DEALERS AND REVENUE OF ECONOMIC INDUSTRIES

Tables 1-5 present data on revenue, number of dealers, price changes, real changes in revenue, input as a percentage of total revenue and the percentage of revenue on which no V.A.T. is due of total revenue - for the entire economy, by economic industries.

Tables 6-11 present economic data on Commerce and Services industries (and sometimes data for the total economy, as well).

Tables 1-6 relate to a number of years and the rest of the tables only relate to 2001.The data for 1999 and 2000 in tables 1-6 were revised.

Similarly, there are Diagrams that describe the distribution by industry of revenue, number of dealers, percentage of inputs and revenue on which V.A.T. is not due in 2001.

Part B - Monthly Indices 2000-2001

Table 13 presents monthly indices of revenue for economic industries at current prices and Tables 14-23 present monthly indices at fixed prices of 1995 for Commerce and Services industries, seasonally adjusted indices and the trend change according to the Henderson method.

It should be mentioned that the industry distribution is based on the Standard Classification of All Economic Activities 1993 .

2. Definitions and Explanations

2.1 General Definitions

Population - The survey population includes all the dealers who were active (see definition below) in 2001. 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, tables do not include the diamonds industry.

A dealer - defined for V.A.T. as one who sells products and assets or supplies services, and is not a non-profit or a financial institution.

An active dealer - according to the definition of the Central Bureau of Statistics (CBS) an active dealer is someone who reported a revenue higher than zero in at least one month in the year (meaning that nil rate dealers are deducted).

It should be mentioned that V.A.T. authorities, for administrative considerations, define a dealer as active if he submitted reports during the year, even if total annual revenue was zero. This definition was formulated for the purpose of tax collection and differs from the definition of the CBS, and hence from the definition of "dealer" that appears in this publication.

Nil rate dealer - the CBS defines a nil rate dealer as a dealer who reports to V.A.T. authorities amounts of zero revenue in all months of a calendar year.
The numeration of the dealers was arranged in two ways:
A. Tables 2, 6, 10 and 11 show data concerning the number of active dealers in 2001, after deducting nil dealers.

B. Tables 7-9 show data concerning the number of active dealers in 2001, after deducting nil dealers and weighting the active months for those dealers who were active only part of the year. The purpose of this weighting is to avoid duplicity in the number of dealers, in cases when new dealers files that opened during the year replaced previous dealer files which were still registered in the V.A.T. The weighting enables an exact representation of the population.

2.2 Classification of Dealers - Definitions

Classification of Dealers by Size and by Type of Dealer

Petty dealer - a dealer with no more than two employed persons, whose turnover does not exceed a certain sum determined by the Minister of Finance. According to rule No. 5877, starting January 1^st 1999, the sum is NIS 240 thousand per year.

Exempt petty dealer - from May 1992 the V.A.T. authorities exempted a group of petty dealers, with small a turnover (NIS 59,991 a year as of January 1^st 2002), from paying V.A.T. and they are not included in the investigated population or in the CBS's sample.

Authorized dealer - a dealer registered according to the registration requirement as an authorized dealer and is not a petty dealer. Only an authorized dealer may issue invoices that can be used for deducting input tax.

Authorized dealers are divided in the tables into two types:

Company - a dealer listed as a company in the Registrar of Companies.

Authorized dealer that is not a company - and from herein, will be called authorized dealer.

Classification of dealers by type of employment:

Partnership - several dealers who requested to register as one dealer are considered a partnership.

Self-employed - a petty dealer or an authorized dealer with no employees.

Employer - a dealer that is not self employed.

2.3 Economic Data - Definitions

For all the active dealers in a calendar year, annual and monthly data were accepted. The data accepted are: revenue at the rate of 17%, revenue at nil V.A.T. rate, total inputs, descriptive characteristics of the dealers and their reporting patterns.

Definition of Revenue and its Components

Total V.A.T. reincludes: revenue on which V.A.T. at 17% rate is due, revenue at nil V.A.T. rate and revenue exempt from V.A.T.

Revenue on which V.A.T. is Due

The revenue of this component includes revenue from sales of goods and provision of services in Israel (except revenue at nil V.A.T. rate) and the revenue from sales of fixed assets of the company. The revenue of all the indirect taxes (except for V.A.T.) that are due on products and services.

Revenue at Nil V.A.T. Rate

This is revenue on which V.A.T. is not paid. The revenue at nil V.A.T. rate is revenue from sales of fresh fruits and vegetables, and from exports of goods and services and provision of services to tourists from abroad as well, and the tax rate on it is zero.

Revenue Exempt from V.A.T.

This is revenue on which V.A.T. is not paid and can not be returned on inputs. Revenue exempt from V.A.T. includes diamonds sales within the Commerce Industry, rental of assets for residence and sales of goods and provision of services for consumption in Elat (except for sales of vehicles and durable goods).

Total Inputs

Total inputs is the value of purchases of the dealer from authorized dealers which entitles it to V.A.T. returns, and 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 V.A.T. like fresh fruits and vegetables, crude diamonds, and purchases from dealers whose revenue is exempt from V.A.T.

2.4 Definition of Locality

The locality attributed to the dealer is that which serves for correspondence with the dealer, that may differ from the place of the business.

2.5 Explanations

2.5.1Reporting Unit - Dealer

The reporting unit for V.A.T. is different from the reporting unit for other administrative sources, such as National Insurance or Income Tax. For V.A.T., the unit is the dealer and 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 V.A.T. and otherwise.

The most prominent difference between the reporting unit for V.A.T. and for the other sources is in cases where the reporting unit for V.A.T. is V.A.T. partnership (see next item).

2.5.2V.A.T. Partnerships

V.A.T. partnerships are created under the V.A.T. Law which requires registration as a dealer of V.A.T. partnership, but also enables for a non-registered partnership to register as a V.A.T. partnership.

A partnership may include businesses from similar or different industries. In a case where the companies act in the same industry, the partnership classification is simple. In cases where the companies act in different industries, the partnership was classified according to its main industry. This method of industrial classification has caused numerous problems, for example:

a. In individual cases, when a specific industry could not be determined, the dealers were classified to an inclusive industry. For instance, a partnership in which most of the companies were active in various industries, was classified as a general industry. The problem mainly exists in large conglomerates.

b. In most files of kibbutzim the complete revenue report of the kibbutz from Agriculture, Manufacturing, Commerce or Services industries appear in one dealer file, and therefore, it was difficult to classify kibbutz files in the appropriate industry.

The difficulty in classifying partnerships leads to small distortions in the industry estimates. For instance, in 2001 the percentage of partnerships was 6% of total dealers and 41% of total annual revenue. It should be mentioned that this publication focuses on various commerce and service industries, which comprise only 32% of the revenue of all the partnerships.

2.5.3Data Obtained from V.A.T. Authorities

The listing obtained from V.A.T. authorities includes: dealer number (that identifies the dealer), locality code and other address details, economic industry according to V.A.T. classification as well as total revenue, revenue on which V.A.T. is due, revenue at nil rate, exempt revenue and total inputs.

There are separate fields for current inputs and inputs for capital formation in V.A.T. files, but actually the separation is not done diligently. Therefore, it is not possible to calculate the added value and the industry product from these figures and due to this, the separation between these fields was eliminated in the file obtained by the CBS.