Council Regulation (EC) No 1687/98 of 20 July 1998 amending Commission Regulation (EC) No 1749/96 concerning the coverage of goods and services of the harmonised index of consumer prices
Date: 1998-07-20
Institutions: Council of the European Union
Subjects: EU Member State, consumer price, goods and services, harmonisation of prices, price index

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COUNCIL REGULATION (EC) No 1687/98

of 20 July 1998

amending Commission Regulation (EC) No 1749/96 concerning the coverage of
goods and services of the harmonised index of consumer prices

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 2494/95 of
23 October 1995 concerning harmonised indices of
consumer prices (1), and in particular Article 4 and
Article 5(3) thereof,

part of the inflationary process affecting consumers and
therefore need to be reflected in the HICP;

Whereas the Statistical Programme Committee (SPC) has
not delivered an opinion within the time limit set by its
chairman; whereas, in this case, following the procedure
laid down in Article 14(2) of Regulation (EC) No 2494/95,
the Commission has to, without delay, submit to the
Council a proposal relating to the measures to be taken,

Having regard to the proposal from the Commission,

HAS ADOPTED THIS REGULATION:

Having regard to the opinion of the European Central
Bank (2),

Whereas, by virtue of Article 5(1)(b) of Regulation (EC)
No 2494/95, each Member State is required to produce a
harmonised index of consumer prices (HICP) starting
with the index for January 1997; whereas the requirement
to produce HICPs in no way puts in question the right of
Member States to publish their national, non-harmonised,
inflation indices, which they may wish to use for national
policy purposes;

Whereas Commission Regulation (EC) No 1749/96 of
9 September 1996 on initial implementing measures for
Council Regulation (EC) No 2494/95 concerning harmo-
nised indices of consumer prices (3) sets down an initial
coverage for HICPs that was restricted to those goods and
services covered by all or most national consumer price
indices (CPIs); whereas the prices to be taken for the
HICP, in particular the treatment of subsidies, rebates and
reimbursements, require harmonised definitions; whereas
the geographic and population coverage of the HICPs
need still to be specified;

Whereas Article 3 of Regulation (EC) No 2494/95
requires that the HICP be based on the prices of goods
and services available for purchase in the economic ter-
ritory of the Member State for the purposes of directly
satisfying consumer needs; whereas prices not actually
paid by consumers in such purchases or opportunity costs
or interest payments are not appropriate for international
comparisons of consumer price inflation;

Whereas it is recognised that changes in reimbursements
might not have an impact on measures of inflation in a
broader context but whereas they do form an essential

(1) OJ L 257, 27. 10. 1995, p. 1.
(2) Opinion delivered on 14 July 1998 (not yet published in the

Official Journal).

(3) OJ L 229, 10. 9. 1996, p. 3.

Article 1

Regulation (EC) No 1749/96 shall be amended as follows:

1. Annex I shall be replaced by Annexes Ia and Ib to this

Regulation;

2. in the first indent of Article 1 the word ‘initial’ shall be

deleted;

3. subparagraph (a) of Article 2 shall be replaced by the

following:

‘(a)(1) The “coverage” of the HICP is defined as those
goods and services which are included in house-
hold final monetary consumption expenditure,
as referred to in (a)(2). It is classified according to
the four-digit categories and sub-categories given
in Annex Ia, which derive from the COICOP
international classification and shall be known as
COICOP/HICP (classification of
individual
consumption by purpose adapted to the needs of
HICPs).

that part of

is defined as

(a)(2) “Household final monetary consumption ex-
penditure”
final
consumption expenditure which is incurred by
households in monetary transactions in one or
both of the time periods being compared, and
specified in Annex Ib. Unless otherwise stated,
Annex Ib follows the definitions laid down in
the European System of Accounts (ESA) 1995
contained in Regulation (EC) No 2223/96 (*).
“Household final monetary consumption ex-
penditure” consists of expenditure incurred on
goods and services that are used for the direct
satisfaction of individual needs or wants either
by:

(a)(2)(a) resident households on the domestic

territory or abroad; or

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(a)(2)(b) resident and non-resident households on

the domestic territory; or

(a)(2)(c) the population of households within the
scope of the national household budget
survey.

(a)(3) Prices used in the HICP are the purchase prices
paid by households to purchase individual goods
and services in monetary transactions. Where
goods and services have been available to con-
sumers
free of charge, and subsequently an
actual price is charged, then the change from a
zero price to the actual price, and vice versa,
should be taken into account in the HICP.

(a)(4) The “weights” of the HICP are the aggregate
expenditure by households on any set of goods
and services covered by the HICP expressed as a
proportion of the total expenditure on all goods
and services covered.;

(*) OJ L 310, 13. 11. 1996, p. 1.’

4. Article 3 shall be replaced by the following:

‘Article 3

Coverage

1. HICPs compiled from price changes and weights
for
each category of household final monetary
consumption expenditure given in Annex Ia ac-
counting for more than one part in a thousand of the
total expenditure covered by all
those categories
included as specified in paragraph 2, shall be deemed
comparable.

The coverage of the HICP shall be extended, as

2.
follows:

(a) starting with the production of

the HICP
for January 1997, Member States shall process the
data collected covering those categories marked as
“initial coverage” as specified in Annex Ia;

(b) on, but not before, the production of the HICP
for December 1999, Member States shall process
the data collected covering also those categories
marked as “December 1999” as specified in Annex
Ia.’;

5. in Article 4 the words ‘Annex I’ shall be replaced by

the words ‘Annex Ia’.

Article 2

Taking into account the views of the committee set up by
Decision 89/382/EEC, Euratom (1), the Commission shall
within two years of the date of entry into force of this
Regulation compile a report and submit it to the Council.
The report shall assess the operation of the provisions of
this Regulation, in particular the concept of household
final monetary consumption expenditure in relation to
relevant alternative concepts. Following this report the
Commission may, if necessary, submit appropriate initi-
atives to the Council for the modification of this Regula-
tion.

Article 3

This Regulation shall enter into force on the 20th day
following its publication in the Official Journal of the
European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member
States.

Done at Brussels, 20 July 1998.

For the Council

The President

W. MOLTERER

(1) OJ L 181, 28. 6. 1989, p. 47.

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The coverage of the HICP shall include the following categories of COICOP/HICP:

ANNEX Ia

Code

COICOP/HICP heading

Initial
coverage
January 1997

Addition
December 1999

Excluded

01.

01.1.

01.1.1.

01.1.2.

01.1.3.

01.1.4.

01.1.5.

01.1.6.

01.1.7.

01.1.8.

01.1.9.

01.2.

01.2.1.

01.2.2.

02.

02.1.

02.1.1.

02.1.2.

02.1.3.

02.2.

02.2.1.

02.3.

02.3.1.

03.

03.1.

03.1.1.

03.1.2.

03.1.3.

03.1.4.

03.2.

03.2.1.

03.2.2.

04.

04.1.

04.1.1.

04.1.2.

04.2.

04.2.1.

04.2.2.

FOOD AND NON-ALCOHOLIC BEVERAGES

Food

Bread and cereals

Meat

Fish

Milk, cheese and eggs

Oils and fats

Fruit

Vegetables including potatoes and other tubers

Sugar,

jam, honey, syrups, chocolate and confectionery

Food products n.e.c.

Non-alcoholic beverages

Coffee, tea and cocoa

Mineral waters, soft drinks and juices

ALCOHOLIC BEVERAGES AND TOBACCO

Alcoholic beverages

Spirits

Wine

Beer

Tobacco

Tobacco

Narcotics

Narcotics

CLOTHING AND FOOTWEAR

Clothing

Clothing materials

Garments

Other articles of clothing and clothing accessories

Dry-cleaning, repair and hire of clothing

Footwear

Shoes and other footwear

Repair and hire of footwear

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS

Actual rentals for housing

Actual rentals paid by tenants

Other actual rentals

Imputed rentals for housing

Imputed rentals of owner-occupiers

Other imputed rentals

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

excluded

part (10)

part (10)

full (11)

full (11)

excluded (12)

excluded (12)

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Code

COICOP/HICP heading

Initial
coverage
January 1997

Addition
December 1999

Excluded

04.3.

04.3.1.

04.3.2.

04.4.

04.4.1.

04.4.2.

04.4.3.

04.4.4.

04.5.

04.5.1.

04.5.2.

04.5.3.

04.5.4.

04.5.5.

05.

05.1.

05.1.1.

05.1.2.

05.1.3.

05.2.

05.2.1.

05.3.

05.3.1.

05.3.2.

05.3.3.

05.4.

05.4.1.

05.5.

05.5.1.

05.5.2.

05.6.

05.6.1.

05.6.2.

06.

06.1.

06.1.1.

06.2.

06.2.1.

06.2.2.

06.2.3.

06.3.

06.3.1.

Regular maintenance and repair of the dwelling

Products for the regular maintenance and repair of the dwelling

Services for the regular maintenance and repair of the dwelling

Other services relating to the dwelling

Refuse collection

Sewerage services

Water supply

Other services relating to the dwelling n.e.c.

Electricity, gas and other fuels

Electricity

Gas

Liquid fuels

Solid fuels

Hot water, steam and ice

FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE
MAINTENANCE OF THE HOUSE

Furniture,
coverings and repairs

furnishings and decorations, carpets and other

floor

Furniture and furnishings

Carpets and other floor coverings

Repair of furniture, furnishings and floor coverings

Household textiles

Household textiles

Heating and cooking appliances, refrigerators, washing machines and
similar major household appliances, including fittings and repairs

Major household appliances whether electric or not

Small electric household appliances

Repair of household appliances

Glassware, tableware and household utensils

Glassware, tableware and household utensils

Tools and equipment for house and garden

Major tools and equipment

Small tools and miscellaneous accessories

Goods and services for routine household maintenance

Non-durable household goods

Domestic services and home care services

HEALTH

Medical products, appliances and equipment

full (13)

full (13)

part (14)

part (14)

part (14)

full (15)

full (15)

full (15)

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

full

Medical products, appliances and equipment

part (16)

full (17)

Out-patient services

Medical services

Dental services

Paramedical services

Hospital services

Hospital services (18)

full (17)

full (17)

full (17)

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Code

COICOP/HICP heading

Initial
coverage
January 1997

Addition
December 1999

Excluded

07.

07.1.

TRANSPORT

Purchase of vehicles

07.1.1A.

New motor cars

07.1.1B.

Second-hand motor cars

Motor cycles

Bicycles

Operation of personal transport equipment

Spare parts and accessories

Fuels and lubricants

Maintenance and repairs

full

full

full

full

full

full

full

Other services in respect of personal transport equipment

full (19)

Transport services

Passenger transport by railway

Passenger transport by road

Passenger transport by air

Passenger transport by sea and inland waterway

Other purchased transport services

Combined tickets

COMMUNICATIONS

Communications

Postal services

Telephone and telefax equipment

Telephone, telegraph and telefax services

RECREATION AND CULTURE

Audio-visual, photographic and data processing equipment and
accessories, including repairs

Equipment for the reception, recording and reproduction of sound
and pictures

Photographic and cinematographic equipment and optical
struments

in-

Data processing equipment

Recording media for pictures and sound

Repair of audio-visual, photographic and data processing and acces-
sories

Other major durables for recreation and culture

Other major durables for recreation and culture

Repair of other major durables for recreation and culture

Other recreational items and equipment; flowers, gardens and pets

Games, toys and hobbies, equipment for sport, camping and open-
air recreation

Gardening

Pets

Recreational and cultural services

Sporting and recreational services

Cultural services

Games of chance

full

full

full

full

full

full (20)

full

full

full

full

full

full

full

full

full

full

full

full

full

full (21)

full (22)

excluded

07.1.2.

07.1.3.

07.2.

07.2.1.

07.2.2.

07.2.3.

07.2.4.

07.3.

07.3.1.

07.3.2.

07.3.3.

0.7.3.4.

07.3.5.

07.3.6.

08.

08.1.

08.1.1.

08.1.2.

08.1.3.

09.

09.1.

09.1.1.

09.1.2.

09.1.3.

09.1.4.

09.1.5.

09.2.

09.2.1.

09.2.2.

09.3.

09.3.1.

09.3.2.

09.3.3.

09.4.

09.4.1.

09.4.2.

09.4.3.

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Code

COICOP/HICP heading

Initial
coverage
January 1997

Addition
December 1999

Excluded

09.5.

09.5.1.

09.5.2.

09.5.3.

09.5.4.

09.6.

Newspapers, books and stationery

Books

Newspapers and periodicals

Miscellaneous printed matter

Stationery and drawing materials

Package holidays

part (23)

full (24)

full

full

part (23)

full (24)

09.6.1.

Package holidays

full

10.

EDUCATION

10.1.

10.1.1.

10.1.2.

10.1.3.

10.1.4.

Educational services

Pre-primary and primary education

Secondary education

Tertiary education

Education not definable by level

11.

HOTELS, CAFES AND RESTAURANTS

11.1.

11.1.1.

11.1.2.

11.2.

Catering

Restaurants and cafes

Canteens

Accommodation services

11.2.1.

Accommodation services

12.

MISCELLANEOUS GOODS AND SERVICES

12.1.

12.1.1.

12.1.2.

12.1.3.

12.2.

12.2.1.

12.2.2.

12.3.

12.3.1.

12.4.

12.4.1.

12.4.2.

12.4.3.

12.4.4.

12.4.5.

12.5.

12.5.1.

12.5.2.

12.6.

Personal care

Hairdressing salons and personal grooming establishments

Appliances, articles and products for personal care

Personal care services n.e.c.

Personal effects n.e.c.

Jewellery, clocks and watches

Other personal effects

Social protection

Social protection services

Insurance

Life insurance

Insurance connected with the dwelling

Insurance connected with health

Insurance connected with transport

Other insurance

Financial services n.e.c.

Financial services n.e.c.

FISIM

Other services n.e.c.

full (24)

full (24)

full (24)

full (24)

full (24)

part (25)

full

part (23)

part (23)

full (24)

full

full

full

full

part (27)

part (31)

excluded

excluded

part (26)

full (28)

full (29), (30)

full (32), (30)

full (33), (30)

part (34)

full (35)

excluded

12.6.1.

Other services n.e.c.

full (36)

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(10) Relates to the practice followed in the national consumer price indices.
(11) Refers to all rentals actually paid by tenants, i.e. the rentals the tenant pays to the landlord regardless of any social benefits the tenant receives from public

authorities (including payments which at the tenant’s discretion go directly to the landlord); see also Annex Ib No 12b.

(12) This does not prejudge the coverage of owner-occupied housing in general.
(13) Refers to expenditure which tenants or owner-occupiers incur on materials and services for minor maintenance and repairs; following a decision on the
treatment of owner-occupied housing, the coverage of this category might need to be extended to include expenditure for major decoration, maintenance
and repair of the dwelling and for extensions and conversions of the dwelling not typically paid by tenants; see also Annex Ib Nos 4 and 15.

(14) Refers to expenditure according to consumption.
(15) Refers to separately identifiable charges for specific services relating to the dwelling whether or not consumers pay according to consumption that is,

excluding payments for services financed out of general taxation; see also Annex Ib Nos 9 and 29.

(16) Refers to health goods outside the social security system.
(17) Full coverage refers to that part of expenditure on health goods and services (other than hospital out-patient services) which is paid by the consumer and
not reimbursed by government, social security or NPISHs; see Annex Ib No 12a and the methodological details of inclusion as specified in accordance
with the procedure laid down in Article 14 of Council Regulation (EC) No 2494/95.

(18) The methodological details and the timetable of inclusion shall be specified in accordance with the procedure laid down in Article 14 of Council Regula-

tion (EC) No 2494/95.

(19) Includes driving licences, road worthiness tests, motor association fees, tolls for bridges, tunnels, shuttle-ferries, and motorways; excludes licences to own

or use vehicles; see also Annex Ib Nos 9, 18 and 19b.

(20) Refers to tickets covering two or more modes of transport and the expenditure cannot be apportioned between them.
(21) Includes fees or subscriptions to sports clubs and fitness centres; it also includes payments for hunting and fishing licences if the government uses the

issue of licences to organise some proper regulatory function; see also Annex Ib Nos 9 and 19b.

(22) Includes entrance fees to museums, fees for libraries, and licence fees and subscriptions to television and radio; see also Annex Ib Nos 9 and 10.
(23) Includes educational goods and services only if they are fully paid by consumers.
(24) Full coverage refers to that part of expenditure on educational goods and services which is paid by the consumer and not reimbursed by government,
social security or NPISHs; see Annex Ib No 12a and the methodological details of inclusion as specified in accordance with the procedure laid down in
Article 14 of Council Regulation (EC) No 2494/95.

(25) Refers to computer courses, language courses, typing courses, and other such courses which are fully paid by the consumer.
(26) Refers to cr(cid:138)ches, nurseries, play schools and kindergartens which are not an obligatory part of the educational system; covered is only that expenditure
which is paid by the consumer and not reimbursed by government, social security or NPISHs; see also Annex Ib No 12a; other items within code 12.3.1
such as retirement homes, schools for the disabled, home cleaning services, and meal programmes are subject to the same arrangement as described in
footnote 18.

(27) Refers to service charges for contents insurance.
(28) Refers to all service charges paid by owner-occupiers and tenants for the kinds of insurance typically taken out by tenants against fire, theft, water damage,
etc.; see also Annex Ib Nos 7, 8 and 24. Following a decision on the treatment of owner-occupied housing, the coverage of this category might need to be
extended to include service charges paid by owner-occupiers for the kinds of insurance for the dwelling typically taken out by landlords.

(29) Refers to service charges for private sickness and accident insurance; see also Annex Ib Nos 7, 8 and 24 and the methodological details of inclusion of

category ‘06. Health’ as specified in accordance with the procedure laid down in Article 14 of Council Regulation (EC) No 2494/95.

(30) The methodological details and the timetable of inclusion shall be specified in accordance with the procedure laid down in Article 14 of Council Regula-

tion (EC) No 2494/95. The implementation may be scheduled for an earlier date.
(31) Refers to service charges for insurance in respect of personal transport equipment.
(32) Refers to service charges in respect of personal transport equipment, travel insurance and luggage insurance; see also Annex Ib Nos 7, 8 and 24.
(33) Refers to service charges for insurance such as civil liability for injury or damage to third parties or their property not arising from the operation of

personal transport equipment; see also Annex Ib Nos 7, 8 and 24.

(34) Refers to banking service charges which are not expressed as a proportion of the transaction value.
(35) Refers to financial services including banking services; not covered are service charges for private or public pension funds, which are a kind of life insur-

ance but restricted to specific groups of persons, as well as interest payments; see also Annex Ib Nos 21 and 23.

(36) Includes fees for the issue of passports, birth, marriage or death certificates, and dues for membership to professional associations if they can be con-

sidered as payments for services rendered; see Annex Ib Nos 9 and 19.

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ANNEX Ib

A. DEFINITION OF HOUSEHOLD FINAL MONETARY CONSUMPTION EXPENDITURE

1. The household sector includes individuals or groups of individuals (as defined in ESA 2.76.a and

2.76.b) and may or may not include institutional households (as defined in ESA 2.76.b).

2. A resident household has its centre of economic interest within the economic territory of the
Member State, which may or may not include territorial or extraterritorial enclaves (as defined in ESA
2.04 to 2.07).

3. A monetary transaction is an economic flow that is an interaction between institutional units by
mutual agreement, where the units involved make or receive payments, or incur liabilities or receive
assets denominated in units of currency. By convention the collection of household refuse shall be
considered as interaction by mutual agreement. Transactions that do not involve the exchange of
cash, or assets or liabilities denominated in units of currency, are non-monetary transactions. Intra-
unit transactions are normally non-monetary transactions. Non-monetary transactions involving more
than one institutional unit occur among transactions in products (barter of products), distributive
transactions (remuneration in kind, transfers in kind, etc.) and other transactions (barter of non-pro-
duced non-financial assets).

Household final monetary consumption expenditure covers the following borderline cases:

4. It covers items not treated as intermediate consumption, like materials for small repairs to and in-
terior decoration of dwellings of a kind typically carried out by tenants as well as owners, and ma-
terials for repairs and maintenance to consumer durables, including vehicles.

5. It covers items not treated as capital formation, in particular consumer durables, that continue to
perform their function in several accounting periods; this includes the transfer of ownership of some
durables from an enterprise to a household.

6. It covers financial services directly charged.

7. It covers non-life insurance services by the amount of the implicit service charge.

8. It covers all expenditure financed out of non-life insurance claims, including payments made directly
by the insurance companies to the garages, hospitals, doctors, etc. This implies that the full price paid
by households or by insurance companies to the garages, hospitals, doctors, etc. is covered by the
HICP.

Non-life insurance claims are the amounts which insurance enterprises are obliged to pay in settle-
ment of injuries or damage suffered by persons or goods. They are current transfers from the in-
surance companies to the receiving households and, therefore, enter into the households’ disposable
income. Any expenditure made as a result, for example payments to garages, hospitals, or doctors, is
treated as being incurred by the households and not by the insurance companies. It is irrelevant
whether the households actually make the expenditure before the claims are paid out, which then
look like social security reimbursements, or whether the payments are made directly by the insurance
companies to the garages, hospitals, etc. In the latter case, the companies are treated merely as agents
acting on behalf of the households who are still treated as incurring the expenses.

9. It covers payments by households for licences, permits, etc. which are regarded as purchases of
services. If the government uses the issue of licences to organise some proper regulatory function,
such as checking the competence or qualification of the person concerned, the payments made
should be treated as a purchase of services from government and the prices taken in the HICP, but if
the licences are being granted automatically on payment of the amounts due, payments should be
treated as direct taxes and not prices. Driving or pilot’s licences, television or radio licences, firearm
licences, museum or library admissions, garbage disposal fees, etc. are treated in most cases as
purchases of services rendered by government, whereas licences on the use of vehicles, boats or
aircraft are treated in most cases as taxes.

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10. It covers the purchase of output at not economically significant prices, e.g. entrance fees for a

museum.

Household final monetary consumption expenditure does not cover the following border-
line cases:

11. It does not cover income in kind because it is not a monetary transaction (although according to ESA

3.76.b it is included in final consumption expenditure).

12.

(a) It does not cover social transfers in kind received by households, including those parts of expend-
iture initially made by households for which they are subsequently reimbursed by social security,
government units or NPISHs, e.g.
for medical expenses or education. When a household
purchases a good or service for which it is subsequently reimbursed in part or in whole, the
household is treated merely as agent acting on behalf of a social security fund, government unit or
NPISH. The amounts reimbursed to households are treated as social transfers in kind made by
social security, government units or NPISHs. They are not recorded as cash transfers to house-
holds and do not form part of households’ disposable incomes. This accounting treatment leads to
the same result as when a social security fund purchases the goods and services from market
producers and then re-sells them to households at low non-market prices. This implies that the
price taken for the HICP is the amount paid by the household less the reimbursement.

(b) All other rebates by public authorities, especially housing payments to tenants in order to reduce
their rents (including payments which at the tenant’s discretion go directly to the landlord), are
considered as social benefits in cash and, therefore, enter into households’ disposable income.
This implies that the full price of the good or service before the rebate is covered by the HICP.

13. It also does not cover services of owner-occupied dwellings, because these are no monetary transac-

tions (although according to ESA 3.76.a it is included in final consumption expenditure).

14. It does not cover the purchase of dwellings, and items treated as acquisitions of a non-produced asset,

in particular the purchase of land.

15. It also does not cover expenditure that an owner-occupier incurs on the decoration, maintenance and

repair of the dwelling not typically carried out by tenants.

16. It does not cover the expenditure on valuables.

17. It does not cover expenditure by households owning unincorporated enterprises when incurred for

business purposes.

18. It does not cover current taxes on income and wealth, which are all compulsory, unrequited
payments, in cash or in kind, levied periodically by general government and by the rest of the world
on the income and wealth of institutional units, and some periodic taxes which are assessed neither
on the income nor the wealth. Other current taxes include all those payments by households for
licences which are to be regarded as taxes, such as licences to own or use vehicles, boats or aircraft,
etc.

19.

(a) It does not cover subscriptions, contributions and dues paid by households to NPISHs, like trade
unions, professional societies, consumers’ associations, churches and social, cultural, recreational
and sports clubs.

(b) However, if a club, union, society or association can be considered as a market producer selling its
services at an economically significant price, which usually is the case even though the legal status
may be a non-profit organisation, then the subscriptions, contributions and dues paid by house-
holds are considered as payments for the services rendered — not as a transfer — and, thus,
covered by the HICP.

20. It does not cover voluntary transfers in cash or in kind by households to charities, relief and aid or-

ganisations.

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21. It does not cover payments of property income, including interest. Property income is the income
receivable by the owner of a financial asset or a tangible non-produced asset in return for providing
funds to, or putting the tangible non-produced asset at the disposal of, another institutional unit.
Under the terms of the financial instrument agreed between them, interest is the amount that the
debtor becomes liable to pay to the creditor over a given period of time without reducing the amount
of principal outstanding.

22. It does not cover compulsory or voluntary social contributions, such as employers’ actual social
contributions to social security funds, insurance enterprises or autonomous as well as non-auto-
nomous pension funds administering social insurance schemes to secure social benefits for their
employees, or employees’ social contributions payable to social security, private funded and unfunded
schemes.

23. It does not cover life insurance and pension funding services (although according to ESA 3.76.f and g
such services are included in final consumption expenditure by the amount of the implicit service
charge).

24. It does not cover net non-life insurance premiums. These are premiums payable under policies taken
out by institutional units. The policies taken out by individual households are those taken out on
their own initiative and for their own benefit, independently of their employers or government and
outside any social insurance scheme. Net non-life insurance premiums comprise both the actual
premiums payable by policy holders to obtain insurance cover during the accounting period
(premiums earned) and the premium supplements payable out of the property income attributed to
insurance policy holders, after deducting the service charges of insurance enterprises arranging the
insurance. (NB: this service charge is covered by the household final monetary consumption expend-
iture). Net non-life insurance premiums are the amounts available to provide cover against various
events or accidents resulting in damage to goods or property, or harm to persons as a result of natural
or human causes, for example fires, floods, crashes, collisions, sinkings, theft, violence, accidents,
sickness, or against financial losses resulting from events such as sickness, unemployment, accidents,
etc.

25. It does not cover current transfers between households, which consist of all current transfers in cash
or in kind made, or received, by resident households to, or from, other resident or non-resident
households.

26. It does not cover fines and penalties. They are imposed on institutional units by courts of law or
quasi-judicial bodies and treated as compulsory current transfers. Also not covered are fines and
penalties imposed by tax authorities for the evasion or late payment of taxes, which cannot usually be
distinguished from the taxes themselves.

27. It does not cover lotteries and gambling; neither the payment of the service charge to the unit organ-
ising the lottery or gambling, nor the residual current transfer that is paid out to the winners
(although according to ESA 4.135 the service charge is included in final consumption expenditure).

B. DEFINITION OF PRICE

28. At the time of purchase, the purchaser’s price is the price for the products the purchaser actually
pays; including any taxes less subsidies on the products; after deductions for discounts for bulk or
off-peak-purchases from standard prices or charges; excluding interest or services charges added
under credit arrangements; excluding any extra charges incurred as a result of failing to pay within
the period stated at the time the purchases were made.

29. Goods and services for individual consumption (‘individual goods and services’) are acquired by a
household and used to satisfy the needs and wants of members of that household. Individual goods
and services have the following characteristics:

(a) it must be possible to observe and record the acquisition of the good or services by an individual

household or member thereof and also the time at which it took place;

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(b) the household must have agreed to the provision of the good or service and take whatever action

is necessary to make it possible, for example by attending a school or clinic;

(c) the good or service must be such that its acquisition by one household or person, or possibly by a
small, restricted group of persons, precludes its acquisition by other households or persons.

All household final consumption expenditure is individual. By convention, all goods and services
provided by NPISHs are treated as individual.

By convention, all government final consumption expenditure on education, health, social security
and welfare, sport and recreation, and culture should be treated as expenditure on individual
consumption services except for expenditure on general administration, regulation, research, etc. In
addition, expenditure on the provision of housing, the collection of household refuse, and the opera-
tion of transport system should also be treated as individual. The collective consumption expenditure
is the remainder of the government final consumption expenditure. It consists in particular of man-
agement and regulation of society, the provision of security and defence, the maintenance of law and
order, legislation and regulation, the maintenance of public health, the protection of the environ-
ment, research and development, and the infrastructure and economic development.