Page:NATIONAL INTELLIGENCE SURVEY 18; CZECHOSLOVAKIA; THE ECONOMY CIA-RDP01-00707R000200110014-8.pdf/30

 APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8

increased to 65%, with the intention of draining off more money than enterprises could otherwise use for new investments and wage increases. In addition, an economy-wide flat-rate tax of 25% was imposed on the total volume of wages paid by enterprises; this measure was considered to be more effective in controlling wage increases than the previous progressive tax on wage increases. Enterprises were also required to pay a contribution to the state budget for health insurance and social security. Lastly, a property tax of 4% was imposed on total net assets of an enterprise; this rate could be slightly raised if new equipment (except that being acquired on credit) were added.

In January 1972 several new measures were enacted, designed to control enterprise expenditure without impeding production. Profit replaced gross income as a measurement of enterprise effectiveness. The system of enterprise taxes was replaced in favor of individual repayments to state revenue. These levies on enterprise produce about 66% of all revenue. The level of repayment—ranging between 65% and 75% of net profit—is set in conjunction with the economic plan so that high growth industries are allowed larger reserves for investment and wage funds. A few select enterprises are allowed to loan funds up to 5% of their net profit.

The state budget for 1971 and 1972 (Figure 14) reflects the power of the Federation in collection and distribution. The Federation collects over 60% of the tax and repayment revenue; 40% of Czech expendable revenues come from the Federation, 60% in Slovakia. The Czech and Slovak National Committees allocate their expenditures to economic (32%) and social (64%) development within their respective areas. National defense represents 8% to 9% of total expenditures or the Czechoslovak and National Committees. Little change has been recorded in the share allocated to defense throughout the past decade.

3. Economic institutions (U/OU)

As in all Communist-type economics, nearly all economic activity in Czechoslovakia is controlled by the state. The private sector accounts for less than 5% of national income, mostly through earnings of private plots in agricultural cooperatives. State control has long been a feature of the economy. Even at the time of the Communist takeover in 1948 only about one-third of the national income originated in the private sector. A new wave of nationalization in 1948 lowered this share to 20% in 1950. By 1969 the private sector was reduced to its present level. Private enterprise outside agriculture is insignificant, consisting only of some 2,000 full-time artisans and service workers. In 1965 an additional 7,000 persons permanently employed in other areas were allowed to supplement their incomes by working "on their own account," and by 1969 this number had grown to 15,000. The government granted this limited concession to private enterprise as the only way, given the tight labor

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8