State transfer payments. Transfer payments are

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

Definition

Transfer payments are subsidies to enterprises of various patterns of ownership, Russian producers and payment of interest on government loans. This list can also include cash payments for social needs: scholarships, pensions, compensation of utility costs.

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

Transfer Accounting Procedure

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

Types of Transfer Payments

In this case, the second type of non-production operations is divided 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 from wealthy relatives, etc. These operations are not the result of production activities, and act as a transfer of funds from one private person to another.

Therefore, there is another, broader definition. Transfer payments are an irrevocable and one-way transfer of property rights, cash, goods and services by some economic entities to others on an unpaid basis. That is why various operations in the field of securities (for example, the purchase and sale of bonds and shares) are also seized when calculating GDP, because these operations are a simple exchange of paper assets in order to redistribute property.

History of occurrence

Back in 1944, such payments consisted mainly of interest on federal debt and social security benefits. Transfer payments were not payments for goods or services purchased. 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 the subsequent post-war years, these articles have already ceased to balance each other. Therefore, the basic rule applicable to any years of our era is the need to deduct the amount excluded from transfer payments from cash receipts of national importance. Only with this algorithm, the amount of taxes with the addition of gross savings will become equal to the value of government spending in conjunction with gross investments.

Transfer payments to the population

This type of payment belongs to the category of “unearned”. In other words, it is not a direct payment for the services provided and can also be attributed to such an economic category as transfer payments. This is, firstly, a social insurance benefit that is paid to unemployed or elderly citizens. Secondly, benefits to war veterans can be assigned here. And finally, thirdly, transfer payments include interest payments on state debts. Thus, personal income of any citizen of Russia may 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 payment of wages. This is necessary to create a certain balance in the economy of the state and to create the basis for subsequent transfer payments.

The impact of government regulation on transfer payments

The main priority in state economic regulation is the reformation and reorientation of the state economic sector, which is now at the disposal of the country. Significant changes are also taking place in this sector of the economy related to the goals set, the methods used and the mechanisms of functioning of public sector facilities. During this period, new problems may arise related to the coordination of actions of the state property sector and the private economic sector.

Transfer Source

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 expressed in the implementation of measures aimed at reducing income inequality. The modern market contributes to such inequality in the distribution of national income among citizens. Today, amid widespread abundance, poverty continues to be an acute political and economic problem. Therefore, an increase in transfer payments contributes to the redistribution of tax revenues, thanks to payments from the state to certain segments of the population in the form of certain benefits (for example, unemployment or war veterans), as well as social insurance payments. Thus, these subsidies form some resource flows that do not always take a monetary form. Often they are presented in the form of targeted means of payment or in kind (an example is the issuance of baby food). From the position of macroeconomics, the value of transfer payments should be quantified, since the required amount of tax revenues depends on the amount received. After all, it is taxes that are the main source for transfer payments.