THE STATE BUDGET FOR 1970

Created: 3/1/1970

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COKTSIEUTIOK Tu JSC The Sfaft Budget The State Budget0 calls for an Increase In expendituresercent over the9ate of increase commensurate vith the planned rate of growth of national income and industrial output. The Soviot State Budget constitutes, in size, nearlyercent of the gross nationalroportionimes the share for the combined budgets at the federal, state, and local levels ofin the United States. The larger scope of the Soviet budget is aof the inclusion of funds for financing activities such as investment,

higher education, health, recreation, and culture which arc normally privatelyin theCt-tcc.

2. The budget is the chief vehicle for mobilizing and distributing the

financial resources of the economy in support of the economic plan. Once

the economic plan Is formulatedmostly in physical termshe financial

plan (Including the budget) reflects in rubles the allocations! decisions

embodied in the economic plan. After the Soviet plan and budget have been

approved, funds are allocated to subordinate agencies and expenditures are

monitored by the Ministry of Finance and the state bonis. These actions

implementinA the budget constitute part of the pressure in the system which

Insures that the economic plan Is carried out in accordance with the

priorities established by the leadership.

I

3- The usefulness of announced budget data as indicators of future Soviet economic policies is severely limited. For one thing, the scope of the

Soviet budget is changingesult of the financing and accounting changes being introduced' by the economic reform. Budgetary expenditures are decreasinghare of total financing of the economy, as capital investment is being financedreater extent from higher retained profits of enterprises and from long-term bank credit. Another difficulty in analyzing in Soviet budget data is that the published version of the budget is highly aggregated. Large sums are included as unspecified residuals, and the content and coverage of many of the categories are only partly known. Tor example, Defenseingle number in the Budget with no further breakdown. umber of defense and defense-related activities are known to be included under other budget categories.

U. The State Budget of the USSRO is highlightedmaller planned rate of increase of budget expenditures for Defense as compared to rates of growth in earlier years of the post-Khrushchev regime. The appropriation for Defense0 is set9 billion rubles, an increase of less than one percent over9 figure. This increase is the smallestnd contrasts to an average annual increase of nearlyercent. The Defense share of total planned budget expenditures3 percents the lowest in many years.

5. Part of the decline in the growth of budget expenditures for Defense0 can probably be attributed to the effect of price revisions. Just as upward price revisions were partly, responsiblearge increase in appropriationsrice reductions on individual products in the

electrotochnical, instrument building, machine tool building, radio, and other industries introduced0 could be expected to affect the prices of some military end items, thus understating the real changes in defense programs.

6. As indicatedhe explicit item for Defense, moreover, does not include all military expenditures. Forubstantial portion of military-space research probably is carried out under expenditures for scienc In addition, some kinds of defense-related items may be regularly located in the expenditure residuals. The consistent equality of planned and actual expenditures for Defesne in recent years suggests that any divergences from the planned outlays may also be concealed under the residuals.

7- One particularly large expenditure residual is that part undar

t^viiviis) i'wb ZXZ Z. CC-V':T'?.'.

The size of this residual has been difficult to assess in recent years becauseaucity of budget data. Actual expenditures for theare not available6 and planned expenditure data are inccmplete8 Nevertheless, it appears that the residue! in the planned budgets has increased fromillion rubles89 billion rubles9 and toillion rublesarge part of the residual in the past could be accounted for by price subsidies for agricultural procurement. This subsidy, identified for the first time in9 Budget Plan, was expected toillion rubles for that year. Some other items which probably have been included in the

funds for purchasing state materia! reserves (stocks of raw material, fuel.

food and equipment touffer against seasonal interruptions or otherpecial accounts for price regulation, allocations for geologic prospecting, and state gold purchases. The lack ofon the components of this residua! has led observers to suggest that

sizeable military expenditures might / involved. For example, additions to state reservesilitary nature may be financed here.

8. Other expendituresefense-related nature may be financed under the residua! formed after expenditures for the primary budget categories are summed. The allocation for internal security is believed to be included under this budgetary expenditures rosidual. Other items that are probably financed under this residua! include tax refunds to individuals andallocations to state banks for expansion of long-term credit, and numerous small miscellaneous expenditures. This residua!9 amountedillion rubles, considerably higher than the levelsillion rubles7 In plan budgets, the residua! also

includes Reserve Funds of the Council ofo meet unplanned requirements for funds arising in the course of the year. In the actual budget fulfillment, the Reserve Funds are reclassified under the categories for which they were expended. 9. Budget planning appears to have been particularly difficult in recent years. Actual total expenditures are usually slightly higher than plan.

but78 the excesses over the announced budget plans wereillion rubles and9 moreillion rubles. As above-plan

expenditures were offset by above-plan revenues, the traditional budget surplus was obtained. The Minister of Finance in the annus! budget speeches, however, reported budget fulfillment for expenditures ofillion rubles over plan?8 andillion rubles under planmplying that the budget plans had boon revised during the course of the year. How these budget revisions were instituted is not clear. The announced budget Is approved, usually in December, by the Supreme Soviet and is published as the Budget It appears that the over-plan expenditures73 wore, inesult of miscalculating the effect of7 revision of

industrial wholesale prices. The process of implementing the economic reforms

of budget planning, probably contributed to therincipal feature of the reform

was the supplanting of budgetary expenditure by self-financing of enterprises

and by bankhus, for Industry and Constructionthe largest

subcategory under Financing the national Economyudgetary appropriations

declinedhare of total planned financing fromercent6 to

ercent While the absolute amount of budget outlays were planned

to remain fairly constant, financing from other sourcesprincipally from

retained profits and amortizationwere to nearly double over tho same

for Industry and Construction in period. Actual expenditures / this period are not yet published, but it

is likely that sizeable above-plan budget expenditures occurred.

most of the Industrie! enterprises had been transferred to the new system

andc Budget Flan calls for the iimc prcpcrticac zT budget ani

non-budget financing as was planned

Increases

agricultural sector has received only modest./ arge planned increase. Budget appropriations forAgriculture and Procurement, vere to increase atercent90 above the plans for the One official of the Ministry of Finance apologized for thein the growth of appropriations, citing the "difficult Budgetary funding of agriculture is much larger thanthe allocation to Agriculture and Procurement if the price subsidyprocurement of agricultural products is added. or example,was to be more than two-thirds as large as the explicit allocation

to the subcategory.

budget allocations to Social-Cultural Measuresroadpublic servicesocial security and welfare measures, education,and medical care, mass media communications, recreational andand financing of "science". These expendituresercent of total budget outlays Budget"science" have grown by almost one-halfompareda one-third increase for the sum of the other Social-Cultural Measures.

A large share of these science expenditures nay be devoted tond space activities. In addition to the budget appropriationlannedillion rublesnterprises and organizations finance approximately one-third of the total outlays for "science".

13. The state budget is planned so that total revenues vill exceed total expenditures. According to published data, there have been no budget deficits The budgetary surplus is reportedly used for increasing the credit resources of the State Bant*. To the extent that the surplus is not fully loaned out, it servoseflationary force,et

withdrawal of money from the economy.

Ik. The Soviet Union relies primarily on Indirect taxation for its revenue. The two major sources of revenueturnover tax and deductions fromccount for about two-thirds of the total budget receipts. Both sources of revenue are obtained by setting prices of goods at levels higher than the oosts of production and appropriating some part of the difference. To some extent thererade-off between the two taxes. For example, If wholesale prices of consumer goods are raised relative to the retail prices, profits (and profit deductions) are increased at the expense of turnover tax. urnover taxteadily declining portion of total revenue while profit deductions were growing in importance. Prom lf5 percent of total revenueurnover tax revenue dropped toercent Over tho same period^profit deductions increased fromercent toercent. 9 and according to0 Plan Budget,

however, revenue free turnover tax is to Increase more than profit deductions.

method of distributing profits has changed under the Previously, planned profit deductions were included in theof the enterprise. Under the reform, profit paymentsinto three parts: apital chargeercentand working capital for mostent chargeby enterprises in the extractive industries for especiallytransportation or other conditions;free" profit remainderafter payment of all other obligations, including repayment ofstipulated deductions into various enterprise funds. Theremainder, however,is by for the largest of the payments intoaccounting for about one-half of total planned profit deductions

Profit payments of all types to the budget currently constituteercent of total profits in the economy.

taxes on the population account for lessercent of The personal income taxhe most important of thewas supposed to be gradually abolished, but instead^itsgrown more rapidly than total revenues. The income tax is paid onrate schedule, exempting those with incomes of underubles

a month. Other taxes on the population include an agricultural tax levied on incomes from privateax on privately owned horses,achelor and small family tax levied on single men betweenndears of age and childless couples.

USSR: Expenditures of the State Budget 1/

S

the National Economy

.93

end construction

and procurement

(foreign and domestic)

and coirarsunications

economy and housing

Measures

'18

science, and culture

3j

and physical culture

welfare measures

hj

5/

Service 6/

expenditures residual

Expenditures

53

:btes to Table 1

1/ Becuase of rounding, components may not add to the totals shown. 2/ Not available.

3/ Including expenditures for capita! investment.

kj Excluding outlays for most ofnd space, interna!

security forces, and possibly other defense-related items.

5_/ Including financing for all loco! and centra! government agencies

such as planning and financial bodies, ministries, government departments,

and the courts and judicial organs.

6/ Consisting of payments of Interest and principal on the public debt. fj Estimated.

fl/ Th* ftideet Plan includes Reserve Funds of the Council of Ministers.

/O

USSR: Revenues of theBudget 1/

>totes to Table 2

1/ Because of rounding, components may not add to the totals shown. Zj Including removal of surplus working capital and recalculations of previous year's profits.

3/ Including collective farms, consumer and producer cooperatives. U/ The state social insurance budgeteparate budget, but Is consolidated with the union budget and the budgets of individual republics to form the overall state budget.

2/ Including income from forestry operations, customs duties, repayments on loans made to foreign countries, proceeds from gold sales, income from the sale or rent of state-owned properties, entertainment tax, and various otbelacs paid b?/ Consisting mainly of purchases by individualsercent domestic lottery.

cash-or-commcdity

2/ Consisting ofnd miscellaneous

local taxes and fees.

G. P. Xosyachenko, and ethers, eds,et Sovetskikh.

Tsentral'noye statisticheskoye upravleniye, Fferganoye.

lan: Pinansy SSSR, no.koncotcheskava gagota,. 2.

ctual0 plan: Pravda.; Pravda. p.inansy SSSR. no.

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