Primary Income Distribution Account (current prices)

This account reflects the receipt of labour income by employees, the mixed income of households from business activities; taxes on production and imports by governments; profits by non-financial enterprises and financial institutions. Property income is received and paid by all sectors of the economy. Primary income can come to residents not only from the domestic economy, but also from the “rest of the world”.

In the SNA, primary income is understood as income received by institutional units as a result of their participation in the production of products and services and from the provision of financial assets, land and other assets to other institutional units.

The primary income distribution account also reflects the receipt (or transfer) of factor income from abroad. Factor income from abroad includes, for example, the salaries of citizens abroad or the profits of domestic enterprises that they receive from activities abroad, but which are transferred to their homeland and will be used here for accumulation or final use. At the same time, enterprises and individual citizens must be residents of the domestic economy. Accordingly, the income of foreign citizens or corporations that are not residents of the national economy and which will not be used in the country  is excluded. As a result, the total value of primary income increases (or decreases) slightly, and the resulting indicator at the level of the economy as a whole is called national income, and at the level of its individual sectors – the balance of primary income.

Attention should be paid to the transition about the concept of “product in the production account” to the concept of “income in this account”. GDP is essentially a measure of production and is defined using the categories of output and intermediate consumption, which are also purely productive indicators. National income is obtained as the sum of the income of resident units of the domestic economy. GDP and national income differ in the amount of POC and the balance of factor income from abroad.

This value can be quite small for a large-scale economy, and in some cases it can be neglected. However, from the point of view of economic content, the difference is very significant, since the transition from one indicator to another means a transition from production categories to income categories. The “Use” part of the primary income distribution account reflects only property income paid by institutional units or sectors to creditors, shareholders, landowners, etc.

The difference between the amount of primary income received from non-residents and paid by them is the balance of income from abroad.

The balancing item of the account is the balance of primary income. It is defined as the total amount of income received by an institutional unit or sector, less all primary income paid.

At the level of the economy as a whole, the balance of primary income, determined on a gross basis, i.e. before consumption of fixed capital, represents the gross national product.

GNP = GDP + foreign income balance

The balance of primary income determined on a net basis, i.e. net of consumption of fixed capital, represents net national income.

NPV = GNP – Consumption of fixed capital

The balance of primary income characterizes the income generated by resident institutional units as a result of their participation in production, as well as from property. It is obtained as the difference between the received primary income and income, income determined on a gross basis, i.e. before consumption of fixed capital, is equal to GNI.

The primary income distribution account reflects the activities of resident institutional units or sectors as recipients of primary income and not as producers whose activities constitute primary income.