Payment From Profits Into the Budget

one of the most important sources of revenues for the state budget under socialism. The profits of state socialist enterprises are used in part directly at the level of the enterprise, the association, and the sector, where they serve to create economic incentives and to cover expenditures related to expansion of production. However, a significant share of profits is transferred to the general state centralized fund of monetary resources.

In the USSR, payments from profits before the economic reform of 1966 were made in the form of profit deductions. These deductions were equal to the net balance remaining after covering the requirements of the enterprise but were in no case less than 10 percent of profits. In the course of carrying out the reform, the role of payments from profits in the khozraschet (profit-and-loss accounting) system was increased. Two primary budget payments into the budget were introduced: the capital charge and the fixed (rent) payments. A third payment, consisting of the residual profit balance, was also added. This last payment covers the final adjustment of profit distribution between the enterprise and the state budget. The residual profit balance is formed after the allocation of profits at the enterprise, association, or sector. Enterprises that were not converted to the new system of planning and economic incentives continue to pay profit deductions to the budget.

The planned total payments are determined on the basis of the balance of income and expenditures (the financial plan of the enterprise) for the coming year, with a quarterly breakdown. As a rule, planned payments are paid to the budget, with a subsequent recalculation based on the actual profits as stated in the running total recorded in the accounting reports for the month, quarter, or year. Organizations that perform construction work under independent-work contracts, as well as certain other organizations, constitute an exception and pay directly from actual profit, without the preliminary planned payments. In cases where payments to the budget are delayed or incomplete, financial sanctions are applied. These sanctions include penalties and collection of the amount owed without recourse to the courts.

A distinction is made between centralized and decentralized methods of collecting from profits for the budget. The decentralized procedure is the preferred and most progressive method. It provides for the direct settlement of accounts with state khozraschet enterprises and organizations that have current accounts at the state bank. This method, more than the centralized one, meets the requirements of the khozraschet system and the need to strengthen the responsibility of the enterprises to fulfill their obligations. Under the centralized procedure, industrial enterprises, associations, central boards, ministries, offices, and state committees pay the total amount for all their subordinate enterprises and economic organizations. The payments are made to the Ministry of Finance of the USSR, the ministries of finance of the Union republics, and the krai and oblast financial departments.

A broad system of benefits is applied to payments from profits. Newly created enterprises under ASSR, krai, oblast, okrug, raion, city, or village jurisdiction are exempt from payments for two years if they use local raw materials and waste products. A two-year exemption is also granted in cases when these enterprises use centrally allocated raw and processed materials the combined value of which does not exceed 25 percent of the total value of the raw and processed materials used to manufacture the product. The same exemption is granted to subsidiary enterprises of budget-supported institutions and to certain other institutions.

In the USSR, payments from profits have risen from 18.6 billion rubles in 1960 to 69.2 billion rubles in 1975, and the share of these payments in budgetary revenues has increased from 24.2 to 31.9 percent.

In the foreign socialist countries, the payments from profit are organized according to various principles. They may, for example, be based on production factors, such as charges for capital or land or payments for payroll taxes. Excess profits may be collected by taxation, as is the case in the People’s Republic of Bulgaria and the Czechoslovak Socialist Republic. They may also be extracted through rent payments and direct payments from profit to the budget.

R. D. VINOKUR