State transfer payments. Transfer payments are ...

Transfer payments are payments in the form of compensation to the population, legal entities, as well as other non-state enterprises. They are carried out to support these entities with unfavorable economic factors in the state. The basis is the redistribution of resources from the budget in favor of the extremely needy people.

Definition

Transfer payments are subsidies to enterprises of various forms of ownership, to Russian commodity producers and payment of interest on state loans. In this list, you can include cash payments for social needs: scholarships, pensions, and utility expenses.

Consideration of transfer payments is associated with the definition of added value from any business entity. Its value is determined by the difference in value of the finished products created with subsequent sale and costs associated with the acquisition of raw materials. The so-called added value reflects the real contribution of each individual enterprise when creating the final product in the form of profits, wages and depreciation.

The order of accounting for transfer payments

Transfer payments are reflected in the calculation of GDP. In this case, the cost of goods, services, which are produced (provided) in the current period should be taken into account. However, certain non-production operations that consist of two types are subtracted from the received value: resale of goods and purely financial transactions.

Types of transfer payments

The second type of non-production operations is subdivided into the following types:

• State transfer payments, represented by pensions, scholarships, unemployment assistance, gifts and assistance to various low-income categories.
• Private transfer payments, which are formed, for example, from helping students from their parents, gifts of wealthy relatives, etc. These transactions are not a consequence of production activities, and act as a transfer of money by one private person to another.

Therefore, there is another, broader definition. Transfer payments are the irrevocable and unilateral transfer of property rights, money, goods and services by economic entities to others on a free basis. That is why various transactions in securities (for example, purchase and sale of bonds and shares) are also withdrawn in the calculation of GDP, because these transactions are a simple exchange of paper assets in order to redistribute property.

History of occurrence

Back in 1944, such payments consisted, in the main, of interest on the federal debt and social insurance benefits. Transfer payments were not payments for purchased goods or services. Therefore, they were also excluded from GDP. In accordance with the above, money received from the state, presented as transfer payments, was also excluded. This in 1944 favored the coverage of transfer payments by social insurance taxes. However, in subsequent post-war years, these articles have already ceased to balance each other. Therefore, the main rule applicable to any years of our era is the need to subtract the amount that is excluded from transfer payments from cash receipts of state value. Only with such an algorithm, the amount of taxes with the addition of gross savings will be equal to the value of public spending in conjunction with gross investment.

Transfer payments to the population

This type of payments is classified as "unearned". In other words, it is not a direct payment for the services provided and can also be attributed to an economic category such as transfer payments. This is, firstly, the social insurance benefit, which is paid to the unemployed or to the elderly. Secondly, here can be attributed benefits to war veterans. And, finally, thirdly, transfer payments include payment of interest on the state's debts. Thus, the personal income of any citizen of Russia can include payments for the production and sale of goods and services, as well as transfer payments. However, at the same time income is deducted from social security contributions before paying out wages. This is necessary to create a certain equilibrium in the economy of the state and to create the basis for subsequent transfer payments.

The impact of state regulation on transfer payments

The main priority in the state economic regulation is the reorganization and reorientation of the state economic sector currently in use. In this sector of the economy, there are also significant changes related to the goals set, the methods used and the mechanisms for the functioning of public sector objects. In this period, there may be new problems related to the coordination of the actions of the state property sector and the private economic sector.

Source of transfer payments

For effective functioning, the state must always have a certain part of the national income in the current market economy. Therefore, the primary task of state intervention is direct regulation on its part, which is reflected in the implementation of measures aimed at reducing income inequality. The modern market contributes to the emergence of such inequalities in the distribution of national income among citizens. Today, amidst the general abundance, poverty continues to be an acute political and economic problem. Therefore, the increase in transfer payments facilitates the redistribution of tax revenues, thanks to payments by the state to certain segments of the population in the form of certain benefits (for example, unemployment or veterans of war), as well as social insurance payments. Thus, these subsidies form some flows of resources that do not always take on a monetary form. Often they are presented in the form of target means of payment or in kind (an example is the delivery of baby food). From the position of macroeconomics, the amount of transfer payments must be quantified, since the amount of tax revenue depends on the amount received. After all, taxes are the main source for transfer payments.

Reasons for non-inclusion in GDP

The non-inclusion of their amount in GDP is due to the lack of a new product as a result of such a payment of production, only a redistribution of aggregate income occurs . Transfer payments are subject to inclusion only in consumer private expenses and in investment costs of companies (in the form of subsidies).

At the same time, the receipt of private funds is subject to partial reimbursement by a reverse flow of payments that take the form of transfer payments.