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Document Creation Date: 
December 22, 2016
Document Release Date: 
January 20, 2011
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Publication Date: 
February 14, 1952
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Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1 CLASS` FICATIONg CRiaT/SEC''.. l FnamA7C;; OAl CLNTRAL INTELLIGENCE AGENCY INFORMATION REPORT SECRET SUBJECT Comments on Soviet Nil.itary Expenditures PLACE ACQUIRED DATE ACQU I RED DATE OF II .,r I CLASSIFICATIONS Z;TIiIRTTYI DISTRIBUTION (imy u- I /___ Ill DATE D!STR. /' Feb 52 NO. OF PAGES 3 NO. OF ENCLS. (LISTED BELOW) SUPPLEMENT TO REPORT NO. Managers of military equipment and military construction enterprises and trusts are in a privileced position in the USSR.. Re.luests for additional 50X1-H funds to meet payroll or )?_~tcrial fe uirements are provided ,;ith very little delay; :chile the ieitiistrj of Finance has to decide from shat. categories of the Financial Plan to ::1-iift the funds to cover above-plan Defense ih;inistry expenditures,. In.dust,je, producin- -oods for military as ,cell as for civilian consumption (such as text_i.le and tractor industries), as a rule, supply goods to the I?iinistry- cf .%a afenne at prices below cost, and add the difference to the cost of the c.Lvili--n .sc -mr,ent of .' eir products. Since turn-.over tax on civilian goods is Generally. a fixed perc, -tape of costs,. such a pricing policy enhances the State revenue sources and further limits the effective demands of the population, Armament industries are not re_ju.ired to sho,f profits, since profits .Iould Dnly increase the costs to t'.e Staten all the ;.ndicated increase industrial and transportation profits in the Soviet economy are c' 'er:Lved from consumers' coeds industries, or from tie transportation of consumers' goods 1,r,mro~_ SECRET_ Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1 Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1 SECRET /SECUR.IT Y SECRET. and civilians. Increased profits during the post-war economy in the Soviet Union could have been accomplished tl.rough: Lowering the quality of some consumers' segments of consumers' goods; increased labor productivity in the ;cods industries; increase of prices to consumers (in goods and services). T1le publicized 20 to 35n price reduction in 1950, of such industrial products as iron, steel, and cement constitute a deliberate attempt to fool people abroade 'While some price reductions to the Union-important industries are possible, the 20 to 35" reduction referred to may have applied to cement, iron, and steel ":r'o.kcts sold to the public at tremendously inflated retail prices through tern-over tax. Thus it is quite possible that prices on nails, hardware and ecme.r.t sold to collective farmers in small cuantities were reduced by the puulicizei f lures. Price reductions which have taken place in consumers' goods since 190, have been effected by the reduction of turn-over tax rates Turn over tax rates during the World War II and post-warpc-riods, up to 19117, ,are increased over 100%, according to published revenue figures. All military establishments buy food and other supplies at :wholesale prices :rl:.c' include arc " i.ts , but do not include turn-over tax. One must ogler stars: fr..a the ,ri,nary unction o; ohm urnover tax in tlhe Soviet Union is to sponge up all the currency put into circulation, through ,wages and salaries, for which no consumers' goods are available for the public., and by this means to draw the currency back into the banking system. Since about 70 of all -oods produced in the Soviet Union goes to the government in the form of armaments or in ftc form of construction, machinery, and materials for armament pro.-auction, this vast sum representing 70% of costs in the form of .wages; salaries, upkeep and administration, must be mopped up, mostly through a turn- over tag: on consumers' ;roods, or. material and equipment going into the production of civilian roods Every economist at.d financial man should realize that the Soviet published mili_tai?:, budget is formulated with two main objectivess to reflect; as small a percenta e of.' the -total bud-!et as possible for domestic as well as for foreign propaganda, and to inflate the other budgetary categories, where hidden military emmerdi.tures are included, in order to red' ce the percent age ma'nit:ude of the announced military budget. It would be stupid f cr the Soviet government to make p-"..rchases of food and supplies with turnover tax0 It would amount to taking money out (f one account and ;gutting a.t; into another, while at the same time inflating its military expenditure account. In the case of food supplies, the I?i'nistry of Defense pays the Wholesale output or marketing price, which includes profits but does not include the turnover tax In purchasing other supplies for the armed forces, such as clothing, foo'owear, and other personal items, these are bought on the average about 30% be] o:r production costs. The difference .is shifted by the manufacturers to tl-:c civilian section in arriving at the production costs of commodities. Thus every enterprise has a eo-called mi1':tary price list. SECRET, SECRET/SECURITY IEFORI?IAT'ION Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1 Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1 SECRET/SECLRI'l_ 1,;,-, '7_EON some l9L0 and 19L47 military hand- books quote prices of uniforms, clothin-', footwear and other supplies at ::rices These price lists are issued to Company Quartermaster Sergeants, and they reflect the prices charged to the military personnel in case of loss or other disposal of their equipment as a penalty price; they have nothing whatsoever to do with the cost to the Ministry of Defense. Costs to the Ministry of Defense are from 12 to 2) times less than those indicated by the "penalty" price li.,ts0 the prices paid by the Defense Ministry to the Ministry of Food Supplies and other ministries fcc clothing, footwear, etc have remained at the same the level as in 19400 However, "penalty" prices have about doubled0 (there are some 12 categories of menus of military mess within the Soviet Union; Army, ;sir Force, Navy, schools, hospitals, etc0 Those soviet .forces placed in occupied areas, living at the expense of the Satellites, certainly are fed much better than those in the Soviet Union., since the Satellite countries have to bear the cost of maintenance of the Soviet military personnel0 ll0 I I the average ratio of Soviet enlisted men to officers, and NCO' -- 12. 130 About 10 to 10 the average monthly pay to the enlisted men in the Soviet armed forces About 30 rubles per month0 In the purchase or raw alid fabricated materials for the production of military equipment, t-he ratio is 2 rubles to .,51; in" the purchase of finished products the ratio is about'3 rubles to $1, due to US superior skills in fields of production and in administration and organization. In the case of military aircraft the ratio ma,r be about 305 rubles to $1. SECRET SECRET/SECURITY INFORM/iTIODT X1-HUM I Sanitized Copy Approved for Release 2011/01/20: CIA-RDP80-00809A000600010230-1