slide1 l.
Download
Skip this Video
Download Presentation
Tricks of the Trade Chiara Goretti Senato della Repubblica - Italy Bucharest, 10th April 2008

Loading in 2 Seconds...

play fullscreen
1 / 16

Tricks of the Trade Chiara Goretti Senato della Repubblica - Italy Bucharest, 10th April 2008 - PowerPoint PPT Presentation


  • 217 Views
  • Uploaded on

Tricks of the Trade Chiara Goretti Senato della Repubblica - Italy Bucharest, 10th April 2008. Outline. Fiscal rules: incentive to creative accounting Forecasts: optimism bias Stock-flow adjustment: Infrastructures: the ISPA case Railway transfers Securitisation and lease back

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Tricks of the Trade Chiara Goretti Senato della Repubblica - Italy Bucharest, 10th April 2008' - Roberta


Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Tricks of the Trade

Chiara Goretti

Senato della Repubblica - Italy

Bucharest, 10th April 2008

outline
Outline
  • Fiscal rules: incentive to creative accounting
  • Forecasts: optimism bias
  • Stock-flow adjustment:
      • Infrastructures: the ISPA case
      • Railway transfers
      • Securitisation and lease back
      • Tax collectors
  • Conclusions
slide3

Fiscal rules: incentive to creative accounting

  • From restricted to non restricted activities
  • The EMU case:
    • optimistic growth forecasts
    • deficit vs debt bias: the stock-flow adjustment
    • fiscal surveillance: an evolving statistic and accounting model
  • Coherence of definitions and quality of data
forecasts optimism bias
Forecasts: optimismbias
  • There is evidence of a significant degree of optimism in a number of euro area countries: boosting projected revenues and containing some types of spending;
  • In 2000, the prevailing buoyant economic conditions were taken to be average or normal: medium-term growth prospects were erroneously assessed to be very bright;
  • Afterwards, budgetary developments dramatically worsened.
forecasts lessons
Forecasts: lessons
  • In a rules-based fiscal framework that sets limits on the budget balance, negative growth surprises will necessarily require a downward adjustment of expenditure plans;
  • Budgetary plans should be built on economic growth projections which possibly err on the side of caution.
the stock flow adjustment sfa
The stock-flow adjustment (SFA)
  • Deficit vs debt bias: from restricted to unrestricted activities;
  • Reconciliation between:
      • cash and accrual data;
      • stock and flow indicators;
  • Consistency across the data;

Debtt – Debtt-1 = Deficitt + SFA

slide9
ISPA
  • ISPA (created in 2002): joint-stock company (outside GG);
  • Entire financing of high speed railway, raising money and providing proceed to RFI and TAV (both outside GG) to finance infrastructures;
  • In 2005, Eurostat decided all debt issued by ISPA is to be recorded as gvt debt, with a counterpart as financial transaction in the form of a loan from gvt to RFI-TAV;
  • In 2006, gvt consolidated the ISPA debt, for transparency reasons, with an increase in deficit of about 13 billions.
railway transfers
Railway transfers
  • Capital injections into the state-owned companies are treated as financial transactions;
  • From 2004 on, capital transfers are treated as economic item after Eurostat decision 98/03 (if the company presents losses);
  • Revisions to deficit figures in March 2005 due to railway capital injections: 3.6 billion/euro for 2001; 4.1 b/e for 2002; 4.0 b/e for 2003;
real estate securitisation and lease back
Real estate: securitisation and lease-back
  • 2001 and 2002: securitisation operations concerning a portfolio of buildings owned by the Social Security Fund (SCIP);
  • In 2002, Eurostat decided that – if the initial payment is < 85% of the market price - securitisation are to be recorded as financial items until the full payment is made;
  • Revisions of deficit figures for 2001 and 2002;
  • Lease-back (FIP) of central and local building used as offices, then rented back to gvt;
  • Revenues for 3 bn euro in 2004 e 0.6 bn in 2005.
tax collectors
Tax collectors
  • From 1997, tax collectors have to advance the payment of indirect taxes due in the following year; budgetary impact only in the first year;
  • In 2003, gvt introduced another type of pre-payments;
  • In 2005, Eurostat decided that pre-payments have to be recorded as financial transactions, without improving, in 2003 and 2004, the deficit;
  • December 29th, 2007, pre-payments by tax collectors abolished, in order to worsen the balance.
data statistical deficit revisions
Data: statistical deficit revisions

2001: securitisation operations (0.6%), capital injections in FS (0.4%), re-calculations of current expenditures (0.6%), transactions with the EU budget (0.2%);

2002: capital injections in FS (0.4%).

2003: capital injections in FS, reduction in the accrual estimate of social contributions, tax collectors.

2004: tax collectors.

conclusions 1
Conclusions 1

Experience demonstrates that gvts:

  • aim to exclude expenditures and includes revenues in constrained balance;
  • exploit absence of accounting regulations or opacity in recording methodology;
  • abandon “tricks” when are forced to identify economic substance of transactions (accrual).
conclusions 2
Conclusions 2
  • Avoid temptations on forecasts: independent checks;
  • Investments on quality of data and statistics;
  • Cash and accrual, stock and flows: consistency and coherence of indicators