The paper identifies flaws in the treatment of Intellectual Property as an intangible asset in the current national accounts international standards. It is proposed that the treatment should revert to that of the 1968 System of National Accounts (SNA), where payments for access to Intellectual Property were classified as property income (income transfers) and not as payment for services as in SNA 2008 and the European System of Accounts (ESA) 2010. This dramatic change in treatment has had unfortunate results, most visibly in the case of the revision to GDP estimates for Ireland. In 2016, the estimate for Ireland’s 2015 annual GDP growth was revised upwards from 7.8% to 26.3%. This was caused mainly by a relocation of a large multinational’s registration of Intellectual Property from mainland Europe. The associated access payments were treated as a set of new exports of services, with the subsequent large increase in the GDP level and growth measures of the Irish economy.
This paper sets out how the current standards lead to this widely criticised change and proposes a model which is consistent with the 1968 SNA treatment.