Classification of payments to
deposit insurance and financial
stability schemes
Maurice Nettley
OECD Centre for Tax Policy and Administration
17-19 May 2011
Secretariat’s questionnaire
• Provides an update on the Report of responses by
Delegates to the Secretariat’s September 2010
questionnaire on classification of payments made by
banks and other credit institutions to insure deposits
made by customers
• Asks for comments by Delegates on the Secretariat’s
proposals for taking the topic forward
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Questionnaire
• Asked Delegates to describe any schemes operating
under 3 headings
- similar to Swedish stability scheme
- similar to financial sector interventions operating in
the UK
- other schemes being operated with similar aims
• Asked for each scheme whether any payments received
are being classified as tax revenue or fee for a service in
National Accounts or as tax revenues in OECD Revenue
Statistics
3
Schemes reported by Delegates (1)
• Responses now received from 22 countries
• Reported schemes provisionally allocated into one of six
groups listed in Annexes A-F of the paper ( subject to
comments from Delegates )
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Schemes reported by Delegates (2)
A -Stability fee schemes (7)
B -Schemes similar to UK deposit protection scheme (2)
C -Other government sector scheme (6)
D -Fund operated outside the government sector (10)
E -Non-state scheme backed by deposit takers (3)
F -Voluntary schemes (2)
3 countries reporting that no schemes exist
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Classification of payments made as tax
revenues or fee for service (1)
• Taxes defined as compulsory unrequited payments to
government
• Taxes are unrequited in the sense that benefits provided
by government to taxpayers are not normally in
proportion to their payments
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Classification of payments made as tax
revenues or fee for service (2)
• Under these definitions, payments made under the
schemes listed in Annexes D, E and F cannot be
considered as taxes
- D payments are not being made to government
- E transaction is between banks and an institution
outside the government sector
- F participation is voluntary
• There are a number of different practices being operated
in the schemes listed in Annex A-C
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Classification of payments made as tax
revenues or fee for service – Annex A
• 7 countries have Stability fee schemes
• The payments will be classified as tax revenues in the
National Accounts of Austria, Germany, Hungary,
Sweden and the United Kingdom.
• Of these, all except Germany want to classify as a tax in
OECD Revenue Statistics
• The United States expect to classify the payments as a fee
for service
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•
Classification of payments made as tax
revenues or fee for service – Annex B
• 2 countries reported schemes in the category of scheme
operating in the United Kingdom
• In Australia, the priority claim on assets is treated as a
fee for service but any further levy to overcome the
shortfall would be treated as a tax
• In the United Kingdom, the realisation of assets is
treated as a capital tax in National Accounts but not in
OECD Revenue Statistics
9
Classification of payments made as tax
revenues or fee for service – Annex C
• 6 countries reported other government sector deposit
schemes
• In Canada, the payments are classified as taxes in both
National Accounts and OECD Revenue Statistics
• In Denmark, the payments are not part of public
administration in the National Accounts
• In Australia, Belgium, Germany, and the United States,
the payments are classified as a fee for a service
10
Variation in practice on classification
• Two separate issues in practice
• The interpretation of the word ‘unrequited’ in the OECD
Interpretative Guide
• Not always easy to distinguish between those fees and
user charges to be treated as taxes and those that are not
• When a fee is levied in connection with a service, the
strength of link between the fee and the service and the
link between the amount of the fee and the cost of the
service may vary considerably.
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Interpretation of the term ‘unrequited’
• Tax payment is compulsory with no direct provision of a service
whereas a fee is paid for a specific service
• But a payment could be regarded as a fee and not a tax even when
there is no specified provision of a service for a particular entity if
payments are entirely channelled back to the sector of the economy
where companies are subject to the payment
• This is the case for the stability fee in some countries – as the levy is
made on all firms eligible for support , it may be unrequited for an
entity but for the sector as a whole it does finance a potential
service
12
Tax or a fee for a service (1)
• Payments by the financial institutions could be seen as a
form of insurance fee with the Government acting as
guarantor.
• The 2008 SNA identifies two types of guarantees –
‘standardised’ and ‘one-off’ containing characteristics
consistent with payments for deposit insurance.
• For ‘standardised’ guarantees ( para 17.211 ), payments
are likened to those for non-life insurance.
• For ‘one-off’ guarantees ( para 17.212 ), the text indicates
that payments made should be classified as a fee for a
service.
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Tax or a fee for a service (2)
• On the other hand, in cases when the payments go into a
Government’s general funds, the Government can use
the money as it wishes. It has to guarantee customer
deposits but the size and timing of future payments is
uncertain
• The level of payment is fixed by Government raising the
question of the link between the level of the fee and the
guaranteeing service being provided
• If participation is compulsory, a particular institution
has no choice about whether or not to pay the fee
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Discussions with the IMF and a question for
Delegates
• Secretariat has had some discussions with the IMF about
this topic
• The IMF are planning to update some parts of the GFS
manual later this year and this exercise is expected to
include some text on bank levies.
• Delegates are asked for any views on whether payments
made under the types of schemes listed in Annexes A-C
should be classified as tax revenues in OECD Revenue
Statistics.
• It may be possible for Working Party 2 to influence IMF
thinking if a consensus emerges from the views
expressed by Delegates
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Other proposals for next steps
• Delegates to propose any comments and corrections to
the text in Annexes A-F including proposals to switch
schemes between Annexes
• Any submissions by Delegates not so far responding can
be added to the summary
• Secretariat to provide a paper for the November 2011
WP2 meeting with proposals for the way forward on
classification issues eventually leading to agreed changes
to the text of the OECD Interpretative Guide
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• Thank you and any questions?
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