RUSSIA: Taxation Rationalized

The Supreme Soviet (parliament) last week put aside for the first time its traditional red banners and red bunting, convened in the onetime Throne Room of the Kremlin Palace, now freshly done over in pure white.

The Deputies met to receive the first Soviet budget drawn up since the Commissariat of Finance was “purged”‘ last March. New Finance Commissar Arsenii Grigorevich Zverev made a budget speech declaring that it is the Soviet Union’s “duty to protect . . . the interests and culture of the working masses everywhere.” For this big job, he announced, Russia has adequate funds. The Deputies cheered for many minutes after Commissar Zverev climaxed: “We stand for Peace, but we are ready to give blow for blow! If need be, the whole people stands behind the army and the Communist Party and our great leader Stalin!”

Russians who wanted facts turned from this fighting budget speech to a meaty report Commissar Zverev made in the official publication Bolshevik. In this, Commissar Zverev blames on his purged predecessor, Grigory Grinko, four major shortcomings in Soviet finance: 1) persistently low purchasing power of the ruble; 2) long arrears in salaries which the State owes to personnel of the Motor & Tractor Stations (some have been unpaid for as much as two years); 3) closing by the State of a total of 26,000 Soviet savings banks and institutions; 4) chaotic conditions in the Soviet tax system.

The shortage of those eminently bourgeois institutions, savings banks, seemed particularly to bother Commissar Zverev. who deplored that “430 districts of the Union are completely deprived of savings institutions.” He promised to open this year 5,700 new savings banks. Finally he gave a sweeping pledge to “rationalize” the now almost infinitely complex taxation system of the Soviet Union, announced some progress already made: “We have rationalized in the food industry where, instead of 608 tax rates, we have introduced but 167. We are also revising the taxation system in the wool, cotton and silk industries. But this is not enough. We are fully aware that all of our industrial turnover taxes must be revised in like manner.”

This brings up for revision the most distinctively Communist contribution to Russian finance. It is a Communist contention that the crushing burden of taxes borne by workers under a capitalist state is largely lifted in the Soviet State by turnover taxes. As a capitalist buys materials and adds a profit on to his costs before selling them, the State adds a turnover tax. Thus in Russia the State sells its own wood to its own sawmills, sells its lumber to its furniture factories, sells its furniture to the public—and collects a tax on each of these turnovers. It has been natural for Communist financial planners to get increased revenues for the State by inserting more and more turnovers with resulting complications—now to be ironed out by rationalization.

Commissar Zverev in the course of his ringing budget speech ranged far & wide over all phases of Soviet Union life in striking phrases. There are 33,000,000 pupils in Soviet elementary and secondary schools, he declared, and the proletarian State boasts of no less than 50,000,000 bondholders. Putting in figures with broad brush strokes, Commissar Zverev reported that: 1) the State’s revenues would be 125,184,000,000 rubles (of which 83,000,000,000 rubles is to come from turnover taxes); 2) the State’s expenditures would be 123,684,000,000 rubles (major items: 47,000,000,000 rubles for “financing the national economy,” 27,000,000,000 for military and naval expenses); 3) a surplus for the year of exactly 1,500,000,000 rubles.