THE 1959 SOVIET BUDGET (RR IM 59-12)

Created: 7/10/1959

OCR scan of the original document, errors are possible

Page

Summary and Conclusions - .i

II- Financing the National Economy .

Unspecified

III. Capital

IV. The Military

Research and

V. The

VT. Budgets Of the Union

Appendixes

>

Appendix A. Statistical

Appendix B. Source

Tablet,

L. Planned Budget Revenues and Expend 1turcs in the USSR,

9

for Financing the National Economy of the USSR,

- illir IIi Ti

Allocations to Financing the National Economy of the

ctual9

Plan for the Financing of.Capital.Investment-inithe- hns

3 and

1

Planned Allocations, to State

nd

Financing of Scientific.RescarchUnStitutes.IIn:the'!>

USSR,

Financing.Social-Cultural .Measures in-the USSR; 5? I'..

ctual

oviet Budget

-

Summary and Conclusions

The Soviet State budget, the first year of the Seven Year, shows an increase of more thanercent in the levels of expenditure and revenue compared with3 plan. Such increases indicate an expansion of financial activity which is striking, given the relatively modest goals of the new Seven Year Plan. It appears that increased budget resources will be directed somewhat more toward expansion Of the economy (and possibly of the military establishment) and less toward social welfare than6 The significance of the budget increases, however, is somewhat obscured at present by the lack of detailed information concerning both the size and the changed composition of specific budget categories.

A particularly sharp increase in9 budget appears in theportion of the Budget category Financing the Nationalhis increase seems to he caused oainly by two recently introducedshifts. The first of these shiftsesult of8 reorgani7.atlon of agriculture. The abolition Of the machine tractor stations (MTS's)arge decrease in the budget allocation to Agriculture, but, at the same time, the higher purchase prices for agricultural produce required increased grants to State procurementho are allocated funds from the unspecified portion of the category Financing the National Economy. The Second accounting change concerns modifications in the planning of nonproductivewhich apparently will resulthift of housing investment funds from the sector Industry to the unspecified residual. When these shifts are taken into account,appears that the absolute size of the residual has remained fairly stable

* The estimates and conclusions iu this memorandum represent the best judgment of this Office as See the third footnote, p. See footnote c. Table.elow.

The over-all expansion of capital investment in the Soviet economy continues to be impressive. Centralized capital investment, fromand enterprise owns planned to increase by it percent. The sharp rise In investment allocationsspecially in industry, which is in line with the directives of the Seven Year Plan, suggests that the present assessment by Soviet planners Of future Investment needs

is based on more realistic assumptions than those prevalent when thc now defunct Sixth Five Year Plan was drawn up.

Tbe announced defense allocation will continue at virtually tho 3unit level as that which has prevailed The general growth of budget expenditures, such as nonlnvestaent allocations to industry, however. Is sufficiently large to permit continuation of the rapid growth of those military programs financed under other budgetary Indicative of this is the announced allocation for scientific research institutions (under Education) which will Increase9 by lft.percent over the8 figure. In all likelihood,outlayB for military-oriented reocarch are included in this allocation.

The consumer is not slated to receive any significantly Increased benefits,9 but will continue to profit from the considerable concessions granted7 In general, outlays for social-welfare measures (education, health, pensions, and grants) will increase rather slowly The brightest prospect for theis the continued emphasis on bousing construction; funds allocated to housing will continue to increase althoughate slower than that planned7

The significance of changes in budgetary income and outlay89becurod by two major dllficultloc. In the first place, there hasather large gap in recent years between plan figures and subsequent fulfillment totals. The almost complete absence ofdatalus thc prospect of substantial overexpendlturebscures real trends, especially within the category Financing the Nutional Economy. Second, there is no doubt that recentof Soviet Industry and agriculture has caused changes inprocedures and categories. The precise nature of these changeu, however, cannot be determined at present.

I. Introduction

Revenues and expenditures in9 Soviet state budget, asby finance Minister Arsenly Zverev and approved by tbeInre planned to Increase by moreompared with3 plan budget and byith8ncrease is un-

usually high. Planned Increases In huoget revenues and expenditures5 seldom haveercent annually and usually have been considerably less. Prices in tbe USSR have changed recently for some selected items, it Is true, but the general price level has not risen enough to account for any significant portion of tbe Increased budget totals. Some part of the budget increases may be the result ofchanges, which obscure real trends

The general pattern of expenditures and revenues planned9 'does not differ basically from that planned6 (seehe largest planned Increase in expenditures, amounting toercent, occurs In the category Financing the Nationalhich will account for more than ko percent of total expenditures Other more modest absolute increases are planned In the two categories Social-Cultural Measures and Reserve Funds, Councils of Ministers. Thedefease outlay remains virtually unchanged In absolute terms;ercentage of total itecline. Significant shifts within these categories win be discussed in subsequent parts of this report.

On the revenue side, both the chief sources of revenue, profits transfers and turnover tax, are planned to increase sharply, with the Increase in profits transfers ofercent especially notable. The category Direct Taxes on the Population is planned to provide the same share of budgetary revenue9 ashatercent. Unspecified revenues shov on unexplained increase of almostercent9 comparedossibly reflecting government receipts from the sale of the MTU machinery to the collective farms. The planned budget surplus7 billions approximately the same as that plannedillion rubles) but less than the8illion rubles).

** ollows on p. Tbe budget category Financing the National Economy consists of funds for investment, capital repair, expansion of vorking capital, subsidies, and other operational expenditures of state enterprises and organizations, including state farms but excluding collective farms. The official Soviet exchange rateubles to USortransactions andubles to USor tourist and other "invisible" transactions. Although neither of these rates is appropriate to convert Soviet budgetary entries from rubles to dollars, they do suggest the general order of magnitude.

Table 1

Planned Budget Revenues and Expenditures In the89

/

Percent

Revenues

Total

Tot

Tax

. 5

Transfers

Tuxes on Coopera-

Enterprises

Taxes on the Popu-

Tractor Station

Insurance Receipts

Loans

revenues

3

the National

Measures

Funds, Councils

Ministers

expenditures

b.

Inn response to tbe request of the Economic Con-mission of the Soviet of Nationalities (one of the houses ofinance Minister Zverev announced that the Ministry of Finance bad worked out plansew budget law but that further work and clarification had been found necessary. Int the Supreme Soviet discussions of the budget, no mention was made either of the Economic Commission orew budget lav. Tbe recent reorganization of industry and agriculture would seem toew budget law or, at the very least, extensive modification of thebudget law, but, in tbe absence of any information on the subject, It is ImpooBlble to tell what changes may have taken place.

For the second consecutive year, the budget was presented to the Supreme Soviet and approved before the beginning of the Soviet fiscal yearanuary). Tbe more usual practice in the USSR has been to present tbe budget in the spring, when the Soviet fiscal year waswell underway. In contrast to the procedure followed7owever, when the state budget vas presented along vith the annual economy plan,9 budget was presented alone. 9 economic plan has not yet been announced.

.

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n. Financing the National Economy A. General

The budget category Financing the national Economyarticularly sharp increase ofillion rubles compared withlan- When this category is divided by sector of the economy {seet may be seen that, although the figures are not exactly comparable, the allocation to industry vlll growercent, the allocation to agriculture will drop significantly, and theto transport and communications will increase slightly. The unusually large Increasefromillionillion rublesoccurs in the unspecified outlay part of the category and appears toesult mainly of various accounting shifts. There are three organizational and accounting changes which must be taken into account in order to interpret9 allocation to Financing the national Economy. These are as follows:

The decrease in the allocation to agriculturethe abolition of the KTS-s) acccorpanied by Increased grants to state procurement organisations (reflecting the new higher prices paid to collective farms for agricultural produce).

Modifications In the planning of nonproductivewhich apparently will resulthift of housingfrom the industry category to the unspecified residual.

3- Reporting of enterprise profits and payments of profit taxes directly to the Ministry of Finance, rather than throughsuch as the old Industrial ministries.

B. The Unspecified Residual

*ollows onollows on p. 9. Text continued on

In* actual expenditures for the national, are shown, and the unspecified outlay has been broken down into some of Its components. Tentative estimates of the probable site of these components, along with certain assumptions concerning actual rather than plan outlaysuggest that,harp increasenexplained residual outlays have remained fairly stable at the level ofillion toillion rubles."*

ill i

s I

a Wh

In

ii-ii

The first item under the unspecified outlay le theto trade and procurement, vhlch increased0 toillion rubles5 andillion rublesdata are avuilable concerning the size of these alloca-

tions in aore recent years. On the assumption that they have continued to Increase substantially, however, an estimate ofillion rubles was made

The procurement allocation does not Include exceptional rebates to procurement organizations to cover various types of price These rebates, the second item under the unspecified outlay inere particularly Important5 and, whenin prices paid by procurement organizations for agricultural produce were put Into effect without any corresponding increase In tbe wholesale or retail price levels of this produce. The rebates were estimated, on the basis of6 plan, atillion rubles An increase In wholesale prices6 (brought abouteduction In the turnover tax rate) made rebates no longer necessary.rices paid to collective farms for agricultural produce were again raised, requiring additional outlays from tbe budget toorganizations. Such outlays8 were assumed to be equal to funds originally allocated to the HTS'n but no longer needed for that purpose (see III, C, below). This assumption may well result in an understatement, because8 crop was unusually Large and may nave necessitated greater outlays by atate procurement organizations than originally planned.

The impact of the new procurement prices for agriculturalon9 budget is not completely clear. As long as tbeand retail prices of agricultural goods remain unchanged at tbe same time that prices paid to the farms have increased, thenprocurement organizations will continue to suffer significant losses, which must be covered by allocations from the budget. It has been announced repeatedly In the Soviet press that retail prices of agricultural goods will not be raisedesult of the new higher state purchase prices. The fact that turnover taxes were planned9 to Increase more rapidly than retail trade turnover (see IV, below) indicates that no significant Increases in wholesale prices were taken Into account when the budget plan was drown up (turnover tax being the main difference between wholesale and retail prices). It therefore appears that9 budget, as originally drawn up, provides for rather sizable rebates to procurement organizations, which appear in the unspecified portion of the category Financing the National Economy.

P.bove -

According to the terras of the budget law, the Council ofwas entrusted with the responsibility for adjusting budget items in line with the new wholesale prices for agricultural produce, which were scheduled to go into If in fact wholesale prices were raised asanuary, then the budget will show afrom plan in both revenueecline in turnover tax receipts) and expenditure (by reduction in thef the grants to procurement organi zations).

The estimate9 rebates to procurementoillion rubles, is necessarily rough; it is assumed that rebates for price differentials vere planned approximately equal to the net decline in budget outlays for the MTS's, C,hat it may be somewhat higher than this estimate is suggested byconcerning collective farm income, an alternative indication qf the effect of the new prices. Collective farms will receive9 aboutillion rubles more income than they receivedThis figure reflects the increase in the size of the harvest, but it also gives some quantitative indication of the effect of the new higher prices. Therefore, the estimate in Tabicppears to be aone.

Data concerning the size of the budget allocation to theeconomy are available only for the5illion andillion rubles,

increased emphasis on housing since then suggests that allocationsrather sharply. It appears likely, moreover,ecentshift may have resulted in much wider coverage underas Formerly, housing investment under theof Industrial ministries was included in statistics forindustry, whereas that under the Jurisdiction of municipalitiesin statistics for investment in the municipal economy, ew system of planning capitalscheduled to go into effect whereby productive investment wouldseparate from nonproductive (housing and eoulal-cultural) Under the new scheme,for that housing undersome remaining ministries and departments (mainly transport),be the responsibility of localin9 in-

vestment plan suggest that, in fact, there hashift inthe sector Industry to the sector Other. The allocation fromfor investment in industry will increase8 andOk billion toillion rublesillion rubles)budget-financed investment will, increase fromillionbillionlUnn-

* P.bove.

ormerly included in the sector Industry has been moved to

the sector Other (see Table ft*). It may further be speculated that, If this practice is followed in the listing of budget outlays in thcplan. It is also used ln thc budget plan itself. Of concern here is the shift of investment funds for housing, which would appear probably under the allocation to the municipal economy and nay amount toillion toillion rubles. Other nonproductive investment (health and education) presumably would be shifted to the budgetSocial-Cultural Measures.

In* outlays for the municipal economy have beento beillion rubles5 billion rublesndillion toillion rubles

Hhen the above estimates ore subtracted from the unspecifiedmaller unexplained portion is left, which has remained fairly stable Thus most of the Increase in the announced unspecified outlayppears to be explainable as accounting shifts. The absolute size of theillion toillion rubles56s an entirely reasonable figure to cover outlays for state reserves, gold purchases, and other miscellaneous items. 7 the residual suddenly doubled andevel ofillion rubles. Interestingly enough, ln that year the allocution to industry remained virtually unchanged. When It is remembered7 was the year of thc industrial reorganization, it seems possible that some items were shifted from the sector Industry to the sector Other (residual). Since thai time, the level of the residual,In this way, has been relatively unchanged.

It is sometimes speculated that residual outlays under thesectors reflect military spending (perhaps stockpiling ofand the like). It Is true that military items have been Included in the category Financing the National Economy in the past and that thc UCCR has embarked on costly new militaryhich arc not reflected In the explicit defense allocation. Beforehowever, that unexplained items ln this category Indicate the size of or changes In military spending, it oust be kept in mind that many military outlays, particularlyesearch andnature, which do occur ln the category financing the National Economy are found within specific sectors (such as industry) rnther than in tbe unspecified sectoral allocation.

C.

vr * ' *-

* elow. ** P.bove.

in one race Bf uiufar-reaehtiiB reorganization of the administrative structure of the national economy, USSR, it is logical

to assume that significant changes have taken place In theof expenditures within the budget category .Financing the national Economy. On the surface, however, budget categories, have remained the same, although the size of some Items has fluctuated unaccountably. The question then arises as to the comparability of expenditures In the category Financing the National Economy in recent years.

Forhe system of accounting for'profits andhas been reformed markedly in recenthe:of profits taxes, which was introducedimited scalemakes each enterprise responsible directly to statefor the payment of profits transfers (in contrast to thesystem whereby the trust or ministry is responsible). system was introduced to Insure more direct control byover tbe day-by-day operations of each enterprise andprevent ministries or trusts from abusing their right toof enterprises within their Jurisdiction. Theindustrial management7 gave an impetus to the developmentdecentralized system, so that8 it had become fairly Moreover,esult of the reorganization of induotryany redistribution of profit from one enterprise to anotherplace within the sovnarkhoz rather than within the ministrythat is, it occursertain territorialector of thethis process has had

some effect on budget totals of profits taxes and subsidies seemsclear; however, the problem of measuring the effect la much more difficult. It may be postulated that initially6he new system of profits accounting increased the profits total for the national economy, as reported by Finance Minister Zverev, butlarger subsidies from the budget,-thus In effect inflating budget totals relative to other yearn. Tbe rapid growth In profits and in outlays to Industry for operational expenditures (which include subsidies) supports this proposition. Certainly tbe situation Jn this respect, however, was stabilizedet profits in industry, as well as outlayo to industry for operational expenditures, continue to increase rapidly.

Tbe Increase In allocation to industry for operationalapparently also reflects outlays for research and development. In these times of rapid technological change, the development of new products, particularly weapons and weapons systems, has proved very costly. The fact that totalllocations to industry are planned to increase byillion rublesf vhlch the majorillion rubles) is an increase lr. operational expenditures,may be explainedrowth In developmental outlays.

Analysis of thc category Financing the National Econoay in recent years le also complicated by the rather large gap between plan figures and subsequent fulfillment totals. The tendency in recent years has been for rather sizable overexpendltures in the total for this category (see discussion in III, B, below). The absence of any fulfillment data8 (except for total revenues andlus the prospect of substantial overfulfillmentbscures trends within this category and makes the use of the Soviet budget as an economic Indicator difficult.

III. Capital Investment A. General

The over-all expansion of capital Investment in tho USSRto be impressive (see Centralized capitalfrom budget and enterprise own funds, is planned to increase by lk percent Planned decentralized investment figures are not availableut "in78 they increased by one-third above the preceding year. Tne sharp rise inhlch is in line vith the directives of the Seven Tear Flan, suggests that the present assessment by Soviet planners of future investment needs is based on more realistic assumptions than those prevalent when the now defunct Sixth Five Year Plan vaa drawn up.

Table k

Plan for the Financing of Capital Investment in the USSR a/

9

Billion Current Rublee

/

Own Funds

Own!;

capital

k

capital

d/

Excluding collective farm Investment.

b.

d. Actual, not plan.

-

A.L

.

Atame time that Investment requirements are expanding rapidly, Soviet officials continue to express concern over the financing and control of investment- One concern has been the rapid growth of decentralized Investment, far which the financial resources and thc necessary complement of physical materials are not coordinated at the center. Apparently the large increase in6 led to some diversion of Investment resources away from the centrally planned programs in favor of locally planned programs. In view of thlB fact, decentralized investment ln all probability will grow less rapidly in the future. The numerous deputies at the December session of the Supremo Soviet who asked that local industry be allowed toarger share of profit for reinvestment found their pleas sternly rejected. According to Finance Minister Zverev, recent practice has shown that profits left to local industry for its further development are often used for "other ends."

The budget message and debate indicated that no satisfactory solutions have been founderies of problems which continue to plague financial planning. For example, it was found impossible to decrease the level of finished but uninstalled equipment, which was attacked as unnecessarily high by Zverev last year. On the contrary, the level of uninstalled equipment actually rose slightly between January and June of last year. In another problem area, enterprise holdings of above-plan reserves of stocks and materials continue to be undesirably high. Although costs of production have seenfor cost nctivitlen, in some areas, notably housing,re not going down us planned and may even be rising.

Investment in state housing will continue to Increase9 after the initial push 9 plan allocation of funds to state housing isillion rubles, with which it is plannedillion square meters (sq a) of bousing space6 plan allocation8 billion rubles). Inf housing space will be provided by individual private

B. industry

Tbe planned allocation for centralized investment Id Jnduotry will increaseillion rubles8illionf which the budget-financed portion will increase free;illion2 billion rubles (see Table ft"). Such an Increase ap-peurn quite modest, given the Investment needs of the Seven Year Plan. It hus therefore been speculated (see II, B,hat, inwith the new procedure for planning capital Investment which is

* bove.

scheduled to go intoonproductive investment formerly included in investment under the sector Industry has been shifted to the sector Other. Thus the figures forears are not comparable, and it is necessary to either deflate8 figure or Inflate9 figure by perhapsillion toillion rubles toomparable series.

In all likelihood, actual outlays fron the budget"for invest-cenz (and for financing the national economyhole) will be even greater than plan; at least this has been tho casendlthough the necessary data8 have not as yet been released. This Is true, particularly, of the allocation to It appears that, in recent years, allocations to industry, especially investment ln Industry, have been plannedinimum; subsequently during the year additional sums are allocated as the need arises. This procedure introduces an element of flexibility in financial administration, which is one aspect of the currentto do away with excessive rigidity in economic planning. The increased flexibility is achieved by increasing the level of the Reserve Funds of the Councils of Ministers from 1ft billion rubles planned?8 billion rubles planned Thesefunds arc not earmarked for any specific purpose but are set aside to meet emergencies or unforeseen demands; ln recent years tbey have been used almost exclusively in the category financing tbe National Economy and usually in the part of this category concerned with investment ln industry.

Outlays from enterprise own funds for investment in industry willillion rubles, of3 billion rubles are made up of profits3 billion rubles of amortization allowances. Profits in industry (uo ln the national economyhole) continue to grow rapidly. Moreover, actual profits In industryto Finance Minister Zvorov, amountedillion rubles, conpared withillion rubles planned. OvcrfulfiUment of the profits plan apparently reflects the over-all overfulfillmentercent claimed actual comparedplanned) and general fulfillment of cost reduction plans (in contrasthen costs in acme key industries were not reduced as much as anticipated). Planned profits in industry will increaseillion rublesf which aboutercent will be retained by enterprises fo- "heir own investment within thcinvestment plan.

C. Agriculture

The decline ln the budget allocation to investment in state9 billion rubles planned8ubles planned9s well as the over-all decline in

. *

tbe budget allocation to state" billion rubles planned8 tolllioD rubles planned9 (seean be explained by organizational changes Induring the course8 which affected the relationshipthe budget and the agricultural sector of the economy.

Table 5

Planned Allocations to State Agriculture in the USSR69

Billion Current Rubles

centralized investment

funds

own funds

farm investment

tractor Rtation Investment

V

i

b/

j.

financing

funds

farms

tractor stations and

technical stations

b/

own funds

including general agricultural programs such

ir-

afforestatloD, and experimental stations.

The abolition of thend the subsequent purchase uf agricultural machinery by collective fariDG freed the central budget from the need to provide funda for the purchase and maintenance of MTS machinery. Net outlays from the budget to the MTS's vere planned atillion rubles last year (gross outlay6 billion rubles less MTS revenue to the budget9 billion rubles). Outlays from

-

the budget for the newly formed repair technical stations (BTS's) are much7 billion rubles plannedfirst, because the FTS's operateuch smaller scale and, second, because they are khozraschetthat Is, they are expected to cover costs by revenue.

'Ihe decline in the budget allocation to agriculture,esult of the abolition of the MTS's, is offset by increasedgrants to agricultural procurement organizations, vho must now pay higher prices to collective farms for the purchase ofproduce. These higher prices in turn enable the collective farms to purchase and maintain their own machinery (see II, B,8 the increases In outlays for agricultural iroduce were made possible by the use of funds originally allocated to the KTS's but no longer needed for that purpose.

8 organizational changes in agriculture have tended ln the direction of minimizing the differences between the state farm and the collective farm systems. State and collective farms pay the same price for the machinery they purchase and operate, and they receive the oame price for the produce they sell to the state. The collective farms, however, stilleduce on the collective faro market, where prices are higher. State farms, as statereceive grants from thc budget to cover the major share of the capital investment outlays; on the other hand they must transfer to the stateortion of their profits (which are quite modest). Collective farms, on the other hand, must rely on their own funds, or bank loans, for their Investment outlays. Collective rarra investment plays an Important role in over-all agricultural According to5 plan goals, of theillion rubles to be inveated In agriculture by thatillion rubles are to be invested by collective farms.

Collective farms do not pay profits taxes; they do, however, pay an income tax. Collective farm income tax Is planned to increaseillion rubles83 billion rublesn spite of the fact that tax rates were reduced from Ikf taxable income at the December Supreme Soviet session, tax payments reflect the growing money Income of collective farms which is the result of thc new higher procurement prices.

BLANK PAGE

TV. The Military Establishingnf. A- Defense Expenditures

tefenne allocation, announced1 billion

that

Xm' continuesessentially the same level as which has prevailed6 (see Appendix A,.

Although the explicit military allocation would appearno fundamental change in Soviet policy in regard toestablishment, it must be remembered thatparticularly for the new and expanding areas of militaryare available from othergeneralincrease in budget expenditures planned9ufficiently large to permit the growth of those militaryfinanced under other budget categories (such as FinancingEconomy and Social-Cultural Measures). For example,increase in allocations for operational expenditures inalready noted (see II, C, above) may very well reflectoutlays for development of new weapons.

Accordingecent official Soviet statement, the armed forces of the USSR had been cutenn accordanceecision made earlyhis reduction Is over and above the reductionillion men claimed5t appears from the budgetary allocation to defense, how-ever, that any saving resulting from the manpower releases has been offset by the increased costs of equipping and maintaining military personnel with new complex supplies.

B. Scientific Research and Development

" elow. ** ollows on p. 22

-C--

Expenditures on scientific research, from budget andown funds, continue to Increase rapidly. 9 plan allocs lion3 billion rubles shows an impressive it-percent Increase above the "comparable" figure89 billion rublus. this allocationide range of scientific activity, the increaseb seems unusually high unless substantial sums are included to finance military-oriented research, particularly that connected with the rocket and earth satellite programs (see This allocation Is part of the budget category Social-Cultural Measures and appears under the subcategory Education.

Table 6

Financing of Scientific Research Institutes in the USSR a/

6

8

J

b/

c/

cj

Current Rubles

3

Enterprise Own

/

3.*

N.A.

t.7

3-2

N.A.

k.2

The series of expenditures presented here does notthc total scientific effort in the USSR. Considerable activity, particularly in the field of applied research and producteither is financed from other budget categories, such as Financ ing the National Economy, or is charged to production costs ofand organizations. mall amount of scientific uctivlty carried out in educational institutes and universities is financed from funds to "finance higher educational establishments."

BLANK PAGE

V. The Consumer

9 Soviet plan budget does not promise any significant new benefits to tbe population; it does, however, provide for theof the rather impressive benefits granted7uch as new higher pensions, decreased liability for the Income tax, and abolition of compulsory state loans.

Budget outlays for social-cultural measures (see Tobleill increase slightly9 The outlays for education are planned to Increase2 billion rubles; the bulk of this Increase can be explained, however, by thebill Ion -rublein the allocation to scientific research institutes (seein III, above). Expenditures for general education, planned

Table 7

Financing Social-Cultural Measures in thectualI311

b. c.

d.

5 billion rublesillerccnt increaseecessitated, according to the Finance Minister, by the Increasing number of students, particularly in the boarding schools. It appears that the new system of general education, also discussed at the Supreme Soviet meeting in December, is not expected toincreased sums from the budget, at leasl Outlays from the budget for health will increase moderately, us will social

Billion Current Rubles

a/

b/

c/

d/

which science

A.

welfare

welfare payments. The increase in the latters accounted for by the increased number of pensioners, resulting from the nglng of the labor force. Earlier increases in thisesult of the new pension law

Turnover tax receipts continue to provide the largest share of budgetercent planned- percent revenue increase in this tax contemplatedoupled withercont planned Increase in retail trade turnover, suggests that no significant retail price reductions are planned at present The transfer to the decentrnl ired collection of the turnover tax scheduled to go into effect8 has been Indefinitely According to the proposed new system, turnover taxes would in all cases be paid directly by the producing enterprises (at present, roughlyercent is paid by the enterprise and ho percent by the wholesale trade organizations). The details ore still being worked out by the Ministry of Finance and the Council of Ministers.

Incase to the budget directly from the population continued to accountmall share of budget revenue. Income taxes, which accountercent of budget revenue, are plannedrubles9 compared withillion rubles This increaseesult of higher wages and increases in the labor force. Tbeears hoveeries of reforms in the tax atrac-ture, such as decreased liability to the bachelorand Increased Income tax exemptions to lower paid workers. Although no specific tax reforms were promised to the population in the budget message this year, the speech of Hlkita Khrushchev at the Twenty-First Party Congress in January Indicated that direct taxes on the population will be reduced or even abolished during the Seven Year Plan period.

Soviet budget practice includes both the sale of state bonds and increases in savings deposits as budget revenue. Both appear under thc budget category State Loans. Since the abolition of compulsory state loons from the populationowever, loan revenue hasegligible source ol" Income. The initial effect of the state loan abolition7 was to increase savings deposits (byillion rubles ln that year). Tn spite of rising incomes,savings deposits Increased8 byillion rubles compared with tbe plannedillion rubles. 9 plan Islowerillion rubleo). Evidently the SovietIs not Inclined to put money in savings bonks If increased goods and services are available (in thin case, probably Increased private housing).

VI. Budgetn of the Union Republics

The trend toward increasing the share of budget funds channeled through republic and local budgets which has been in effect6 will comealts the share of these budgets in the total USSR will decline slightly. Expenditures of republic budgets, vhlch accounted for more than half of thetotal budget, will increase9* billion rubles cosrpared with5 billion rubles in the total budget. It is notable that, in the category Financing the National Economy, republicoutlays will fall toercent of the-total, compared9 percent planned last year.

The distribution of republic budget funds among the variouswill not change The RSFSR will continue to account for Just underercent of total republic budget funds and the Ukraine for over l8 percent. For the second consecutive year, the Kazakh budget, which is the third largest of the republics butofercent of the total, willeficit next yearillion rubles. This will occur in spite of the fact thatn the only republic allowed to keepf the turnover tax collected by it. The deficit will be made up by the transfer of the necessary funds from the All-Union budget, because theof heavy Industry In the Kazakh SSR is deeped to be of general, Ail-Union significance. Normally republic budgets are exactly balanced, and the budget surplus occurs in the central Ail-Union budget.

Although the allocation to administration Is planned to decline slightlyillion rubles planned compared9 billion rubles planned, the budget discussion Indicated that economies in this field have not been as great as hoped. It appears that some remnants of the old ministerial structure st^ll remain in some areas of Industry and construction which parallel the work of newly formed organs. Moreover, some parts of theof the Rational Economy appear to have excessive personnel. It was pointed out that In the Ministry of Finance the number of workers increased3 although It was scheduled to decline.

Criticism continues to be levied at the planning-prospecting organizations, which spend moreillion rubles annually. Tt appears likely that they vill be reorganized In the near future and possibly puthozranehet basis.

-dtXJsA-L.

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dnnnyye" (Statisticallnnosy i

Gotninllstleheukoye Btrollel 'stvo (Flnanca and Socialist ConctrueTiouT,' Tti-Stfl. U. Pval. RRhereafter referred to as "Statisticheskly* daanyyc'1)

SSR

or-natlonJ. Industry J,. HO.

U. Eval. RR- Pravda, U. Eval. RR. "Statistlcbcsklyebove).

9- Vofsi, I. S. llanl rovruilyecommunarnogo khozyaystvo (Planning tbe Coamainal Housing,io. U. Eval. RR 2.

10. V. Invrov, et al. Voprosy orgaiiizalsllogoovruirkhozakh (Problems ol' Organization ol* Finance nmi Accounting in the. U. Eval. RR 2.

U. Zverev, A. "Gosudarstvennyy byudzhet SSSR8 godu" (a, U. Eval. RR 2.

verev, A. "Cosudurotvennyy byudzhet pervogo godaState Budget In ther nf the Seven Yearnc HH 2.

13- Pravda, 07 Eval. RR 2.

1*- 5 U. Eval. RR 2.

15- 3 U. Eval. RR 2.

16. Zverev, A. "Gosudarstvennyy byudzhet pervogo goda scalletti"

U. Eval. RR Pravda, U- Eval. RR0 U. Eval. RR 2.

Zverev, A. "Gosudarstvennyy byudzhet pervogo Roda semi'etki"

bove), p,. U. . Zverev, A. "Gosudaratvennyy byudzhet -SSSR8 godu" (h,. . U. Eval. RR Pravda, U. Eval. Doc.

li. Rva>.

20. USSR, Verkhovnyy Sovctaaedanlya V stenograflcheskiy otcbet, U. Eval. Doc. USSR, Verkhovnyy Sovet SSSR. tcnogiaficboskly otcbet Steno-graphic U. Eval. Dor. Pravda, U. Eval. Doc.3. Eval. RR 2.

USSR, Tsentral'noyerovlenlyc. Kal'turaoyr stroltel 'stvo SSSR (Cultural Construction In tho USSR)" npTf. Eval. Doc.

APPENDIX B

ixiurok references

Information

Evaluations, following the classification entry and designatedave the following significance:

Source of Information

Doc.

- Documentary

Confirmed by other sources

-

reliable

2

Probably true

-

reliable

Possibly true

-

reliable

Doubtful

-

usually reliable

5

Probably false

-

reliable

Cannot be Judged

-

be Judged

^'valuations not otherwise designated art? those appearing ci; the cited document; those designated "RR" are by the author of this memorandura. No "RR" evaluation IS given when the author agrees with the evaluation on the cited document.

Prov-do, U. Eval. Doc.

k. Eval.0. Eval. (J. Eval. Doc.

>*. Zverev, A. "Gosudaretvennyy byudzhet SSSR6 godu" ('Hie

State Budget of the USSR, Planovoye tdiozyaystvo,

no U. Eval. RRverev, A. "Cosudarstvennyy byudzhet SSSR8 godu" (The

State Budget of the USSR, Planovoye khozyaystvo,

U. Eval. RRravda, U- Eval. RR 2.

21. Finansy SSSR, no- 2b. U. Eval. RR tatisiicheskiyBbove).

23- "Finansovaya Ptatletika" (Financialinansy SSSR,

no U. Evul. RRa. Pravda, U. Eval. 3- IT. Eval. RR 2.

Ibid.

ibid.

USSR, Verkhovnyy Sovet SSSR.

stenogtaficheskiy otchet - U. Eval. Doc.

. SSR (Finances and Credit in theb, DT" Eval- RR trsl'noye Statisticheekoye Upravlcniya. Karodnoye taiO',;yays'tvocsg godu (The National Economy of the USSR,- U. Eval. Doc.

Verkhovnyy So vet. 9

stenograflcheskiytenographic U. Eval. Doc-Zverev, A. "GosudarstvennyyR6 godu" (a, U. Eval. RR 2.

Tsentral'noye Statisticheskoye Upravleniya. ttorodnoye

khozyaystvp6, above).

6 Ul Eval. Doc.

Zverev, A. "Rabotu finansovykh organovna uroven' novykh zadach" (For the Work of Financialevel of (fewinansy SSSR, no- 5- U. Eval. RR 2.

33- "Finansovaya, above).

3'i. Pravda, U- Eval. Doc.

3 U. Eval. Doc.

Ibid.

37- USSR, Verkhovnyy Sovct SSSR. evralya

Zverev, A. G. "Gosudarstvennyy byudzhetpyatoy pyatiletki" (The State Budget for theof the Fifth Five Year Eval. RR 2.

38. "Statlstichesklye

USSR, Verkhovnyy Sovct SSSR.

, above).

Zyerey, A. "Gosudarstvennyy byudzhet SSSR6 godu"

(a, u. Eval. RR U. Eval. Doc-Zverev,lt- , above) "Finansovaya,- Pravda, U. Eval. Doc. W. 3 U. Eval. RRi5- ibid.

Original document.

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