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INTRODUCTION
1. GENERAL
This publication presents the financial accounts of the general government sector, for the
period 2000-2005, according to the Government Finance Statistics Manual (GFSM) 2001 1 of
the International Monetary Fund. This format provides a comprehensive and thorough
accounting framework for analysis and evaluation of the fiscal policy of the general
government sector. The data in this publication aim to complement the statistics on national
accounts, as well as to enable decision makers, researchers in the field, and the public at
large to follow developments in economic activity, in the financial situation, and in the liquidity
of the general government sector.
The general government sector consists of institutional units and bodies that produce and
provide non-market public and community services, which are primarily funded by
compulsory payments imposed on institutional units belonging to other sectors. The general
government sector in Israel includes government ministries, the National Insurance Institute,
national institutions, local authorities, and non-profit public institutions.
This publication of general government sector accounts according to the GFS framework
was prepared concurrently with the existing presentation of general government accounts
based on the SNA format, which is used in publications on national accounts and in CBS
special publications.
2. STRUCTURE AND CHARACTERISTICS OF THE GFS FRAMEWORK
Two types of flows are listed in the GFS framework – flows from transactions, and other
financial flows.
In most cases, transactions are financial interactions between two institutional units, which
are made on the basis of a mutual agreement. The activities report of the general
government sector presents the outcomes of every transaction made during a given
accounting period. The transactions are divided as follows: revenue; expenses; net
acquisition of nonfinancial assets; and net acquisition of financial assets.
Other financial flows include changes in the value of assets and liabilities resulting from
price changes or changes in exchange rates, as well as liabilities resulting from extraordinary
financial events such as debt write-offs, war, natural disaster, etc.
The balance sheet of the general government sector presents the stock of financial and
nonfinancial assets and liabilities.
The flows and the assets and liabilities are estimated, if possible, in current market prices
and on accrual basis.
1
Government Finance Statistics Manual, 2001, International Monetary Fund, Washington D.C., 2001.
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3. METHODOLOGICAL CHANGES IN THE GFS 2001 SYSTEM VERSUS THE GFS 1986
SYSTEM
Basis for Recording Financial Events
In the previous GFS system (GFS 1986), the flows were recorded at the time the payment
was made or received (cash-based records). In the present system (GFS 2001), the flows
are recorded on accrual basis, i.e., at the time the financial value of the transaction is
generated or changed. Records based on accrual accounting make it possible to fully
integrate economic changes attributed to the given accounting period, which were only
partially recorded in the previous system.
Analytical Framework
The GFS 2001 system includes several balancing items, which highlight that analysis of the
general government sector’s activities has to take a variety of financial variables into
account. The previous system focused on only one item – total deficit. Net lending appeared
on the expenses side of the account.
4. DIFFERENCES BETWEEN THE GFS AND SNA932 SYSTEMS
In the last GFS update, an effort was made to harmonize the GFS system with the SNA93
system. However, there are still some differences between the systems. One substantive
difference is that the GFS system focuses on financial transactions such as taxation,
expenditures, and grants, whereas the SNA93 system presents data on production and
consumption of goods and services in addition to financial activities. The difference between
the two systems is reflected in the structure of the tables and the recording of some financial
activities.
Coverage and Accounting Guidelines
The definition of the general government sector in the GFS system is the same as the
definition in the SNA93 system. Most of the accounting guidelines are the same in both
systems, especially guidelines related to the timing of recording and assessments of stocks
and flows.
Structure of the System
Stocks and flows were defined in the GFS system in the same way as those in the SNA93
system. However, the presentation of the general government sector account in the GFS
system differs from the presentation in the SNA93 system.
2
System of National Accounts 1993, Commission of the European Communities, International
Monetary Fund, Organization for Economic Cooperation and Development, United Nations, World
Bank, Brussels/Luxembourg, New York, Paris, Washington D.C., 1993.
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The GFS system presents “gross” and “net” flows, i.e., initially the account includes the
internal flows between units of the general government sector. Afterwards, consolidation is
performed to attain a “net” presentation of the account for the entire sector. The SNA93
system, by contrast, presents the “gross” account (although it is recommended to present the
“net” account as well).
In contrast to the regular presentation of data in the SNA93 system, this publication presents
separate data for each unit in the government sector, as well as consolidated data for the
entire general government sector.
The analytical framework for the GFS system consists of four accounts: a report on
government activity, which presents all of the transactions recorded in the GFS system; a
report on other financial flows, which summarizes the changes in assets and liabilities
resulting from price changes or from extraordinary events; a balance that shows stocks; and
a report on sources and uses of cash, which provides information on the cash flow.
In the SNA93 system, the transactions are presented in a series of seven accounts: five
current accounts (production account, generation of income account, allocation of primary
income account, secondary distribution of income account, and uses of disposable income
account); and two accrual accounts (capital account and financial account), which show
acquisitions and disposals of assets and liabilities. Other financial flows are presented in two
additional accounts, and stocks are presented in the balance sheet.
The statement on government activities is divided into three parts. The data presented in the
first part of the statement are similar to the current accounts data in the SNA93 system, with
one exception – in the SNA93, capital transfers are presented in the capital account, which is
one of the accumulation accounts. All transactions appearing in the second and third parts of
the statement are presented in the capital and in the financial accounts of the SNA93
system, respectively.
Classifications
Several types of transactions are classified differently in the two systems, because the aims
and emphases of each system are different.
5. USE OF GFS SYSTEM DATA TO CONSTRUCT GOVERNMENT ACCOUNTS
ACCORDING TO THE SNA93 SYSTEM
Collection of government financial statistics is an initial and necessary step in the process of
constructing the general government sector accounts in national accounts according to the
SNA93 system, despite the few differences between the SNA93 and the GFS system.
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6. STRUCTURE OF THE STATEMENT
a. Tables Presenting Financial Accounts of the General Government Sector for Each
Separate Year
Table 1 – Consolidated Account of General Government Operations on Accrual
Basis – Revenue and Expenses, Net Lending/Borrowing
Table 2 – Sources and Uses of Cash
Table 3 – Revenue of the General Government Sector, by Type of Revenue
Table 4 – Expenses of the General Government Sector, By Type of Expense
Table 5 – Transactions in Assets and Liabilities in the General Government Sector
Table 6 – Outlays of General Government, By Function
b. Tables Presenting International Comparisons
Tables 7.1-7.3 present international comparisons of revenue, expenses and outlays in the
general government sector, by type of revenue, expense and function, for selected countries,
in 2005.
7. SOURCES OF THE DATA
Expenses and revenue of government ministries are estimated on the basis of analyses of
government budget execution reports, with the addition of supplementary data obtained from
the Ministry of Finance and the Ministry of Defense. Expenses and revenue of local
authorities, national institutions, and nonprofit institutions are estimated on the basis of data
obtained from analysis of the financial statements of those institutions, as well as on the
basis of various indicators.
8. COVERAGE
To date, not all of the accounts in the GFS framework are conducted by the CBS (e.g.,
transactions in financial assets), mainly due to the lack of appropriate data from various
sources. Nor are all of the details appearing in the recommendations of the GFS calculated
and presented in the tables (e.g., the sub-category of expenses by purpose). For the same
reason, the transition to recording of transactions on accrual basis has not yet been
completed. Nonetheless, the CBS has been making a persistent effort to reach a complete
presentation of the system, both in terms of coverage and in terms of definitions.
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9. MAIN FINDINGS
International Comparison of Revenue, Expenditures and Outlays in the General
Government Sector, by Type of Expenditure and Function 2005
International comparison of general government revenue reveals that Denmark has the
highest rate of revenue from taxes (47.5% of the GDP), followed by Sweden, Norway, and
New Zealand, where revenue from taxes ranges from 34.0% to 37.0% of the GDP.
The Israeli government’s revenue from taxes amounted to 30.0%-32.0% of the GDP in
recent years, similar to countries such as Australia, the United Kingdom, Canada, Finland,
France, and Russia. This rate is considerate high compared with most countries, where the
share of revenue from taxes ranges from 8.0% to 25.0% of the GDP.
In 2005, the current expenditures of the general government sector in Israel amounted to
47.5% of the GDP, similar to the rate in Germany (47.1%). This rate was low in relation to
“welfare states” such as Denmark, Sweden, Finland and Hungary (50.0%-55.0%), but higher
than in other Western countries such as the United Kingdom, Norway, Poland, and
Luxembourg (40.0%-44.0%). In countries with a market oriented economy such as the
United States, Australia, Japan, and New Zealand, government sector expenditures are
32.0%-36.0% of the GDP.
Wages – Expenditure for wages in Israel were about 27.0% of the total current expenditures
of the general government sector. In the United States, Sweden, and France the share of
expenses for wages was similar (25.0%-28.0%), whereas the share of expenditures for
wages out of the total current expenditures in Japan was only about 18.0%.
Defence – International comparison of general government expenditures by function shows
that defense expenditures in Israel comprised 17.3% of the total expenditures in the general
government sector – the highest among the countries selected for the comparison. Israel
was followed by Iran – 13.5%, Russia – 8.5%, and the United Kingdom – 6.0%.
In most of the countries selected for comparison, the share of defense expenditures
amounted to only 2.0%-4.0% of the total government expenditures.
Health – Canada and Australia are the leading countries in terms of expenditures for health
(18.0%-19.0% of the total government expenditures), followed by Norway, the United
Kingdom, and New Zealand (16.0%-17.0%). The expenditure for health in Israel amounted to
12.2% of the total government expenditure in 2005, similar to countries such as Russia,
Germany, and Denmark (12.0%-13.0%).
Education – In 2005, the general government sector expenditure for education in Israel
amounted to 15.4% of the total general government sector expenditure, similar to Canada,
Australia, and Denmark. This rate is higher than in most of the countries selected for
comparison: Norway – 13.9%, the United Kingdom and Poland – about 13.0%; France and
Russia – about 11.0%; the Czech Republic – 9.7%; and Germany – 8.9%. In international
comparison of expenditures for education and health, it is important to take into consideration
that the population in Israel is considered younger in relation to Western countries. The
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percentage of young people subject to compulsory education is relatively high in Israel,
whereas the percentage of elderly people who need health services is relatively low.
Social Security and Welfare – The expenditure for social security and welfare services in
Israel amounts to 24.0% of the total general government expenditures, and is among the
lowest of all developed countries. In Germany, the rate amounts to 47.0%, compared with
about 42.0% in Denmark, Poland, and France, 39.0% in Norway, 36.0% in the United
Kingdom, and 32.0% in New Zealand.
Most countries, including Israel, allocate up to 3.0% of total general government sector
expenses to environmental protection.
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