Vol. 446 No. 6
5 Mr. Rabbitte asked the Taoiseach if his attention has been drawn to concerns expressed by some economists concerning the accuracy of trade figures produced by the Central Statistics Office and, in particular suggestions that they may exaggerate the level of exports; the steps, if any, that are taken to ensure that the figures are accurate; and if he will make a statement on the matter. [698/94]
6 Mr. J. Higgins asked the Taoiseach his views on the accuracy of the statistics on economic growth published by the Central Statistics Office; and if he will make a statement on the matter. [1237/94]
59 Mr. R. Burke asked the Taoiseach if his attention has been drawn to concerns expressed regarding the validity of our foreign trade statistics; if there is a large transfer pricing element; and if he has satisfied himself that the change in the method of gathering information as a result of the completion of the Single Market will improve the situation. [860/94]
I propose to take Questions Nos. 5, 6 and 59 together.
I am aware of the concerns which have been expressed publicly regarding the accuracy of the 1993 trade statistics and economic growth, particularly the export figures. Specific questions have been raised in regard to the accuracy of the new INTRASTAT survey system, which was introduced following the abolition of intra-EU customs controls, and on the possible effects of transfer pricing on the valuation of exports.
In response to these concerns, the Government established an interdepartmental group at the end of July to examine the issues raised including the effect of transfer pricing. The report of this group is expected shortly. In the meantime, the Revenue Commissioners, who are responsible for collecting the data, and the Central Statistics Office have been checking the returns of the most important traders. To date no evidence has been found which would justify significant revisions being made to the overall published figures.
With specific regard to national income statistics, I am satisfied that the figures for economic growth published by the Central Statistics Office are accurate. These statistics are compiled in strict conformity with international methodology and standards and are the best available estimates.
Nothwithstanding his comment that there is no significant disparity, is the Minister of State aware that several leading economists, including the senior economist at the Ulster Bank, have said publicly there is a glaring disparity between the official economic statistics and economic performance and that talk about imports and exports has serious consequences in assessing our economic performance and making accurate predictions as to future growth?
I am aware of what was said but, from the information available to me, I am also aware that some of the information on which the criticisms were based was incorrect. I note that when this was pointed out to them some of the commentators did not correct their various statements. Some commentators attempted to estimate annual price trends on the basis of monthly data up to October 1993 and in doing so failed to take account of the differing price trends in 1992 and 1993; towards the end of 1992 prices were falling but rising towards the end of 1993. I have examined the criticisms expressed by the commentators and I am satisfied that very few can be substantiated.
I appreciate that the Minister of State finds it necessary to defend all the statistics to defend the Government's claims of massive growth but he must be aware there are significant discrepancies in the trade figures and in those for domestic spending, manufacturing output, bank lending, economic growth and GNP. This gives cause for concern given that future European Union funding will be dependent on a growth rate of less than 75 per cent of the EU average. Is the Minister of State taking these concerns seriously and does he intend to implement whatever recommendations are made by the working group he established to ensure that our figures reflect the real world and not some statistical wonderland?
I do not think the Deputy is trying to imply that the Central Statistics Office is gathering information to suit the Government; during the debate on the Statistics Bill all Members of the House made it clear they were happy that the Central Statistics Office was independent. The points raised were serious and I treated them as such. I sought information from the Central Statistics Office about the views of commentators. Deputy De Rossa mentioned some of them. If he wishes I can attempt to give an explanation of where the commentators went wrong. I mentioned the figures for export growth. In that case they got it wrong by using the monthly rather than the annual figures, not taking into account the differing price trends at the end of 1993.
Another criticism is the inconsistency with other economic statistics, most notably the industrial turnover index; the inconsistency between the increase in the exports of hi-tech products and the turnover of hi-tech industries; the impact of transfer pricing on exports artificially inflating the level of national income and the growth rate; the high export surplus resulting in a current account surplus in the balance of payments inconsistent with reserves; the unacceptably high increase in trade with non-EU countries in the year 1992-93. I can refute each and every criticism but I do not want to be accused of wasting the time of the House. Nevertheless, it is important to try to answer each one individually.
On the question of inconsistencies with other economic statistics, notably the industrial turnover index, that point was raised initially on the industrial turnover and export figures. Ideally data collected from different sources at different times should be consistent, but is rarely consistent because of information from different sources, different survey approaches and so on. For example, in the industrial turnover and the merchandised exports statistics differences can arise for a number of reasons: specifically turnover as surveyed in the monthly industrial inquiry is defined as turnover of manufactured goods and goods purchased and resold without further processing are not included. That would lead to some distortions. There may be some slight difference if companies based in Ireland import goods, perform services on them and then re-export them without taking ownership, when the turnover recorded in the monthly industrial turnover is the service fee charged to the owners of the goods. If Irish companies take goods back for repairs and then return them, the turnover records note only the repair charges whereas the full value is recorded in the merchandised import and export statistics. In addition, the industrial turnover index will incorporate rebates to companies which are not always reflected in export figures. Exports are also recorded at market prices whereas the turnover reported in the monthly production statistics is valued at factor costs. Significant differences in timing can occur between the time produce is sold into intervention and sold some years later. The above are some of the reasons the figures may not be consistent.
If one considers the inconsistencies between the increase in exports and turnover of hi-tech products — and this was particularly criticised — in addition to all the other reasons I outlined to explain the differences between the two series at an aggregate level, comparisons at a sectoral level are less likely to produce comparable results because of differences between the industrial classifications used in the industrial turnover index and commodity classifications. For example, a computer manual may be produced in the computer or printing sector and recorded in the turnover of that sector but is exported with the computer and included in the export of computers. There was a criticism that transfer pricing on exports was artificially inflating the level of national income and growth rate. Everybody would agree that there is an element of transfer pricing that is difficult to quantify, because it is an internal practice of multinational organisations and, by definition, a hidden activity. It is almost impossible, therefore, to determine its extent. However, on discussing this matter a number of factors suggest that it might not be as widespread now as previously. The increase in export sales relief from zero to 10 per cent tax rate reduces the attraction of engaging in that practice. As well, most capital exporting countries have become more vigorous in policing it, the US being one example.
I have dealt with some of these matters in detail but it would be fairer to respond to the Deputies more fully by letter. There are explanations as to why various statistics are not consistent but they are reliable and whatever differences exist are small. The statistics are checked and rechecked and the checks carried out by the CSO and the Revenue Commissioners have not indicated a huge need for their revision.
I am sorry the answer is so long.
Before we proceed I advise the House that we shall be proceeding to deal with priority questions at 3.30 p.m. sharp.
When will the interdepartmental group report? Will its report be published? In carrying out its study of alleged inaccuracies has the group in question or the CSO visited other EU countries to determine how the INTRASTAT system is working?
I expect that the interdepartmental group will report within the next few weeks. I do not know whether its report will be published but I will certainly consider it. To my knowledge the group has not visited other countries. There are difficulties with the INTRASTAT system because there is a change from a system where everything was documented and all the documents were available to a survey system. There are difficulties throughout the European Union with the new system. Some countries have adapted to it extremely well but others have not. The problems are caused in the main by slow responses to the questionnaires and in some cases the quality of the returns is not very high. The problems are being ironed out. The INTRASTAT system is under review in all countries in Europe.
The Minister is right in that I am not attempting to claim that the CSO is producing statistics to suit the Government but my point is that the Government, naturally enough, is reluctant to question the statistics because they paint such a rosy picture of the economy. He has given some explanation for that, but will he circulate the information he has on the various questions raised? Does it address the question of different levels of productivity as between the multinational sector and the indigenous sector where there are respectable increases in productivity in designated sectors but the productivity levels of the multinational sector have gone virtually into outer space, they have risen so high? There is a suspicion that this is not related necessarily to what is being produced but to the practice of transfer pricing.
I will make available as much information as possible on the various criticisms and responses to them. I attempted to skim through it earlier but I have no information in relation to the specific question concerning different productivity levels and I am not sure if any such study has been undertaken. In relation to transfer pricing, all the indicators seem to suggest that whatever level it was at — and it is not easy to quantify — it is less attractive for people to continue with the practice. The evidence is that the practice is in decline but I will endeavour to obtain the information the Deputy is seeking.
