,  hotels and  restaurants. 

The  Task  Force  on  The  Use of  Household  Budget  Surveys  will  investigate  how  the  figures  from 
the  household  budget  surveys  can  be  used  when  compiling  GDP  estimates  in  general  and  to  what 
extent  they  can  be  a  tool  for  capturing  under-reported  sales  (e.g.  in  retail  establishments,  hotels, 
cafes  and  restaurants). 

The  Task  Force  on  the  Use  of  Intrastat  data  will  investigate  how  the  GDP  estimates  can  be 
safeguarded  and  improved  using  this  data.  Since  the  abolishment  of  the  intra-EU  customs 
formalities  and  the  introduction  oï  Intrastat  for  recording  intra-HU  trade  in  merchandise,  the 
accuracy  of  the  statistical  information  on  this  type  of  trade  seems  to  have  declined  substantially,  in 
particular  at  the  product-group  level.  Such  a  decline  of  the  quality  oi'information  on  foreign  trade 
reduces  the  reliability  of  the  expenditure  and  commodity  How  methods  for  estimating  GDP.  It  is 
also  likely  to  reduce  the  quality  of  the  balancing  process.  ImprovcmcMt  of  the  statistical  information 

lb 

on  intra-EU  trade  in  merchandise  is  therefore  very  important  for  maintaining  and  improving  the 
quality  of the Member  States' GDP  estimates. 

The  first  meetings  of each  of these  Task  Forces  took  place  between  September  and  November  1995 
and  more  meetings  are  planned  for  the  end  of  1995  and  the  beginning  of  1996.  All  of  the  Task 
Forces will  report  back to the GNP  Committee  by the end  of June  1996. 

The  work  on  exhaustiveness  should  be  complete  and  the  Commission  reservations  lifted  by 
October  1998. 

It should  be  noted  however  that  some  difficulties  in achieving  this  date  in  some  Member  States  are 
likely.  The  precise  scope  of  the  work  required  from  each  Member  State  will  vary,  and  it  is  not  yet 
fully  specified.  For example, the recommendations  of the four  GNP Committee  Task  Forces will  not 
be  known  until  June  1996. Those  recommendations  will  need  to  be  considered  by  the  Commission 
and  then  discussed  and  agreed  by the GNP  Committee,  before  being  implemented  by  October  1998. 

In  1996  missions  to  the  Member  States  are  planned  in  order  to  discuss  detailed  plans  for  the  work 
still  to  be  done  to  ensure  exhaustiveness  before  October  1998,  e.g.  on  employment  comparisons, 
which  should  be  incorporated  as  part  of  the  forthcoming  revisions  of  national  accounts,  or  on 
estimating  income  in kind,  in particular  on the treatment  of the private  use of business  cars. 

2.7 

Progress  on the transversal  issues since  1994 

Alongside  the  major  efforts  made  on exhaustivity,  much  progress  was  made  on  the  other  transversal 
subjects  of  reservation  and  investigation  facing  the  Commission  and  the  GNP  Committee.  The 
following  points of progress  are notable: 

The  Task  Force  on  dwelling  services,  which  began  its  work  in  mid  1993,  completed  its  work  by 
mid  1994  by  specifying  the  manner  of  application  of  the  stratification  method.  Based  on  its  work, 
Eurostat  presented  a  draft  Commission  Decision  specifying  the  methodology  to  be  used  in  all 
Member  states  to  the  meeting  of  the  GNP  Committee  in  December  1994. After  some  modifications 
on  points  of  detail,  the  proposal  gained  the  unanimous  support  of  the  GNP  Committee,  and  the 
Commission  Decision  was  duly  adopted  (95/309/EC,  Euratom  of  18 July  1995).  Member  States  are 
required  to  provide  GNP  estimates  compiled  using  the  new  common  methodology  for  dwelling 
services  for  the  years  1988 onwards  in the  data  transmission  for  GNP  own  resource  purposes  due  in 
September  1996.  In  practice  some  countries  may  need  a  derogation  to  allow  the  work  to  be 
completed  by the  end  of  September  1997. 

The  comparability  of  estimates  at  the  borderline  between  intermediate  and  final  uses  was 
discussed  in a document  for  the  GNP  Committee  in July  1994.  Issues  of  particular  concern  include, 
for  example, the  recording  of expenditures  on  infrastructure  repairs,  improvements  and  renewals, on 
small  value  capital  goods  and  on  software.  Detailed  information  on  the  practical  steps  Member 
States  take  to  conform  with  the  ESA  regarding  such  expenditures  will  be  required  before 
comparability  can  be  verified  and  where  necessary  improved.  An  extensive  questionnaire  seeking 
this  information  was  sent  to  Member  Slates  in October  1994  for  answer  by  the  end  of  1995. 

Eurostat  presented  a  first  document  on  financial  institutions  to  the  GNP  Committee  in  January 
1994.  The document  identified  a  number  of  technical  questions  concerning  the  measurement  of  the 
output  o!" some  types  of  financial  services  (such  as  insurance  and  foreign  exchange  dealing)  and 

some  other  questions  concerning  the  coverage  of  certain  types  of  financial  institutions  (such  as 
those  institutions  which  are  not  supervised  by  the  government  or  central  bank)  in  the  statistical 
reporting  framework.  It  was  followed  by  a  questionnaire  to  each  Member  State  seeking  detailed 
explanations  of these points and posing  some  further  questions  for  each  country  following  a  detailed 
institutions.  Most  of  the  replies  to  the 
study  of  their  inventories  as  they  concern  financial 
questionnaire  have  now  been  received  and  a  follow-up  report  will  be  prepared  for  the  GNP 
Committee  during  the next few  months. 

Concerning  government  and  non-profit  institutions,  a  first  document 
the  most 
important  issues  was  presented  to  the  GNP  Committee  in  December  1994.  The  Committee's  view 
was that while at least  some of the  issues are undoubtedly  of some  importance  for  GNP,  particularly 
the  subject  of the  imputation  of the consumption  of  fixed  capital  for  government  capital  assets,  they 
are  of  lesser  priority  than  many  of  the  other  subjects  also  being  studied  at  the  same  time  by  the 
Committee  (e. g. exhaustiveness).  It was agreed  therefore  that  further  work  on  government  and  non 
profit  institutions  should  be  deferred  for  a  year  or  so,  in  order  that  more  important  work  could  be 
progressed.  This subject  is therefore  due to be taken  up again  shortly  with  the  GNP  Committee. 

identifying 

The  earlier  work  on  the  transition  from  GDP  to  GNP  noted  in  section  2  of  this  document  was 
followed-up  by  a  report  to  the  GNP  Committee  meeting  of  December  1994.  This  report  followed 
the  bilateral  discussions  on  the  subject  held  with  each  Member  State  and  identified  a  list  of  points 
needing  improvement  in  some  Member  States  and  an  important  difficulty  in  the  recording  of  the 
activity  of  mutual  investment  funds  common  to  all  Member  States  which  was  in  need  of  further 
investigation.  The  Committee  decided  to  set-up  a  Task  Force  to  propose  what  should  be  done  on 
mutual  investment  funds.  The  Task  Force  met  three  times  in  the  first  half  of  1995.  A  document 
setting-out  a  recommended  treatment  of  these  funds  based  on  the  work  of  the  Task  Force  was 
presented  to the  GNP  Committee  at  its meeting  in  October  1995.  Discussions  were  continued  at  the 
December  1995  meeting  of  the  Committee  and  are  expected  to  be  concluded  in  March  1996.  The 
other  points  of  weakness  concerning  the  transition  from  GDP  to  GNP  which  need  improvement  in 
some Member  States are being  pursued  on  a bilateral  basis. 

The  subject  of  agriculture  was  discussed  in  a  document  for  the  GNP  Committee  in  July  1994.  A 
large number  of detailed  and  technical  difficulties  in  measuring  the agricultural  contribution  to  GNP 
were  identified.  Weaknesses,  usually  of  minor  consequence,  were  found  in  the  estimates  for  many 
Member  States,  but  a  reservation  was  thought  necessary  and  so  introduced  on  the  Portuguese 
estimates  for  agriculture.  Often  the  general  points  of  weakness  found  were  connected  to  the  use  of 
the  concept  of  the  "national  farm"  for  agricultural  economic  accounts,  and 
incomplete 
compatibility  with  the concepts  needed  for  national  accounts. The  Committee  decided  to consult  the 
specialists  in  agricultural  economic  accounts  ol'  a  working  party  attached  to  the  Committee  on 
Agricultural  Statistics  on  the  technical  and  detailed  points  raised  in  the  document.  The  GNP 
Committee  will  return to the subject  during  1996, once this advice has been  received. 

its 

The  subject  of  the  use  of  VAT  data  for  estimating  GNP  has  long  been  a  subject  of  interest  for  the 
GNP  Committee.  Two  aspects  of  this  subject  have  been  of  particular  interest,  both  hinging  on  the 
calculation  and  interpretation  of the theoretical  amount  of  VAT:  that  is the  amount  of  VAT  that  can 
be  expected  if  the  VAT  rules  and  regulations  are  applied  to  the  estimates  of  economic  activity 
contained  in  the  national  accounts.  The  first  aspect  of  interest  concerns  the  interpretation  of  the 
difference  between  this  theoretical  amount  of  VAT  and  the  amount  of  VAT  actually  received  by  the 
state.  The  second  aspect  of  interest  concerns  which  VAT  concept  is  actually  used  as  the  VAT 
element  which  is  a  component  of  GNP.  At  the  January  1994  meeting  of  the  Committee  Eurostat 

presented  a  paper  identifying  differences  between  the  concepts  used  for  the  estimate  of  VAT  as  a 
component  of  GNP  in  some  of  the  Member  States  and  setting  out  the  main  themes  for  further 
investigation.  This  was  followed  by  a  short  questionnaire  to  collect  the  additional  information 
needed  to take this work  forward,  and then  by a second  document  for  the  GNP  Committee's  meeting 
in June  1995. Discussion  to agree a feasible  common  method  for  estimating  VAT as a component  of 
GNP  for  all  Member  States  were  taken  up  again  at  the  December  1995  meeting  of  the  Committee 
and  will  be further  pursued  bilateraly. 

The  work  on  all  of  the  transversal  subjects  is  scheduled  to  be  complete  and  the  Commission 
reservations  lifted  by  October  1997  (for  dwellings  results  are  due  in  September  1996).  Derogations 
may  be necessary  for  some countries  to allow  some of the work  to be completed  by October  1998. 

19 

2.8 

Progress  on the country  specific  issues since  1994 

Much  progress  has  also  been  made  in  individual  Member  States  to  improve  the  comparability  and 
reliability  of  their  GNP  estimates  in  country-specific  ways.  The  improvements  made  can  be 
summarised  as  follows: 

Great  efforts  have  been  made  to  fundamentally  redevelop  the  national  accounts  of  those 
Member  States  which  were  seen  as  having  the  weaker  based  GNP  estimates.  These 
redevelopments  have  already  seen  large  changes  to  the  GNP  estimates  for  Greece, 
Luxembourg  and  Portugal.  Similarly,  important  developments  are  underway  in  Belgium 
and  Ireland,  though  that  is not to  say that  equally  large  changes  to the  GNP  estimates  of 
those two countries can be  expected. 

All  of  the  Member  States  have  done  important  work  in  response  to  the  Commission's 
country-specific  reservations  on  aspects  of  their  GNP  compilation  methods.  In  many 
cases  this  work  has  enabled  the  Commission  to  lift  the  reservations  concerned.  In  the 
other  cases  the  work  in  hand  is  expected  to  enable  the  Commission  to  lift  the 
reservations  between  the  time  of  writing  and  the  target  deadline  of  October  1997 
(though  again  in  some  cases  a  derogation  to  allow  a  deadline  of  October  1998  may  be 
necessary). 

All  of the  Member  States  also  have  their  own  important  national  accounts  development 
projects.  These  projects  are  not  directly  the  consequence  of  work  programmes 
emanating  from  the Commission  and the GNP  Committee  but they are nevertheless  very 
important  and they complement  them. 

A  complete  list  of  the  individual  improvements  made  by  each  Member  State  would  be  very  long 
indeed.  Major  improvements  made  already  by  Member  States  or  currently  being  implemented  by 
them  include the  following: 

In  Belgium,  a  series  of  institutional  changes  have  been  made  with  the  intention  of  giving  a  new 
impetus  to  the  development  of  the  national  accounts.  The  existing  system,  noted  as  having 
considerable  shortcomings  by  Eurostat  in  a  detailed  report  of  1992,  will  be  subject  to  a  major 
overhaul.  Important  new  features  of  the  national  accounts  system  will  include  a  new  range  of  basic 
statistics  from  enterprises  and  the  replacement  of  the  1958  OECD  framework  of  national  accounts 
with  that of the  ESA. 

In  Denmark,  work  already  completed  has enabled  the Commission  to lift  one  reservation  specific  to 
Denmark,  and  another  is expected  to be  lifted  shortly.  The Commission  has  also  been  able  to  lift  its 
reservation  on taxes and  subsidies, after  some changes  were  made by Statistics  Denmark.  Work  on a 
wide-ranging  revision  of  the  national  accounts, involving  the  incorporation  of  several  important 
new  data  sources,  is  due  to  be  completed  in  mid-1997.  The  revision  includes  a  number  of  projects 
which  address  themselves  at  the  Commission's  remaining  points  of  reservation  specific  to  Denmark 
and  others  which  take  forward  the work  done  so  far on  exhaustiveness. 

In France,  improvements  made  to some of the component  national  accounts  estimates  have  allowed 
the  Commission  to  lift  one  of  its  reservations  specific  to  France  and  the  reservation  on  the 

2 0 

transversal  reservation  on  taxes  and  subsidies.  Work  is  also  in  progress  on  the  longer-term 
developments  needed  to lift  the remaining  reservation  specific  to  France. 

In  Germany,  estimates  GNP  inclusive  o(  the  new  Lander  of  Germany  were  presented  to  the  GNP 
Committee.  A  Commission  report  to  the  GNP  Committee  in  July  1994  gave  a  critical  appraisal  of 
them,  noting  the great efforts  that  had  been  made  and  some  areas  where  they can  be improved  in  the 
future.  The  Commission  reservations  specific  to  Germany  (both  the  old  and  new  Lander)  are  being 
addressed,  with  the  different  pieces  of  work  required  due  to  be  completed  at  various  dates  between 
now  and  October  1997.  The  transversal  reservation  on  taxes  and  subsidies  has  been  lifted  for 
Germany. 

In Greece,  the  national  statistical  office  has, with  assistance  from  some  technical  experts  funded  by 
the  Commission,  made  great  improvements  to  its  national  accounts.  The  major  revision,  largely 
completed  in  1994,  featured  improved  methods  for,  for  example,  construction,  distribution  and 
business  and  personal  services,  and  led  to  the  previous  GNP  estimates  increasing  by  over  20%. 
Although  some  further  improvements  are  still  necessary,  it  is clear that  a very  substantial  increase  in 
the  comparability  and  reliability  of  the  Greek  national  accounts  has  already  been-achieved.  The 
information  still  needed  by  the  Commission  before  the  specific  reservations  for  Greece  can  be 
assessed  and  then  in due course  lifted  is expected  to be provided  by  February  1996. 

In Ireland,  a  number  of  projects  to give  important  improvements  to  the  reliability  of  the  estimates 
of  GDP  from  the  income  approach  are  continuing.  In  addition  the  development  of  the  expenditure 
approach  and  of a supply  and  use  framework  will  lead  to  more dependable  national  accounts.  These 
developments  are due to be completed  in  1997, when,  if the work  is successful,  it should  be  possible 
to lift  all of the Commission's  reservations  specific  to  Ireland. 

In Italy,  the  existing  use  of  employment  data  to  give  exhaustive  national  accounts  is  recognised  to 
be  a good  foundation  for  them.  Work  to  make  the  maximum  use  possible  of  family  budget  surveys 
and to build  a good  quality  business  register  is underway.  Once  these major  tasks are completed  it is 
expected  that the Commission's  reservations  specific  to Italy  should  be  lifted. 

In  Luxembourg,  a major  revision  was  completed  during  1994,  featuring  improvements  to  many  of 
the  basic  statistics  particularly  for  services  and  some  of  the  estimation  methods  used.  The  previous 
estimate of GNP  was  increased  by some  10% as a result.  Once  full  documentation  is received  on  the 
revised  system  of  national  accounts,  the  Commission  expect  to  be  able  to  lift  most  or  all  of  the 
reservations  specific  to  Luxembourg 

For  The  Netherlands,  an  important  revision  of  the  national  accounts,  eliminating  some  of  the 
relative  weaknesses,  was  completed  in  1992.  A  further  revision,  incorporating  notably  further 
improvements  to  exhaustiveness  is  underway  and  is due  to  be completed  in  1999.  A  study  has  been 
completed  in  response  to  the  only  Commission  reservation  specific  to  the  Netherlands  and  a  small 
revision  to GNP  will  allow  the reservation  to be  lifted. 

In  Portugal,  the  main  weaknesses  of  the  national  accounts  system  were  addressed  in  a  major 
revision  completed  in  1994.  The  revision  saw  much  improved  estimates  of  the  contribution  of.  for 
example,  large  parts  of  the  services  industries,  and  led  to  the  previous  estimates  of  GNP  being 
increased  by  some  15%). Although  some  further  improvements  to  the  Portuguese  national  accounts 
will  still  be  necessary,  the  important  work  completed  already  should  shortly  allow  many  of  the 
Commission  reservations  specific  to  Portugal  to  be  lifted.  1 he  remaining  reservations  specific  to 

:>.  i 

Portugal  are  expected  to  lead  to  further  improvements  to  GNP  in  1996,  and  it  is  hoped  that  those 
reservations can also be lifted  then. 

In Spain,  improvements  have  been  made  to  the  treatment  of  the  national  lottery  and  of  taxes  and 
subsidies.  The  Commission's  reservation  on  the  Spanish  national  lottery  estimates  is  being  lifted. 
Work  is  underway  to  enable  the  remaining  specific  reservations  for  Spain,  and  the  transversal 
reservation  on taxes and  subsidies,  to be  lifted  by  1997. 

In The  United  Kingdom,  work  already  completed  has enabled  the  Commission  to lift  all  four  of  its 
reservations  specific  to the United  Kingdom  estimates of GNP. 

Concerning  the new  Member States, Iceland  and  Norway,  Eurostat  carried  out  a first visit  to  each 
of  the  countries  during  the  second  half  of  1994.  Those  visits  were  used  to  collect  some  basic 
information  on  the  sources  and  methods  used  in  each  country,  and  to  guide  them  in  their  provision 
of more  detailed  information  to  the Commission.  A  report  on  each  visit  was  discussed  by the  GNP 
Committee  at its meetings  in December  1994 or March  1995. 

2 2 

Annex B to the report to Council and Parliament on GNP Directive 

Summary of the improvements made to GNP estimates for the years under reservation 

Year 

1988 

1989 

1990 

1991 

1988-

1988R95 

total 

reservation 

1989-1  1989R95 

total 

reservation 

1990-

1990R95 

total 

reservation 

1991-1  1991-IV 

total 

reservation 

change 

improvements 

change 

improvements 

change 

improvements 

change 

improvements 

Country 

Unit 

Belgium 

Md BFR 

5445 

5513 

1.25% 

0,06% 

5952 

5991 

0,66% 

N/A 

6352 

6345 

- 0 , 1 1% 

N/A 

6680 

6699 

0,28% 

Denmark 

Md DKR 

Germany 

Md DM 

G-eece 

Md DR 

695 

2122 

7290 

694 

-0.14% 

0,11% 

733 

725 

-1,09% 

0,11% 

111 

753 

-3,09% 

0,11% 

784 

782 

-0,26% 

2108 

-0.66% 

N/A 

2261 

2249 

-0,53% 

N/A 

2410 

2494 

0,97% 

N/A 

2826 

2882 

1,98% 

8997 

21.75% 

20,70% 

8768 

10691 

21,93% 

20,60% 

10409 

12867 

23,61% 

20,90% 

12813 

15726 

22,73% 

MdPTA 

39190 

40018 

2.1  1  : : 

0,69% 

44597 

44945 

0,78% 

0,64% 

49627 

49971 

0,69% 

0,56% 

54223 

54736 

0,95% 

Soam 

France 

Ireland 

Md FF 

Md IR£ 

itaiy  (L'T) 

1000 Md 

Ljxemoourg  Md LFR 

Netherlands  Md HFL 

Portugal 

Md ESC 

UK 

MdUK£ 

5645 

18.8 

1072 

326 

449 

5880 

463 

5726 

1.43% 

0,07% 

6101 

6154 

0,87% 

0,08% 

6467 

6479 

0,19% 

0,03% 

6722 

6735 

0,19% 

20 

6.38% 

1084 

1.12% 

360 

10.43% 

454 

1,11% 

3,67% 

-0,04% 

9,20% 

1,56% 

20.9 

1177 

373 

473 

22,18 

6,12% 

1183 

0 , 5 1% 

404 

485 

8 , 3 1% 

2,54% 

3,30% 

N/A 

8,85% 

1,69% 

22,9 

1291 

397 

509 

24,06 

5,07% 

3,93% 

24,25 

25,4 

4,74% 

1296 

0,39% 

N/A 

1407 

1409 

0,14% 

442 

11,34% 

516 

1,38% 

9,32% 

1,37% 

433 

543 

482 

11,32% 

542 

-0,18% 

6780 

15.31% 

15,53% 

6994 

8004 

14,44% 

14,71% 

8460 

9490 

12,17% 

14,21% 

10206 

10915 

6,95% 

459 

-0.86% 

-0,10% 

511 

502 

-1,76% 

-0,16% 

548 

540 

-1,46% 

•0,24% 

568 

566 

-0,35% 

——————— 

N/A 

0,11% 

0,85% 

20,70% 

0,67% 

•0,06% 

3,51% 

N/A 

8,78% 

•0,18% 

10,74% 

-0,25% 

19XX-I = first estimate for  19XX 

N/A =  not available 

19XXR95 = revised estimate in  1995  for  19XX 

Foreword 

The  above  table  shows  the  changes  to  the  Member  States'  GNP  estimates  for  the  period  1988  to 
1991.  Some  of these  changes  are  the  result  of ongoing  adjustments  of  GNP.  This  is not  dealt  with 
here.  The  purpose  here  is  to  highlight  those  changes  which  reflect  improvements  as  a  result  of 
applying  Commission  decisions  or after  notification  of reservations.  The  notes  which  follow  clarify 
the particular  type of improvement  in each  country. 

In order  to  measure  the  progress  achieved  by  the  Member  States,  Eurostat  and  the  GNP  Committee 
were also  keen to assess  improvements  to the  statistical  methods  and  sources  used  after  reservations 
had  been notified,  especially  when  changes  in figures  are not  indicated  in sufficient  detail. 

The  period  from  1988  to  1991  was  selected  because  it  corresponds  to  the  years  for  which  the  GNP 
estimates are supposed  to be  final  and  for  which  reservations  have  been  expressed. 

Belgium 

For  1988  the  overall  extent  of  GNP  adjustments  directly  relating  to  reservations  (0.06%)  matches 
the  average  rate  of  correction  for  the  three  different  ways  of  calculating  GNP.  Where  output  is 
concerned,  these  changes  (0.13%  of  total  GNP)  affect  mainly  compensation  received  from  the  rest 
of  the  world  (0.19%)  and  the  value  added  of  market  services  (-0.08%).  With  regard  to  income,  the 
improvements  (0.16%)  concern  mainly  taxes  paid  to  Belgian  enterprises  (-0,33%),  company  profits 
(0.25%),  compensation  of  employees  (0.13%)  and  dividends  received  by  Belgian  firms  (0.09%). 
On the expenditure  side, the adjustments  (-0.12%) relate wholly  to estimates  of final  consumption. 

The other  changes  for  1988 and  those  for  the years  1989 to  1991 stem  primarily  from  changes  in the 
statistical  bases  and  procedures  used,  as  well  as  retropolation  to  these  years  of  new  and  more 
detailed  data  obtained  since  1994.  Exhaustiveness  has  been  enhanced.  However,  it  is  not  possible 
at present to attribute  these adjustments  to any  particular  reservation. 

Denmark 

Denmark  has  changed  ils  GNP  estimates  from  11>XS to  1991  to  take  account  of  the  reservations 
which  were  notified  to  the  Danish  authorities  on  the  subject  of  water  supplies  and  commercial 
activities.  The  impact  of  the  changes  for  these  four  years  is  approximately  0.02%  of  GNP  in  the 
case of water  supplies  and  0.09%  for  commercial  activities. 

It  should  also  be  pointed  out  that,  in  order  to  comply  with  the  decision  on  taxes  and  subsidies, 
Denmark  withdrew  the adjustments  for  taxes and  subsidies  which  it had  introduced  in  1991. 

Germany 

Since  1990  the  GNP  estimates  in  Germany  have  taken  into  account  the  country's  unification  on  3 
October  of  that  year.  The  figures  for  1988  and  1989 thus  apply  to  the  old  Federal  Republic,  while 
those for  1990 and  1991 include the new  Lander. 

Germany  has  adjusted  the  1991  estimate  for  the  new  Lander  by  some  0.85  %,  in  response  to  the 
reservations  which have been  notified  for these new  Lander. 

Greece 

Greece  has changed  its  GNP  figures  for  1988-1991  as  part  of  the  thorough  overhaul  of  its  national 
accounts,  which  is  still  ongoing.  The  impact  of  the  changes  over  the  period  amounts  to 
approximately  20.7% of GNP. 

Spain 

Spain  has  made  changes  to  its  GNP  estimates  for  1988-1991  in  response  to  the  reservations  which 
were notified.  These adjustments  concern the national  lottery (0.36% bf  GNP), insurance  services  (-
0.21%)  and  subsidies  for  educational  activities  (0.48%).  The  estimates  for  the  national  lottery  are 
final  for  the  1988-1991  period.  The  procedure  for  lifting  the  reservation  concerning  the  national 
lottery  is  under  way.  On  the  other  hand,  the  figures  for  insurance  services  and  education  subsidies 
are still  provisional. 

France 

France  has  supplied  GNP  estimates  for  1988-1991  which  have  been  revised  in  the  light  of  the 
reservations  which  were  notified,  with  reference  to  the  economic  territory,  leasing  operations, 
insurance,  depreciation  of  highways  and  networks,  theft  of  stocks,  treatment  of  inspection  and 
supervision  fees  paid  to  the  State  and  payments  to  the  SNCF  and  the  RATP  in  respect  of  the  carte 
orange  season  ticket.  The  adjustments  made  for  all  these  reservations  for  1988-1991  are  final  and 
come  to  0.07%,  0.08%,  0.03% and  -0.06% of  GNP  respectively.  Also,  since  1992  France  has  been 
transmitting  data  incorporating  the  adjustments  required  for  these  items.  The  specific  reservations 
have been  lifted. 

Ireland 

Ireland has adjusted  its GNP estimates  for  1988-1991  in response  to certain  reservations  which  were 
notified.  The adjustments  amount  to 3.67%,  3.30%,  3.93% and  3.51%  of GNP  for  the  four  years in 
In  the  case  of  1988,  more  than  two-thirds  of  the  changes  concern  the  gross  operating 
question. 
surplus.  As  for  1989-1991,  it  is not  possible,  on  the  basis  of  the  data  which  have  been  supplied,  to 
break  down  the  changes  in  accordance  with  the  various  reservations  which  were  notified.  The  new 
estimates  are  provisional. 

Italy 

The  only  change  which  Italy  has  made  to  its  national  accounts  for  1988-1991,  as  a  result  of 
reservations  which  were  notified,  is  an  adjustment  of  -0.04%  of  GNP  for  compensation  to 
employees  received  from  the  rest  of  the  world.  This  adjustment  stems  from  the  reservation  on  the 
transition  from  GDP  to  GNP  which  the  GNP  Committee  has  not  yet  considered.  As  the  revision  of 
Italy's national  accounts  is not yet complete, it is currently  impossible  to ascertain  the adjustments  to 
be made. 

Luxembourg 

As  a  result  of  the  major  revision  of  its  national  accounts  which  was  completed 
in  1994, 
Luxembourg  has  adjusted  its  estimates  for  the  national  accounts  for  1988  to  1991,  with  the  aim  of 
complying  with  the  reservations  which  were  notified.  The  adjustments  for  the  period  amount  to 
approximately  +9%  of  GNP.  They  relate  mainly  to  better  coverage  of  services  and  financial  and 
insurance  activities  (about  90%)  of  the  increase)  and,  to  a  lesser  extent,  to  the  reappraisal  of  the 
market  and  non-market  services of general  government. 

Netherlands 

The  Netherlands  has  adjusted  its  GNP  estimates  for  1988-1990  as  part  of  the  major  revision  of  the 
national  accounts  which  was  completed  in  1992.  The  changes  amount  to  approximately  1.5%  of 
GNP.  The  figures  for  1991  were  estimated  using  the  new  base  and  have  not  been  greatly  altered 
subsequently.  Minor  adjustments  were  made  to  the  figures  for  1988  to  1991  after  the  revision  of 
fixed  capital  consumption  which  was  made  possible  in  1995  thanks  to  the  availability  of  new  data 
on  investment.  This  revision  may  be  attributed  to  the  reservation  concerning  general  government 
and private non-profit  institutions. 

Portugal 

As  part  of  the  major  overhaul  of  its  national  accounts,  Portugal  has  corrected  its  GNP  estimates  for 
1988-1991.  The  changes  amount  to  15.53%,  14.71%,  14.21%  and  10.74%  of  GNP  respectively. 
The  figures  for  1991  required  less adjustment,  the reason  being  that,  unlike  the  previous  three  years, 
the  initial  estimate  for  that  year  already  included  the  Azores  and  Madeira,  which  together  account 
for  about  5%  of  GNP.  Moreover,  for  the  period  1988-1991,  the  ligures  for  the  changes  relating  to 
reservation  improvements  are higher  than  those  for  the  total  change. This  is due  to the  fact  that  other 
corrections  have  led  to  a  decrease  in  the  GNP  estimates  between  1993  (the  year  in  which  the 
reservation  improvements  were  made)  and  1995. 

It  is  not  possible,  with  the  data  which  arc  currently  available,  to  break  down  the  effect  of  revision 
(excluding  the  Azores  and  Madeira),  i.e.  approximately  10%,  in  accordance  with  the  various 
reservations  which  were  notified. 

'Ah 

United  Kingdom 

In response to the reservations  which  were  notified,  the  United  Kingdom  adjusted  its GNP  estimates 
for  1988-1991.  The  improvements  in  connection  with  the  reservations  (-0.10%,  -0.16%,  -0.24% 
and  -0.25%  of  GNP  respectively  for  the  four  years  in  question)  match  the  adjustments  to  property 
income  received  from  the  rest  of  the  world.  They  relate  to  the  "transversal  reservation"  on  the 
transition  from  GDP  to  GNP.  The  heading  "total  change"  nevertheless  includes  some  adjustments 
made  on  the  basis  of  other  reservations.  Some  of  these  reservations  had  a  negligible  impact  on 
GNP,  an  example  being  insurance,  for  which  only  1991  was  adjusted  (0.08%). 
In  other  cases 
(register  of  import-export  firms,  register  of  leasing  companies),  it has  not  been  possible  to  calculate 
the  overall  effect  on  GNP,  since  the  adjustments  were  made  to  the  input-output  tables.  For  these 
ables,  however,  the  changes  made  to  the  statistical  methods  after  the  notification  of  reservations 
have  proved  satisfactory.  The  new  estimates  supplied  by  the  United  Kingdom  for  1998-1991  are 
final  and  the specific  reservations  have been  lifted. 

2 7 

ISSN 0254-1475 

COM(96) 124  final 

DOCUMENTS 

EN 

17 

Catalogue number  : CB-CO-96-133-EN-C 

ISBN 92-78-01853-8 

Office  for Official  Publications  of the European Communities 

L-2985  Luxembourg 

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