Extraplan Profit

a category of the socialist economy expressing surpluses in the profit actually obtained, in relation to the total planned profits of enterprises, associations, and sectors.

Extraplan profits are obtained by discovering and efficiently using internal economic reserves and by improving the quality indicators of economic accountability. They are progressive if they are obtained by strengthening intensive methods of managing the economy and by making more rational use of material, labor, and financial resources. Extraplan profits reflect the additional contribution of enterprises, associations, and economic organizations to improving economic efficiency.

In some instances, extraplan profits are the result of factors that do not depend directly on the activities of production groups. For example, they may stem from a change in the prices of consumer raw materials and supplies, in the depreciation rates, or in the wholesale prices for products sold by the enterprise. However, extraplan profits can also be obtained as a result of negative factors such as raising prices, increasing the production of more profitable (“advantageous”) but less needed output, reducing the profit plan, and decreasing production outlays by lowering product quality. In such cases, enterprises and associations are penalized with financial sanctions, such as the confiscation of “unearned” and, therefore, illegal profits by the budget.

In industry the most important factors in obtaining extraplan profits are the improvement and streamlining of production and the maximum use of scientific and technological achievements, making it possible to increase the volume of output and sales, lower costs, and improve the assortment structure and quality of output. At sovkhozes and other state agricultural enterprises, the main factors in the formation of extraplan profits are an increased yield of agricultural crops and increased productivity of livestock, based on mechanization, the introduction of chemicals into agricultural production, and land reclamation. In state trade, extraplan profits depend on the introduction of new, progressive forms of trade; an increased volume of retail trade turnover, over and above the plan; and the reduction of distribution costs.

The distribution of extraplan profits is intended to strengthen the material responsibility and interest of groups at enterprises and associations in making fuller use of the reserves for the growth of production and in increasing efficiency, taking into consideration the economic interests of society. Therefore, a portion of the extraplan profits is used for additional economic incentives and for the expansion of production. The remainder becomes part of the centralized fund of monetary resources.

In the USSR until 1966, approximately 75 percent of all extraplan profits went into the enterprise fund and were used for bonuses for socialist emulation and for housing construction exceeding plan targets. The deduction rates from the extraplan profits for the incentive funds were several times higher than those from profits earned within the plan targets, creating a situation that hindered the elaboration and acceptance of taut profit quotas. Under the new management system, extraplan profits in industry, excluding the portion assigned a specific purpose (for example, deductions for consumer commodities), are distributed in a certain sequence, beginning with the capital payment, fixed payments to the budget, and payment of interest to the bank above the total stipulated in the financial plan. After these payments have been made, the enterprise makes up for shortages in its circulating capital, liquidating loan liabilities to temporarily replenish deficiencies for which it is to blame. Subsequently, additional deductions are made into the economic incentive fund (within the established amounts and within the limits of the undistributed extraplan profits), and the enterprise pays bonuses in accordance with the results of socialist emulation. It also pays off bank loans that were taken for the purpose of increasing the output of consumer goods, introducing new equipment, and meeting certain other expenditures when the production development fund was insufficient. The total free remainder of extraplan profits is paid into the state budget.

Individual industrial sectors have special procedures for the distribution of extraplan profits. For example, the instrument-making and automation and control systems sectors use a normative method for distributing such profits between the budget and the sector. However, if the plan is overfulfilled by more than 2 percent, the share of the sector is set at a rate reduced by 30–50 percent. This encourages the acceptance of taut planned profit quotas.

In the other socialist countries extraplan profits also serve as a source of increases in the economic accountability funds of the enterprises and in the centralized and reserve funds of associations. Extraplan profits are also a source of additional payments into the budget. Various methods are used in the distribution of these profits. For example, in the German Democratic Republic, a portion of the extraplan profits is paid into the budget, based on the rate of deduction from net profits. In the majority of the socialist countries, if extraplan profits are obtained illegally or are the result of factors not depending on the enterprises (associations), they are paid directly into the budget.