Abstract
The article is aimed at studying the Soviet fiscal policy and its effects on the country’s economic development in 1926–1940. We used a historical and logical method to research the effectiveness of the two instruments of taxation – the turnover tax and tax charges on profits – and their role in the impressive achievements of the Soviet economy. To analyze and compare the data we used the key indicators of economic development and tax collection for 1926–1940. The results of the analysis have confirmed our hypothesis that the turnover tax and tax charges on profits along with price regulation and planned economy led to the formation of a cost-effective economic model in the USSR. We have shown that this model ensured constant reduction of production costs, accelerated growth of the urban population and unprecedented expansion of heavy industry. Radical simplification of the tax system, which was a part of the 1930s reform, not only had a considerable fiscal effect but also affected social development. The turnover tax and tax charges on profits allowed the government to mobilize considerable resources for investment to stimulate growth in production of heavy industry at a rate of 10–16% a year, which created a multiplier effect in the whole economy. However, financial resources were mobilized at the expense of consumers, since higher taxes were mainly imposed on enterprises of light industry and food industry. This led to “commodity hunger”, the introduction of ration cards, and strict administration. It is concluded that the distinctive feature of the Soviet fiscal policy was its complex nature and subordination to the single goal of the country’s industrialization. For citation Sodnomova S. K., Leontyeva Yu. V. Fiscal policy and incentives for development of the Soviet planned economy in the industrialization period. Journal of Tax Reform. 2019;5(1):70–82. DOI: 10.15826/jtr.2019.5.1.061 Article info Received December 20, 2018; accepted March 25, 2019
Highlights
Keynes suggested actively manipulating tax rates and government spending in order to implement discretionary and non-discretionary monetary policies. In their turn, designed a brand new formula of a tax reform. They suggested that the diverse taxes paid by enterprises be replaced with two main taxes – the turnover tax and the tax charges on profits
Our hypothesis is that the turnover tax and tax charges on profits along with the price regulation and planned economy allowed the Soviet government to establish a cost-effective economic model, which involved optimization of production costs, accelerated growth of the urban population and unprecedented expansion of heavy industry
The Soviet planned economy functioned as a single mechanism operated from the center, “manually” or “automatically”, mainly through prices and mandatory levies on enterprises, including taxes
Summary
Economic growth and technological innovation are the main priorities in the development of Russia. In order to achieve a major technological breakthrough, substantial investment is required, which means that there is a need for efficient instruments of taxation, capable of mobilizing the necessary resources In this context, it would be interesting to look at the Soviet experience of designing and enforcing its fiscal policy in the 1930s. In their turn, designed a brand new formula of a tax reform They suggested that the diverse taxes paid by enterprises be replaced with two main taxes – the turnover tax and the tax charges on profits. Our hypothesis is that the turnover tax and tax charges on profits along with the price regulation and planned economy allowed the Soviet government to establish a cost-effective economic model, which involved optimization of production costs, accelerated growth of the urban population and unprecedented expansion of heavy industry
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