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higher in the second scenario because the denominator of the ratio will be lower by the amount of additional income tax that is required to finance the free education and health services.

Fortunately, one of the innovations of the SNA 93 was the disaggregation of government final consumption expenditure into individual (e.g. education and health) and collective (e.g. defence) expenditure. These new aggregates are included in two new accounts in the SNA 93 and enable an alternative household saving ratio to be calculated using adjusted disposable income (the sum of household disposable income and government individual consumption) rather than disposable income in the denominator.

The differences between the simulated saving ratios and the standardised ratios in Chart 2 are shown in Table 1. The changes tend to reduce the gap between saving ratios in the euro area and the United States. This is due to the fact that a more significant level of services is provided by the government to specific households in the euro area than in the United States, as well as to the initial

Euro area

United States

Japan

1991

2.3

0.4

0.6

1992

2.4

0.4

0.6

1993

2.3

0.3

0.6

1994

2.3

0.3

0.6

1995

2.3

0.3

0.6

1996

2.2

0.2

0.5

1997

2.1

0.2

0.5

1998

2.0

0.3

0.7

1999

1.9

0.1

0.6

2000

1.8

0.1

0.5

2001

1.8

0.1

0.4

2002

1.9

0.1

0.4

Table 2. Changes from standardised household saving ratios: income taxes versus taxes on production and imports (percentage points)

Sources: OECD, National Accounts of OECD Countries database, 2004 and national statistical agencies

4

difference in savings rates. In most years the adjustments for Japan lie roughly midway between those for the euro area and those for the United States.

Income taxes versus taxes on production and imports

The government raises revenue from households either directly by means of direct taxes (mainly income taxes) or indirectly by means of taxes on production and imports that are reflected in household final consumption expenditure (value added tax, import duties, sales tax, etc.). The value of household saving is not directly affected by the mix of these taxes, since both types effectively enter into current outlays (taxes on production and imports via (higher) household final consumption expenditure, and income taxes directly as a current transfer to the government and (lower) disposable income). However, other things being equal, household saving ratios will be lower the greater the reliance on taxes on production and imports since taxes on income are deducted in deriving household disposable income, but taxes on production are not.4

The hypothetical adjustments to the household saving ratios, shown in Table 2, are in the opposite direction to those for household consumption of public services and increase the gap between the ratios for the United States and the euro area by approximately two percentage points. The adjustments for Japan are higher than those for the United States, but significantly lower than those for the euro area.

Social security schemes versus private pension schemes

The comparability of household saving across countries may also be affected by the relative importance of social security schemes organised by the government as compared with private pension or life insurance schemes. The reason is that contributions to private pension or life insurance schemes and the income earned by these schemes are both included in household saving, whereas

4. The precise method of making a hypothetical adjustment for this factor is complicated because there are a range of possible approaches and because it is difficult to allocate taxes on production and imports across the categories of final demand. The adjustment used here is based on the notion that net taxes on products could be replaced by additional income taxes on households and hence it involves subtracting net taxes on products (i.e. on goods and services) from household disposable income to derive a modified household saving ratio.

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