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1. General This publication continues previous publications on Dealers and Revenue of the Economic Industries According to Value Added Tax starting with 1987 data. In 2004 a new sample was drawn (for explanations of the new sampling method, see Para. 4). The tables in this publication are based on the new sample, except for Tables 4 and 5. Part A – Annual Tables Tables 1-7 present data on revenue at current prices and at 2004 prices, except for Tables 4 and 5 in which the data are presented at 1995 prices. In addition, data are presented on: the number of dealers, price changes, real changes in revenue, input as a percentage of total revenue and the percentage of revenue on which no VAT is due out of total revenue – for the entire economy, by industries. Tables 8-12 present economic data on Trade and Services industries (and sometimes data for the total economy, as well). Table 13 presents the demography of businesses, which is calculated according to the Business Register and not according to the VAT sample. In Tables 1-3, 4A, 5A and 6-8, data of 2007 and 2008 were revised, compared with the previous publication. In addition, there are diagrams that describe the distribution by industries for: revenue, number of dealers, percentage of inputs, and revenue at a VAT rate of 0% in 2009. Part B – Monthly Indices 2008-2009 Table 14 presents monthly indices of revenue for industries at current prices. Tables 15-30 present monthly indices at fixed prices of 2004 for Trade all economic industries, seasonally adjusted indices and the trend changes. The industry distribution is based on the Standard Classification of All Economic Activities 1993.1 2. Definitions and Explanations 2.1 General Definitions Population – The survey population includes all the dealers who were active (see definition of Active Dealer below) in 2007-2009. According to the definition of a dealer, the population does not include: banks, insurance companies, provident funds, non-profit institutions (NPIs), and government and municipal institutions. Similarly, data for manufacturing industries do not include the diamond industry. Exempt dealer – defined in the Value Added Tax (VAT) Law as dealer whose annual turnover does not exceed NIS 73,300 (the amount valid as of January 2010, and updated monthly according to the increase in the Consumer Price Index). The transactions of exempt 1 The Central Bureau of Statistics (2003). Standard Industrial Classification of All Economic Activities 1993. Technical Publication No. 63. Second Edition. Jerusalem: the author. - XV - dealers are not subject to VAT (excluding land transactions), and exempt dealers do not charge their clients VAT. The turnover of exempt dealers from transactions is reported to the VAT authorities once a year, solely for the purpose of ratifying or changing the dealer’s legal status. The file received every month from VAT does not include exempt dealers. Therefore Tables 1-12 in this publication do not include the transactions of those dealers. For the first time, this publication presents additional data on the amount of exempt dealers and their revenue for every industry (see Tables 14-15). Those tables indicate that the largest number of exempt dealers was in Personal and Other Services (17,903 dealers), followed by Health Services, Welfare and Social Work (11,336 dealers. In Education there were 6,420 exempt dealers – over two-thirds of the number of dealers who are liable for VAT. In Hairdressing and Beauty Parlours the percentage of revenue among exempt dealers was relatively high in comparison with dealers who are liable for VAT. In the other industries, there were fewer exempt dealers, and they comprised a small percentage in comparison with the dealers who are liable for VAT. Dealer – defined for VAT as one who sells products and assets or supplies services, and is not a non-profit or a financial institution; as well as someone who conducts a random transaction. Active dealer – the Central Bureau of Statistics (CBS) defines an active dealer as someone who reported revenue of more than zero at least one month in the year (i.e., nil rate dealers are deducted). On the other hand, VAT authorities define a dealer as active even if he reported zero revenue during the entire year. This definition is used due to administrative considerations of tax collection, and it differs – as noted – from the Bureau definition, as it appears in this publication. Nil rate dealers – the CBS defines a dealer at a VAT rate of 0% as a dealer who reports to VAT authorities' amounts of zero revenue all 12 months of a calendar year. Dealers were enumerated in two ways: a. Tables 2 and 8 present data concerning the number of active dealers, after deducting nil dealers. b. Tables 9-13 present data concerning the number of active dealers, after deducting nil dealers and weighting active months for those dealers who were active only part of the year (i.e., a dealer who was active only one month out of the entire year will be counted as 1/12, etc.). The weighting makes possible an exact representation of the population. In addition, it prevents duplication in the number of dealers, in cases when new dealer files that were opened during the year replaced previous dealer files which were still registered with VAT. 2.2 Classification of Dealers – Definitions Classification of Dealers by Definition of Dealer and Type of VAT File Authorized dealer – a dealer who is registered according to registration requirements as an authorized dealer, and is not an exempt dealer. Only an authorized dealer may issue invoices that can be used for deducting input tax. Authorized dealers are divided in the tables into three types: Company – a dealer listed as a company with the Registrar of Companies. - XVI - Authorized dealer that is not a company – and henceforth, will be called an authorized dealer. Partnership/Dealers' Union – several dealers who requested to register as one dealer are considered a partnership. Dealers were classified according to the following categories: Self-employed – anyone who does not hire employees. Employer – a dealer who is not self-employed. 2.3 Economic Data – Definitions For all the active dealers in a calendar year (except for exempt dealers), annual and monthly data were accepted. The data received were: revenue on which VAT is due, revenue at a VAT rate of 0%, revenue exempt from VAT, total inputs, descriptive characteristics of the dealers, and their reporting patterns. Definition of Revenue and its Components Total VAT revenue includes: revenue on which VAT is due, revenue at a VAT rate of 0% and revenue exempt from VAT. Revenue on which VAT is Due Revenue resulting from sales of goods and provision of services in Israel (except for revenue at a VAT rate of 0%), as well as from the sale of fixed assets of the company. The revenue includes all indirect taxes due on products and services, but not VAT itself. Revenue at a VAT Rate of 0% The revenue at a VAT rate of 0% is mainly revenue from export of goods and services, sales of fresh fruit and vegetables, and from provision of services to tourists from abroad (which is, in fact, export of services), and the tax rate on it is zero. Revenue Exempt from VAT This is revenue resulting from transactions on which the dealer is not entitled to a return of VAT on inputs. For example, sale of diamonds within the Trade industry, rental of residential property, and sale of goods and provision of services for consumption in Elat (except for sale of vehicles and durable goods). Total Inputs Total inputs are the value of purchases made by the dealer from authorized dealers, which entitle the dealer to VAT repayment. It includes current inputs for production and purchases of capital formation, such as acquisition of buildings, equipment and machinery. Not included are purchases that are exempt from VAT, such as fresh fruit and vegetables, crude diamonds, and purchases from dealers whose revenue is exempt from VAT. - XVII - 2.4 Explanations 2.4.1 Reporting Unit – Dealer The reporting unit for VAT is different from the reporting unit for other administrative sources, such as National Insurance or Income Tax. For VAT, the unit is the dealer whereas for National Insurance, the unit is the employer or the self-employed. These differences in the definitions often cause lack of correspondence between the data from the different sources. For example, the employer that appears in National Insurance in a certain economic industry can include additional dealers in VAT and vice versa. The most salient difference between the reporting unit for VAT and for the other sources is in cases where the reporting unit for VAT is a VAT partnership (see Para. 2.4.2). 2.4.2 VAT Partnerships/Dealers' Union VAT Law requires a registered partnership to be registered with VAT as a partnership dealer. In addition, the law also makes it possible for a non-registered partnership to register as a partnership dealer. A partnership/dealers' union may include businesses from similar or different industries. In cases where the companies are active in the same industry, the partnership classification is simple. In cases where the companies act in different industries, the partnership/dealers' union is classified according to its main activity. Because the entire partnership is regarded as one unit in this publication, there may be differences between the various industries compared with other surveys (e.g., the Trade and Services Survey), in which each company joined in a partnership is regarded separately, and each one has its own industry classification. For this reason, there may also be differences between Table 9, which is based on the VAT sample, and Table 13, which is based on the Business Register. The difficulty in classifying partnerships leads to small deviations in the estimates for industries. For example, in 2009, 5.3% of all dealers were partnerships and their revenue constituted 42.9% of total revenue in the economy. But it is important to bear in mind that this publication focuses on the various trade and services industries, and they constitute approximately 44% of the revenue of all partnerships. 2.4.3 Data Obtained from VAT Authorities As stated above, the listing obtained from VAT authorities includes: dealer number (that identifies the dealer), locality code and other address details, economic industry according to VAT classification, total revenue, revenue on which VAT is due, revenue at nil rate, VATexempt revenue and total inputs. It should be noted that the industry – according to which the processing is conducted – undergoes a process of improvement in the Business Register. There are separate fields for current inputs and inputs for capital formation in VAT files. However, neither those reporting nor the VAT authority distinguish between those two types of data in practice. Therefore, it is not possible to calculate the gross value added from these figures. - XVIII - 2.5 Notes a. In Transportation, revenue was measured at market prices, and does not include support and subsidies to public transportation. The revenue of the Postal Authority is included only as of April 2006, when it became a company. b. Financial and Business Activities does not include banks and insurance companies, because they are not defined as authorized dealers (banks and insurance companies pay VAT at a rate of 15.5% on wages and profit, and not on their transactions). Therefore, this industry includes only: insurance agents, brokerage and services to the financial industry, real estate, and business and legal services. c. Public Services include data only on health and education services. Public institutions sector, e.g., government ministries, municipalities and non-profit institutions, are not considered dealers, and they pay VAT on wages at the lower rate of 7.5%. 3. Main Findings 3.1 Total Revenue of Economic Industries and the Changes in Revenue (Tables 1, 3) The total amount of revenue of dealers in the economy, excluding diamonds, in 2009, totaled NIS 1,288 billion, compared with NIS 1,344 billion in 2008. Total revenue includes the revenue of fabless companies, which manufacture through subcontractors abroad, and the local company is only responsible for the R&D, marketing and manufacturing administration. These companies were classified in the 7300 class. The total nominal growth in 2009, compared with 2008, declined by 4.2%. After deduction of the rise in prices according to differential price indices (see Para. 4.5), the quantitative change in the revenue of the entire economy between 2008 and 2009 declined by 4.4%. The quantitative change in revenue is not uniform throughout the various industries. In Manufacturing (excluding diamonds) a rise of 6.8% in real terms was recorded, following a rise of 2.7% in 2008; in Construction, the revenue fell by 10.6% in 2009; in Business Activities, a decline of 2.9% was recorded and in the personal services industries a decline of 1.5% was recorded; in Banking, Insurance and Other Financial Institutions a decline of 5.9% in real terms was recorded, in the Agriculture category, a decline of 3.6% was recorded. The smallest decline was found in Trade industries – 1.1% in real terms. In Electricity and Water Supply the revenue remained stable. Health Services, Welfare and Social Work was the only industry in which revenue increased – by 3.6% in real terms. 3.2 Distribution of Dealers and Distribution of Revenue, by Industries (Tables 1-2) In 2009, there were 440,000 active dealers in the economy, of which 15,000 were in Manufacturing (excl. diamonds), 89,000 in Trade, 124,000 in Business Activities, and 30,000 in Personal Services. In 2009, dealers in Manufacturing comprised approximately 5% of all the surveyed dealers, while their revenue was approximately 26% of the total revenue of the economy’s industries. Trade included approximately 20% of the dealers, and approximately 32% of the revenue; Business Activities included approximately 28% of all dealers and approximately 14% of the revenue; and in Personal Services there were approximately 7% of all dealers and only approximately 1.5% of total revenue. - XIX - This difference in the characteristics of the industries results from the centralization of revenue that exists in Manufacturing, as opposed to the spread of dealers that exists in the Services industries. The centralization of revenue is expressed by the fact that a small number of dealers have a relatively high share of the total revenue. Concurrently, the spread of dealers is expressed in the fact that a large number of dealers have a relatively low share of the total revenue. 3.3 Data on Partnerships Centralization of the revenue as opposed to the spread of the number dealers is also apparent from an analysis of the distribution of partnerships (see Para. 2.4.2). Dividing the partnerships into revenue groups in 2009, shows that 60% of the partnerships reported a revenue of NIS 1 million and less, and their revenue constitutes less than one percentage of the total partnership revenue; whereas only 3.5% of the number of partnerships reported revenue higher than NIS 100 million, and their revenue constituted more than 85% of total partnership revenue. Most partnerships with low revenue are those of self–employed persons who joined in a partnership, and not partnerships of companies. 3.4 Statistics on Dealers, by Frequency of Reports The pattern of reporting to VAT is monthly, bi-monthly and annual. It was found that in 2009, approximately 17% of the dealers reported every month, and their revenue was approximately 90% of the total revenue in the economy; 82% of the dealers (approximately 9.5% of the revenue) reported bi-monthly; and approximately 1% of the dealers (approximately 0.5% of the revenue) reported once a year. Most of the dealers who report once a year are in the diamonds industry, and report revenue at a VAT rate of 0%. The data appearing in this publication do not include the diamonds industry. Some of those reporting annually are located in Elat, in the free trade zone, and report revenue that is exempt from VAT (except for durable goods). 3.5 Series of Data on Revenue of Industries at 1995 Prices for 1997-2004 and at 2004 Prices for 2004-2009 (Tables 4-5) Tables 4 and 5 are based on the old sample and were not updated. These tables were prepared on the basis of quantitative changes (each year compared with the previous one), which were calculated and published in previous publications. In Table 5 the index was calculated on the basis of Table 4 at 1995 prices. Tables 4A and 5A were calculated according to the new sample, at 2004 prices. 3.6 Revenue of a VAT Rate of 0% and Revenue Exempt from VAT (Table 6) Table 6 presents the percentage of revenue with a VAT rate of 0%, and revenue exempt from VAT out of the total revenue. In Agriculture, this value constitutes in 2009 approximately 38% of the division revenue, and it results from the sale of fruit and vegetables and from export. In Manufacturing (excluding diamonds), approximately 47% of the revenue is at a VAT rate of 0%, and results mainly from export. In Trade, approximately 12% of the revenue is at a VAT rate of 0%, and results from the sale of fruit and vegetables. In Accommodation Services and Restaurants, approximately 17% of the revenue is at a VAT rate of 0%, and their source is exports of tourism services. The share of VAT-exempt revenue in Transport is approximately 31%, and results mainly from the export of sea and air transport services. In Computer Services, R&D, 59% of the revenue is at a VAT rate of 0%. - XX - 3.7 Inputs on which VAT is Due (Table 7) Table 7 presents percentages of the inputs on which VAT is due, out of the total revenue. As mentioned above, the reports include inputs for investment purposes, acquisition of equipment and buildings, and other current inputs. In 2009, the percentage of inputs in the industry was approximately 59%. This amount consists mainly of current inputs for production and purchase of equipment, and does not include inputs exempt from VAT, such as fruit and vegetables. In Electricity and Water Supply, the inputs were approximately 59% of the total revenue. This includes current inputs for production and investments, e.g., fuel for electricity production, as well as electricity that serves as an input in the Water Supply industry. In addition, inputs include investments in acquisition of machinery and equipment. In Construction, the inputs are 71% of the total revenue, and they are inputs for construction and acquisition of equipment as an investment. In the Trade industry, the inputs are approximately 75% of the revenue. These are the goods purchased by the industry for sale purposes. In the Business Activities industry, inputs totaled approximately 43% of the total revenue. In the recreational, cultural and sporting activities industries, the percentage of inputs was approximately 57%. The inputs in this industry include a high equipment factor, such as: cinema halls, theaters and various sport facilities. Tables 8-12 present data for the entire economy for 2009. 3.8 Statistics on Dealers, Revenue and Gross Value Added for Trade Industries (Table 8) Table 8 presents the number of active dealers (without weighting for number of months of activity), revenue, gross value added and changes in real terms in the gross value added for 2007-2009, in Trade industries only. Gross value added data for 2007-2009 were estimated according to the change in real terms in revenue, based on VAT data. In 2009, the gross value added in Trade industries rose by 1.1%, continuing a rise of 1.1% in 2008. The gross value added weights are slightly different from the revenue weights, and therefore there is a difference between the total change in real terms in the revenue, compared with the change in real terms in gross value added of the Trade industry. 3.9 Type of Employer and Type of VAT File, by Industry (Table 9) Table 9 presents a cross-section of the revenue and number of dealers who are self-employed and employers, and of authorized dealers, companies and partnerships (see Para. 2.4.2). The number of dealers in Tables 9-13 is weighted by the number of months of activity. Self-employed compared with employers 50% of all active dealers in the economy in 2009 were self-employed, and 50% were employers. However, there is a substantial gap between the share of self-employed and the share of employers in the revenue – 6% and 94%, respectively. Dealers according to type of file In 2009, approximately 5% of all dealers in the economy were partnerships, and their revenue was approximately 43% of the revenue in the economy; approximately 71% of dealers were authorized dealers (who are not companies), and their revenue was approximately 8% of the - XXI - revenue in the economy; and approximately 24% of dealers were companies whose revenue comprised approximately 49% of the revenue in the economy. In Wholesale and Retail Trade industries, it was found that 5% of dealers were partnerships (43% of the revenue), 70% of dealers were authorized dealers (8% of the revenue) and 25% were companies (49% of the revenue). Retail Trade is characterized by a higher percentage of authorized dealers, and reaches approximately 78% (21% of the revenue). In the Business Activities, 5% of the employers were partnerships (28% of the revenue), 65% were authorized dealers (11% of the revenue), and approximately 30% were companies (61% of the revenue). The Personal Services, Education and Health industries are characterized by a high percentage of authorized dealers. 3.10 Quantitative Characteristics, by Industry (Table 10) Table 10 presents quarterly and average values of revenue for the entire economy, and for the Trade and Services industries for 2009. The quarters in this table are calculated in relation to a single business. In the various Trade industries the cutoff of the lowest quartile ranges from NIS 100,000 to NIS 668,000 per year, compared with the cutoff of the entire economy – NIS 103,000. The meaning of the lowest quartile is that one-quarter of all dealers had a revenue which was equal or lower than this value. For example, in Retail Sale of Electrical and Gas Household Appliances (Class 5231), one-quarter of all dealers have a revenue of up to NIS 188,000 per year. In the Business Activities, the cutoff of the lowest quartile ranges from NIS 58,000 to NIS 142,000 per year. In the Personal Services, the cutoff of the lowest quartile ranges from NIS 56,000 to NIS 106,000 per year. 3.11 Size Groups of Revenue, by Industry (Tables 11-12) Table 11 examines the Trade and Services divisions and their Groups, by permanent groups of revenue amounts. This distribution makes it possible to examine the amount of centralization in the industry, by comparing the percentages of dealers and revenue in each industry, and the groups of revenue. The size of the revenue group depends on which group one chooses to focus on. If one chooses to present the low revenue groups, the distribution of dealers is more complete; if one chooses to present the high revenue groups, the distribution of revenue is more complete. In this publication, the second alternative was chosen. For example, in 2009 approximately 82% of dealers in Computer Services (Division 72) had a revenue of up to NIS 1 million; whereas only 0.6% of dealers in this industry, each of whom had a revenue of over NIS 100 million, had approximately 50% of the total industry revenue. Table 12 only presents data on partnerships (dealers' unions). The data in the table indicate that the revenue of more than half of the partnerships was up to NIS one million. However, approximately 85% of the total revenue in the economy was in large partnerships with a revenue of over NIS 1,000,000. Note: - XXII - Tables 10 and 11 are tables that supplement information on the industry distribution, by amount. Table 11 does not give enough details regarding dealers with a revenue of up to NIS 1 million. Rather, it presents those with the highest revenue in the economy. However, Table 10 makes it possible, through the quartile revenue values, to split up this group. For example, in the Retail Sale of Building Materials industry (Group 524), the value of the upper quartile is NIS 2,053,000. i.e., approximately 75% of the dealers in this industry had a revenue which was equal to or lower than this value; whereas the two lowest revenue groups, of up to NIS 5 million, which includes the upper quartile value, contain approximately 89% of all dealers. 3.12 Statistics, by Districts and Cities It was decided not to publish data by districts and cities in order to avoid bias. Dealers in the VAT sample were categorized into cities and districts according to the locality code appearing in the VAT file. (If there was no locality code in the VAT file, it was taken from the National Insurance file.) The locality code can create biases for two main reasons. First, in VAT partnerships the code of the business is categorized according to one of the files in the partnership, and does not necessary reflect the location of most of the revenue. Second, there are dealers whose activity is spread among several branches throughout the country, but there is only one VAT address. The less homogeneous the unit of the dealer, the less accurate the estimates will be. For example, Retail Trade is dominated by marketing chains with branches throughout the country. In the survey, however, all of the branches are assigned one address according to the record listed in VAT. For the above-mentioned reasons, it was decided that in the meantime data taken from the VAT sample will not be published by districts and cities. 3.13 Business Turnovers – Demographics of Businesses in the Business Sector (Table 13) One of the important criteria for examining financial activity in the economy is the number of businesses that were opened and closed during the calendar year. With the use of this index, it is possible to estimate the scope of activity in the economy, and its business vitality. A summary of the total gross entries of business openings and closings points to the vitality of the economy; and a summary of net entries of business openings and closings points to the expansion or reduction of the business activities in the economy. Closer examination by economic industries shows the expansion or reduction of activity in specific industries and their vitality. Table 13 was calculated from the Business Register file, which was established at the Central Bureau of Statistics. The Business Register includes information from the VAT file and the employers’ file of the National Insurance Institute. Business openings include businesses that opened during the current year, even if VAT data were not reported, as well as businesses that had been considered closed and reported that they resumed activity. Business closings include businesses that closed during the current year, including dealers who reported 0% VAT during the year. In this table, as opposed to the rest of the tables in this publication, Manufacturing also includes diamonds, and Wholesale Trade also includes trade in diamonds. In Table 13, it can be seen that in 2009 approximately 46,000 businesses opened, and approximately 37,000 businesses closed. This is a rise of approximately 9,000 businesses in the business sector. A similar rise has been noted in 2008. The number of businesses in the Computer and Related Services and R&D, which include start-up companies, grew in 2009 by 5.9%, after a rise of 7.8% in 2008. The number of businesses in Other Business Activities (e.g., services of lawyers, accounting, market research, architecture, and advertising) grew in 2009 by 4.15%, after a growth of 4.5% recorded in - XXIII - 2008. In Trade, the number of businesses grew by 0.7% in 2009, after a rise of 0.6% in 2008. In Accommodation Services and Restaurants, a rise of 3% occurred in the number of businesses in 2009, continuing a rise of 2.3% in 2008. In Health Services, Welfare and Social Work, a rise of approximately 3.5% was recorded in the number of businesses in 2009, continuing a rise of 3.9% in 2008. In Construction and in Electricity and Water Supply, there was a 1.8% increase in the number of businesses in 2009, continuing a 2.7% increase in 2008. However, in 2009, the downward trend continued, and there was a decline of 1.1% in the number of businesses in Manufacturing, following a decline of 0.2% in 2008. In addition, there was a decline of approximately 0.9% in the number of businesses in Transport and Communications categories, continuing a decline of 0.4% in 2008. In sum, there was an increase of 1.9% in the number of businesses in all of the industries in the economy in 2009, continuing an increase of 2.4% in 2008. 4. Methods 4.1 The Sample 4.1.1 General The VAT sample is planned so that the size of revenue, not the number of dealers, is estimated effectively. In the new sample as of 2004, the sampling method was changed from sampling proportionately to size to sampling in size strata. The sampling frame was divided into sample strata, which were defined as size groups of revenue within specific industries. The sample was extracted at a uniform probability for each sample stratum. The dealers with the highest revenues (in the highest sample stratum) in each industry are sampled with certainty. The method was changed in order to deal more effectively with the long-term dynamics of businesses. A business that is a partnership is sampled as a single unit, without relating to the partners. 4.1.2 Basic Sample The basic sampling frame was extracted from the CBS Business Register. At the time of planning the basic sample, the sampling frame included all the businesses that belong to the VAT file, that were active in 2003, except for dealers in the diamond industry and dealers who report only random deals. A computerized algorithm determined the boundaries of the size groups and a sample size was allocated for each stratum. In each industry the dealers were divided into size strata according to the value of the total annual revenue of the business. In each sampling stratum the dealers were sampled at equal probabilities according to their allocation (the sampling probability changes with each stratum), and dealers in the top size stratum in each industry were all sampled with certainty. Each sampling unit in the framework was assigned a ‘Permanent Random Number’ (PRN), for use throughout the survey. This number was intended to ensure, as much as possible, the continuity of the sample over time. 4.1.3 Supplementary Samples – New Businesses New businesses are frequently opened, and in order to keep the sample up to date and avoid undercoverage of new businesses, a supplementary sample of new businesses is issued every 2 months. For this purpose, a sampling frame of units created during this period, known as a supplementary sample is used. The units in the frame intended for supplementary samples are allocated to strata by the division boundaries determined in the basic sample (in accordance with the industry and the size of the new business). - XXIV - The process of supplementary sampling is “accumulative sampling”, in which the number of those being sampled in the supplement depends, inter alia, on the size of the accumulative sample up to the previous supplement, and the size of the accumulative sample required for the present supplement. In this method, the difference of the sample size in the stratum beyond the supplements is minimal. New dealers who have not yet been allocated to a sample stratum go into a “waiting group” and are added to estimates at probability 1; after two months the possibility of including them in the sampling frame will be re-examined. Also, in addition to supplementary sampling, the sample is updated annually (see Para. 4.1.4). 4.1.4 Revision The dynamics of businesses in the economy (businesses grow, shrink or close down) dictates updating their representation in the sample, in order to improve the quality of the estimates. Therefore, once a year a revision of the sample is performed. The sample strata of all dealers in the frame are updated according to the dealer’s revenues in the last year, and consequently an update of the sample and sample probabilities is performed, while attempting to preserve as much as possible the continuity of the sample. In addition, units that are closed down are deleted from the frame and the sample. 4.1.5 Estimation Every dealer in the sample has a weighting factor assigned to him, which is the opposite of the sample probability. The weighting factor reflects the number of dealers in the population that the dealer represents in the sample. The data on every dealer in the sample were multiplied by his weighting factor. As noted, the sample probability was determined so that it will greatly reduce the relative sample errors of the estimated revenue. It is also possible to estimate the number of dealers or any other datum in the same manner (multiplication by the weighting factor), but the relative sample error will generally be bigger. 4.2 Tests of Revenue Data Revenue data undergo tests of receiving and entering data. These tests identify errors in receipt of revenue data which in many cases result from errors in revenue at a VAT rate of 0%. The errors found are errors of moving fields while entering data (for example, the dealer number or date was entered in the revenue field). These tests are performed since these few cases may cause significant errors. 4.3 Imputation of Missing Revenue In cases where the revenue data are missing, and the dealer was obligated to report but did not, imputation is performed. The extent of imputed revenue in the data presented in the publication is negligible. 4.4 Classification of the Sample by Industries The frame used to create the sample was extracted from the CBS Business Register. In the Register each dealer is classified by his main activity, by various classification sources. In certain cases, the dealer’s main activity does not coincide with the activity from which most of the dealer’s revenue is derived (especially in partnerships), and therefore there may be a small bias between the various industries. 4.5 Adjustment Method for Rising Prices - XXV - The revenue of industries is presented in current prices and percentages of change, each year compared with the previous one, with adjustment to price indices. The changes in real terms were made by adjustment based on differential price indices each year, at the level of divisions, and based on the relative share of those industries in the total revenue in the industry. The revenue of the industries was adjusted by the price indices detailed below: Agriculture - by price indices of agricultural output. Manufacturing - weighted index by weights of the sales to the local market and exports. The indices used are wholesale price indices of the Manufacturing output to local targets, and the export price index in NIS. Electricity and water supply - by the average price per kwh, and the water price index in the Consumer Price Index. Construction – by index of residential construction inputs and housing prices. Wholesale trade – according to foreign trade indices for imports and exports, wage indices, the price index excluding fruit and vegetables, and the index for prices and maintenance of private vehicles. Retail trade – by the appropriate sections in the Consumer Price Index. Accommodation services and restaurants – by the accommodation services and restaurants index in the Consumer Price Index. Transportation – by the price index of output in Transportation. Communications – by the price index calculated within the framework of the calculation of the Communications industry and the postal price index. Insurance Agents Industry – by the insurance index in the Consumer Price Index. Real Estate – by the Other Housing Expenditures Index in the Consumer Price Index. Business and Legal Services – by the Consumer Price Index – General. Private Education – by the sub-index of the price indices for education, lessons, lectures and supplementary courses in the Consumer Price Index. Private health services – by the price index of dental care and private health services in the Consumer Price Index. Personal services – by the appropriate services in the Consumer Price Index. 5. Limitations of the Data The limitations are divided into three groups: a. Sampling errors b. Non-sampling errors c. Other limitations a. Sampling errors Because the estimates are based on a sample, there is a deviation between the estimates and the “Census value”, i.e., the data that would have been received in the census. These errors are called sampling errors. In industries in which there is a large number of dealers who were - XXVI - sampled by probability, the standard deviation is high, and the data credibility may be impaired. - XXVII - b. Non-sampling errors 1. Errors in revenue datum The revenue data at a VAT rate of 0% are not controlled well by VAT, and therefore there are errors at a rate that varies from year to year. 2. Errors in industrial classification These errors harm the quality of the industrial estimates. In this connection, it should again be mentioned that partnerships that combine activities from various industries make accurate classification difficult. In the new sample, all of the classifications were taken from the Business Register, in which the industries are constantly checked and updated. Therefore the quality of the classification is better. c. Other limitations Although some of the limitations of the data were mentioned earlier, a summary of the limitations is presented below. 1. The revenue in this publication is the revenue reported to VAT. In addition, it should be borne in mind that the revenue reports are affected by the depth and extent of collection by the VAT authorities and that illegally unreported revenue is not included. 2. In order to calculate accurate revenue estimates, CBS requires revenue reports only. However, the calculations also include reports of asset sales. Therefore, these reports which are submitted for purposes of VAT payments, make it difficult to calculate exact estimates. - XXVIII -