1.
GENERAL
This publication presents a set of data that specify and summarise the expenditure and
revenue of the general government sector in the years 2006–2012. The government sector
includes the institutional units and bodies that produce and provide public and community
non-market services, and are mainly financed by compulsory payments levied on institutional
units belonging to other sectors. The general government sector includes the government
ministries, the National Insurance Institute, national institutions, local institutions, and public
non-profit institutions. The summaries are based on specific and detailed data for each year.
Estimates for previous years have been adjusted after receipt of updated figures and
specifications, and as a result of the adjustment of accounts to the System of National
Accounts (SNA2008).
For the entire general government sector and for each of its sub-sectors separately,
summaries are presented according to a combination of two types of classification:
1) Classification by economic category of expenditure – expenditure on production of
services, subsidies, interest, current transfers, gross capital formation, and other
expenditures. This classification indicates the share of each sub-sector in the
demand for goods and services, supply of services, and allocation of revenue.
2) Classification by function – general services, defence, public order and safty,
economic affairs, environmental protection, housing and community services, health,
recreation, culture and religion, education, and social protection. These summaries
allow for examination of the purpose of all general government expenditures and of
each of its sub-sectors.
The concentration of expenditures according to a combination of the two types of
classification above indicates how expenditure for a specific function is divided among the
different types of expenditure on the one hand, and how the expenditure by economic type is
divided among the various services provided by the government on the other.
Tables 1 and 2 present data on the total expenditure of the general government sector by
function and type of expenditure, as a percentage of the total and as a percentage of the
Gross Domestic Product (GDP).
Tables 3 and 4 present data on general government consumption expenditure, by function
and type of expenditure, as a percentage of the total and as a percentage of the GDP
Tables 5 and 6 present the quantitative changes in general government consumption
expenditure sector consumption, by function and type of expenditure.
Tables 7 and 8 present data on total expenditure and consumption of the general
government sector in a combined classification, by function and type of expenditure as well
as by sub-sectors: the government ministries, the National Insurance Institute, local
authorities, non-profit public institutions, and national institutions.
Table 9 summarises the quantitative changes in general government consumption
expenditure in a combined classification, by function and type of expenditure.
Table 10 presents the individual and collective consumption expenditure of the general
government in a combined classification, by type of expenditure and by function.
Table 11 presents data on internal transfers between the different units (sub-sectors) in the
general government sector.
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Tables 12–14 present a summary of revenue and expenditure in the general government
sector, in different categories: current account, capital account, as well as a breakdown by
sub-sectors.
Table 15 presents the full account of the different types of sources and uses in the
government sector, in a format set by the international System of National Accounts
(SNA2008).
Table 16 presents an international comparison of revenue from taxes, expenditure by
function and government deficit in 2011 in the OECD countries.
2.
MAIN FINDINGS
2012
In 2012, general government expenditures amounted to 400 NIS billion (about 40% of the
Gross domestic product – GDP). Of that amount, about 62% was expenditure on production
of services, and the rest of the expenditure was for transfer payments, subsidies, interest
payments, fixed capital formation, etc.
Of the total general government expenditure, 15.1% was for defence, 27.3% was for social
protection, 17.3% was for education, and the rest was for other purposes.
General government revenue amounted to 361.1 NIS billion in 2012 – a nominal increase of
about 3.5% compared with the previous year.
Revenue from taxes that year was about 81.6% of the general government revenue (29.7%
of the GDP).
The total deficit of the general government sector, which is defined as revenue less
expenditure in the current account and capital account, amounted to 38.4 NIS billion in 2012
– about 3.9% of the GDP, following an overall deficit of 2.7% of the GDP in 2011.
The growth of the general government consumption expenditure in 2012 stood at 3.2% in
quantitative terms, compared to 2.5% in 2011. In 2012, general government consumption
expenditure comprised about 57% of the total general government sector expenditure
(22.9% of the GDP).
About 48% from the total general government consumption expenditure was for
compensation of employees, about 43% was for net purchase of goods and services, and
the rest was for taxes on production and consumption of fixed capital (imputed).
The output of the general government sector in 2012 was about 249 NIS billion.
Trends
Between 2006 and 2012, general government consumption in constant prices increased by
about 19%, whereas the GDP rose by 29% during the same period.
The share of payments for wages out of the total general government consumption increased
slightly, from over 46% in 2006 to 48% of the total consumption in 2012.
Individual consumption expenditure gradually rose from 49% of the general government
consumption in 2006 to 53% in 2012.
There has been considerable fluctuation in the general government deficit over the years.
The amount of the overall deficit ranged from 0.9% of the GDP in 2006, to 5.3% in 2009. As
of 2009 there has been a decreasing trend in the overall deficit, in terms of a percentage of
( 10 )
the GDP: in 2010, the overall deficit was about 3.6% of the GDP and in 2011, it declined to
2.7% of the GDP and in 2012 the overall deficit was about 3.7% of the GDP.
The current deficit (saving) of the general government sector also fluctuates over the years:
from 0.1% of the GDP in 2006, to 4.1% in 2009 and 3.1% in 2012.
During the years 2006–2011, the total general government expenditure has declined from
about 44% of the GDP in 2006 to about 40% in 2012.
Analysis of the general government sector expenditure by function reveals a continuous rise
in the share of expenditure for social protection over the years – from approximately 25% in
6006 to 27% of the total expenditure in 6016 and in the share of education - from 15.2% in
2006 to 17.3% in 2012. At the same time, there was a decline in interest payments from
10.2% in 2006 to 6.9% of the total expenditure in 2012. There has been also decrease in the
share of the interest payments over the years from 10.2% in 2006 to 6.9% of the total
expenditure in 2012. Health expenditure has slightly increased during the years 2006-2012
form 11.6% in 2006 to 12.6% of the total expenditure in 2012.
The share of revenue from taxes in the GDP has decreased gradually from 34.8% in 2006 to
29.7% in 2012.
3.
TERMS, DEFINITIONS AND EXPLANATIONS1
General government sector: Institutional units which, in addition to fulfilling their political
responsibilities and their role of economic regulation, produce principally non-market services
(possibly goods) for individual or collective consumption and redistribute income and wealth.
The general government sector in Israel includes the following units: government ministries,
the National Insurance Institute, local authorities, national institutions, and non-profit
institutions which are funded mainly by the government sector,
General government consumption expenditure: Is equal to the value of the intermediate
consumption of goods and services, deducting sales, plus compensation of employees,
taxes on production (including tax on wages), and consumption of fixed capital.
Compensation of employees includes imputed expenditure, which reflects the government
obligation to pay pensions to its staff after retirement.
General government consumption expenditure can be divided into two main categories:
a) Expenditure on goods and services for individual consumption;
b) Expenditure on services for collective consumption.
1
The definitions are based on the new System of National Accounts ( SNA 2008), which was prepared by five
international organizations: The United Nations, the International Monetary Fund, the World Bank, OECD, and
EUROSTAT. The new system is presented in: the System of National Accounts 2008, United Nations,
International Monetary Fund, World Bank, Organization for Economic Cooperation and Development,
Commission of the European Communities, New York, 2009.
( 11 )
Individual consumption expenditure: Includes expenditure intended to provide services
that can be attributed to specific individuals, such as education services, health services,
cultural services, etc.
Collective consumption service: Services provided simultaneously to all members of the
community or to all members of a particular section of the community (i.e. all the households
in a certain area). It includes expenditure on defence, public order, general public
administration, research and development, environment protection, etc.
Expenditure on production of services: Is equal to the value of the intermediate
consumption of goods and services, compensation of employees, taxes on production
(including tax on wages), and consumption of fixed capital. Compensation of employees
includes imputed expenditure, which reflects the government obligation to pay pensions to its
staff after retirement.
Imputed social contributions: Are equal in value to the sums that should have been
transferred to provident funds in order to ensure the de facto entitlements to the social
benefits they accumulate.
Other taxes on production: Taxes other than those incurred directly as a result of engaging
in production; they mainly consist of current taxes on the labour or capital employed in the
enterprise, such as payroll taxes or current taxes on vehicles or buildings.
Intermediate consumption/purchase of goods and services: The value of goods and
services consumed as inputs in the production process, excluding fixed assets whose
consumption is recorded as consumption of fixed capital. The goods and services may be
either transformed or used up during the production process.
Consumption of fixed capital: The decline, during the course of the accounting period, in
the current value of the stock of fixed assets owned and used by a producer as a result of
physical deterioration, normal obsolescence or normal accidental damage.
Current transfer: A transaction in which one institutional unit provides a good, service or
asset to another unit without receiving from the latter any good, service or asset directly in
return as counterpart and does not oblige one or both parties to acquire, or dispose of, an
asset.
There are three types of current transfer:
1) Taxes on income and other current taxes;
2) Pensions and social contributions;
3) Other current transfers.
Social transfers in kind: Goods and services provided to households by government and
non-profit institutions serving households either free or at prices that are not economically
significant.
Subsidies: Current unrequited payments that government units (including local authorities
and foreign government units) make to enterprises on the basis of the levels of their
production activities or the quantities or values of the goods or services that they produce or
import. In addition to the direct current subsidies, this item also includes the subsidy
component of loans to finance current activities, which are granted by the government to
producers under preferential conditions at interest rates lower than those of the market (e.g.,
loans from export funds).
Subsidies on products: Subsidies payable per unit of a good or service.
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Other subsidies on production: Subsidies (excluding subsidies on products) that domestic
producers may receive as a result of engaging in production.
Gross fixed capital formation: The total value of a producer's acquisitions, less disposals,
of fixed assets during the accounting period plus certain specified expenditures on services
that add to the value of non-produced assets.
Included are acquisitions of durable goods (except land and mineral deposits) for civilian use;
work in-progress on construction projects; major improvements; road construction and other
infrastructure projects; outlays on improvements to land and fruit plantations. Also included
are intangible assets (mainly acquisitions and own production of software, and expenditure
on exploration of minerals - oil and gas). Expenditure by the General Government on
construction and equipment for military use is not included.
Capital transfer: Capital transfers are unrequited transfers where either the party making
the transfer realizes the funds involved by disposing of an asset (other than cash or
inventories), relinquishing a financial claim (other than accounts receivable) or the party
receiving the transfer is obliged to acquire an asset (other than cash) or both conditions are
met. Capital transfers include investment grants, capital taxes and other capital transfers.
Investment grants: Capital transfers, in cash or in kind, made by the government to other
resident or non-resident institutional units to finance part or all of the costs for acquiring fixed
assets.
Other capital transfers: Includes all capital transfers, with the exclusion of capital taxes and
investment grants.
Taxes on income: Taxes on incomes, profits and capital gains; include current levies by the
government, the National Insurance Institute and local authorities:
a) On income from wages, property, capital gains, from entrepreneurship and from
pensions, as well as levies on financial assets, on net-wealth of enterprises, and on
ownership of goods.
b) Payments to the National Insurance Institute - both by the insured and by the
employer. From 1995, also includes health tax paid by households.
c) Mandatory payments for Israeli passports, court fees, etc.
Taxes on production and imports: Consist of taxes on goods and services when they are
produced, transferred, delivered, or otherwise used of by the producers or the importers.
Taxes and duties on imports are levied when the goods cross the border to Israel or the
customs border, or when services are delivered by non-resident units to Israeli resident
institutional units.
Taxes on products: Taxes that are payable per unit of goods or services. The tax is specific
per unit of quantity of goods or services when they are produced, sold, imported, exported,
transferred or used for own capital formation. Examples of taxes on products: V.A.T., sales
tax, gasoline tax, and customs.
Market output: Output intended for sale at economically significant prices, i.e., prices
intended to cover at least half of the cost of production.
Non-market output: Goods and individual or collective services produced by non-profit
institutions serving households or by government that are supplied free, or at prices that are
not economically significant, to other institutional units or the community as a whole.
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Net value added: The balancing item in the production account: the value of output less the
value of both intermediate consumption and consumption of fixed capital. Value added is
intended to measure the additional value created by the production process.
Non-produced non-financial assets: Non-financial assets that are needed for production
but have not been produced themselves.
Property income: Income receivable by the owner of a financial asset or a tangible nonproduced asset in return for providing funds or putting the tangible non-produced asset at the
disposal of another institutional unit. It consists of interest, distributed income of corporations,
reinvested earnings of direct foreign investment, and rent.
Operating surplus: The surplus or deficit accruing from production before taking account of
any interest, rent or similar charges payable on financial or tangible non-produced assets
borrowed or rented by the enterprise, or any interest, rent or similar receipts receivable on
financial or tangible non-produced assets owned by the enterprise.
Primary income: Accrued income of institutional units as a result of their involvement in the
production process or as a result of the ownership of assets that may be used for that
process.
Net lending/net borrowing: The difference between changes in net worth due to saving and
capital transfers and net acquisitions of non-financial assets (acquisitions less disposals of
non-financial assets, less consumption of fixed capital). If the amount is negative it
represents net borrowing. It is a balancing item in the capital account.
Net saving of the general government: In the current account it is the difference between
current receipts and current expenditures of the general government.
Government gross disposable income: The balancing item in the secondary distribution of
income account. It is derived from the balance of primary income account of the general
government sector plus current taxes on income and wealth, social protection contributions,
and all current transfers, (except social transfers in kind, received), and less all such
transfers paid.
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Wages and compensation for employees
A.
Wages and salaries: Wages and salaries are defined as remuneration in cash or in
kind by the employer to the employee for work carried out during the period of the
report, including wages based on units of work-time or on a monthly basis.
Wages and salaries include all types of gross payments, as specified below:
1) Basic wages, cost of living allowances, seniority payments, back
pay, advance payments, overtime, on-call and shift allowances.
2) Bonuses and special allowances such as education and proficiency
allowances, “13th month” salary, and retirement pay, compensation
for unused sickness day quota, etc.
3) Transportation allowance, vacation allowance, car allowance,
telephone compensation, per diem expenses, clothing allowance,
etc.
4) Payments in kind (only subject to income tax), such as: meals,
housing services, holiday gifts, etc.
B.
Supplementary expenses for wages and salaries/employers’ social contributions:
include social contributions payable by employers, such: actual contributions to the
National Insurance Institute, to pension funds, provident funds, study funds, etc. In
addition, these expenses include imputed contributions to pension expenses for
employees, which derive from the employer’s obligation to pay the workers’ retirement
pensions instead of contributing to pension funds, for example, imputed contributions to
budgetary pension schemes for civil servants.
C.
Taxes on wages and salaries: Taxes levied on employers for wage and salary
expenses, such as payroll tax and employers’ tax.
D.
Other components of labour cost: Expenses for vocational training, welfare, recruiting
workers, and providing work clothes, maintaining a cafeteria, payments to professional
organizations, etc.
E.
Compensation of employees/compensation for employee jobs: Compensation of
employees/employee jobs is defined as the total expenditure for wages and salaries and
supplementary expenditures for wages and salaries (items A+B).
F.
Labour Cost: Labour cost includes compensation of employees/employee jobs, taxes
on wages and salaries, and other components of labour cost (items C+D+E). There may
be cases in which reported labour costs include only compensation of
employees/employee jobs and taxes on wages and salaries (items C+E). In those
cases, it is recommended to classify the item as a labour cost for employees as well.
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CLASSIFICATION OF THE FUNCTIONS OF GOVERNMENT - COFOG1
Code
01
General services
01.1 Executive and legislative organs, financial and fiscal affairs, external affairs
01.2 Foreign economic aid
01.3 General services
01.4 Basic research
01.5 R&D general services
01.6 General services n.e.c.
01.7 Public debt transactions
01.8 Transfers of a general character between different units of government
02
Defence
02.1 Military defence
02.2 Civil defence
02.3 Foreign military aid (CS)
02.4 R&D defence
02.5 Defence n.e.c.
03
Public order and safety
03.1 Police services
03.2 Fire-protection services
03.3 Law courts
03.4 Prisons
03.5 R&D public order and safety
03.6 Public order and safety n.e.c.
1
United Nations, Department of Economic and Social Affairs, Classification of the Functions of
Government.
( 16 )
04
Economic affairs
04.1 General economic, commercial and labour affairs
04.2 Agriculture, forestry, fishing and hunting
04.3 Fuel and energy
04.4 Mining, manufacturing and construction
04.5 Transport
04.6 Communication
04.7 Other industries
04.8 R&D economic affairs
04.9 Economic affairs n.e.c.
05
Environmental protection
05.1 Waste management
05.2 Waste water management
05.3 Pollution abatement
05.4 Protection of biodiversity and landscape
05.5 R&D environmental protection
05.6 Environmental protection n.e.c.
06
Housing and community amenities
06.1 Housing development
06.2 Community development
06.3 Water supply
06.4 Street lighting
06.5 R&D housing and community amenities
06.6 Housing and community amenities n.e.c.
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07
Health
07.1 Medical products, appliances and equipment
07.2 Outpatient services
07.3 Hospital services
07.4 Public health services
07.5 R&D health
07.6 Health n.e.c.
08
Recreation, culture and religion
08.1 Recreational and sporting services
08.2 Cultural services
08.3 Broadcasting and publishing services
08.4 Religious and other community services
08.5 R&D recreation, culture and religion
08.6 Recreation, culture and religion n.e.c.
09
Education
09.1 Pre-primary and primary education
09.2 Secondary education
09.3 Post-secondary non-tertiary education
09.4 Tertiary education
09.5 Education not definable by level
09.6 Subsidiary services to education
09.7 R&D education
09.8 Education n.e.c.
10
Social protection
10.1 Sickness and disability
10.2 Old age
10.3 Survivors
10.4 Family and children
10.5 Unemployment
10.6 Housing
10.7 Social exclusion n.e.c.
10.8 R&D social protection
10.9 Social protection n.e.c.
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4.
SOURCES OF THE DATA AND METHODS OF CALCULATION
General government consumption expenditure is estimated by the analysis of the
Accountant General’s budget performance reports, and of budget provisions. In addition,
complementary data received from the Ministries of Finance and of Defence is used. The
estimate of expenditures by local authorities, national institutions, and non-profit institutions
is based on data obtained from analysis of their financial and budget accounts.
The estimate of consumption of non-profit institutions (labour expenditures and
purchase of goods and services), at current prices, is based on findings of a survey of
expenditures of non-profit institutions. This survey summarizes consumption expenditures
from financial reports of the institutions or from special questionnaires sent to them. For
those years in which reports had not yet been received, the value of services in the last year
for which data were available was extrapolated according to changes in wages as reported to
the National Insurance Institute. The estimates for labour expenditures of non-profit
institutions at constant prices were obtained by extrapolating according to the change in the
number of work hours of employees in each type of institution. Purchase of goods and
services, at constant prices, were calculated using price indices adjusted to the composition
of the purchases made by the institutions.
Estimates of gross capital formation in fixed assets are based mainly on data obtained
from the government, local authorities, and government institutions, or on analysis of the
financial reports of those institutions.
Regarding years for which the above-mentioned information has not yet been received,
extrapolation was conducted using the following indicators:
a) Data on imports of transport equipment, machinery and other equipment;
b) Reports on revenue from sales of domestically produced investment goods;
c) Quarterly estimates on areas of building begun and completed;
d) Periodic data on investment in residential building carried out by the Ministry of
Construction and Housing.
Estimates at constant prices
The estimates are calculated each year, at the prices of the previous year, and are presented
in the tables as chained estimates at 2010 prices, to allow comparisons between nonconsecutive years. Because of the chaining, estimates for each category of the consumption
components do not add up to the total expenditure for consumption.
For general government consumption expenditure estimates, quantitative changes in the
expenditure on wages were computed according to the change in labour inputs. Other
current expenditures were usually deflated by the wholesale price index of manufacturing
output, which was weighted in accordance with the characteristic production industries of the
various expenditure items.
The estimates of gross capital formation, at constant prices, were based on the price indices
of construction costs and on the price indices of equipment in Israel and in the main
countries from whom Israel imports.
Estimates of the changes in the number of employed persons, employees, and work hours
are usually based on findings from the Labour Force Survey in Israel and on data from the
National Insurance Institute.
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The following are some additional explanations regarding the methods of calculating
the various series:
1)
The classification of the functions of the general government sector (COFOG) and
other public institutions is based on the manual of the United Nations Statistical
Office. The expenditure was classified by the typical function of each type of
expense, without considering the administrative unit in which the financial reports
were recorded.
2)
Starting at 1998, the calculation of the nominal deficit, which includes the net
linkage of principal, has added.
3)
In the series on government transfer payments, rent subsidies for residents of
public housing (Amidar, Amigur, and other public housing companies) were
imputed. Additionally, the series on income from property and income from capital
accounts were adjusted following the new classification of the items included in
those series.
4)
Health institutions whose main income is derived from sale of services to the
government or to households are not included in the general government sector.
5)
Expenditures deriving from the government's obligation to pay pension to its
workers after they retire were imputed.
6)
The expenditure includes interest payments, but does not include payments on
account of principal, which are also included as expenditures in the report of the
accountant general.
7)
Interest payments were not classified in the various functions, and appear in the
COFOG manual under the function of "general services”. A large part of interest
payments is not attributed to current activities; it reflects the fact that in the
previous years the expenditure was financed by loans rather than by taxes.
8)
Expenditure and revenue of government-owned commercial establishments are
not included in the calculation of the general government sector deficit.
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5.
COMPARISON WITH PREVIOUS PUBLICATIONS
This publication includes several corrections to the data estimations that were publicized in
the previous publication, as of 2006. These corrections were made as a result of more
detailed and more recent data made available. Some methodological changes were made as
well, in order to adapt the Israeli government accounts to international requirements, as
explained above.
The significant changes made in this publication are the following:
The series on compensation of employees in the civilian and defence consumption
expenditure was revised following revisions in the model for imputing funded pensions during
the period 2006–2012.
The series on purchases in the civilian consumption expenditure was updated following the
addition of the expenditure for Financial Intermediation Services Indirectly Measured (FISIM),
and the addition of the estimate for acquisition of the output of the Central Bank by the
government.
The series on income from property and interest payments were updated following
addition/subtraction of Financial Intermediation Services Indirectly Measured (FISIM).
The series on other transfers from the private sector was updated following the addition of
current transfers from the Central Bank to the government, which was imputed on the basis of
acquisition of the output of the Central Bank by the government,
With the implementation of the new SNA2008 methodology in the National Accounts, the
GDP series was updated. As a result, all the data in this publication which are presented as a
percentage of GDP have changed.
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