The most important among the listed revenue sources were the turnover tax and deductions from profits. Together their yields ranged from 50 percent of total revenue in 1960 to almost 69 percent in 1967, but their relative weights changed markedly during this period. In 1960 the turnover tax yielded 40 percent and profit deductions 10 percent of revenue; by 1967 their respective shares were 43 and 26 percent. Social insurance premiums contributed between 3.2 and 4.5 percent, while the yield from direct taxes on the population declined from 2.7 percent in 1960 to less than 1 percent in 1967. In 1969 income taxation was abolished for individuals and for some poor collective farms in hilly and mountainous areas.

The leadership has claimed that the abolition of direct taxes on the population with the concomitant improvement in public welfare was made possible by the country's economic advance based on the Party's correct revolutionary policy, and it contrasted the progressive nature of this measure with an alleged intensification of exploitation and misery of workers in what are officially called imperialist and modern-revisionist countries. This comparison ignores the existence of the turnover tax, which is particularly heavy on consumer goods, and of the enterprise profits deduction, both of which are reflected in the sales price of commodities and, consequently, represent a hidden form of sales taxes. This method of taxation is known to be regressive, in that it takes no account of differences in income and places the heaviest burden on those least able to pay.

The published budget laws usually specify the amount of revenue to be derived from the socialized economy, including collective farms and cooperative enterprises. The proportion of this revenue was reported to have been 85.5 percent in 1960 and from 88 to 89 percent in the 1968-70 period. This information cannot be reconciled with the published revenue statistics, particularly with the data concerning the taxation of noncollectivized farm enterprises, the proceeds from which were reported to be less than 0.5 percent in 1964. The revenue from the nonsocialized sector consists mostly of taxes imposed on the output from personal farm plots of collective and state farm workers and, to a lesser extent, of taxes on some private artisan and other activities still tolerated by the government within narrowly prescribed limits.

Information on budgetary expenditures is also incomplete. Published statistics failed to specify the use of 17.5 percent of the total outlays in the 1960-65 period, and no explanation is readily at hand for the decline of the unallocated residue from that level to between 3 and 4 percent in 1968-70. The published data included outlays for the national economy, social and cultural needs, defense, and administration.

The proportion of total expenditures devoted to social and cultural needs and to defense remained remarkably stable between 1960 and 1970. Annual outlays for these two categories fluctuated, respectively, only from 22.6 to 25.1 percent and from 7.6 to 9.9 percent of total expenditures. The share of administrative expenditures declined steadily during this period from 2.7 to 1.7 percent. Outlays for the national economy were also shown by the published statistics to have been quite stable in the 1960-65 period, with an annual variation of only 2.6 percent. Coincident with the decline and virtual disappearance of the unreported expenditure residue after 1965, however, the share of industry rose sharply from 46 percent in 1965 to more than 64 percent in 1968 and remained above 61 percent through 1970. The reasons for, and the implications of, this change in reporting practice are not known.

An average of 47 percent of the budgetary expenditures in the 1960-67 period was devoted to investment, with annual fluctuations of this category between 39 and 55 percent. The lowest rates of investment occurred in 1962 and 1963 as an aftermath of the abrupt cessation of Soviet aid deliveries. In absolute terms the volume of investment increased from 1.1 billion leks in 1960 to 1.8 billion leks in 1967. Total investment for the years 1966-70 was planned at 6.5 billion leks, an increase of 34 percent over investments in the preceding five-year period. Actual investment in the years 1966-69 was reported to have exceeded the plan for those years by 12 percent. In line with the Party's policy of promoting a rapid growth of the country's productive capacity, from 80 to 82 percent of the investment has been devoted to the construction of facilities for material production.

Industry has received the largest share of investment—48 percent in the 1961-65 period and 50 percent under the plan for 1966-70. On an annual basis, industry's share ranged from a low of 36 percent in 1962 to a high of 61 percent in 1965. The proportion of agricultural investment was much lower—only 15 percent of the total in 1961-65 and less than 19 percent of the total planned for 1966-70. During the first two years of the 1966-70 period, actual investment in agriculture lagged substantially and amounted to only 11.7 and 16.2 percent, respectively. The lack of adequate investments has been a contributing cause of poor agricultural performance. There has been no consistency in the pattern of industrial and agricultural investment. The respective shares of these two sectors in total investment fluctuated widely from year to year in the 1960-67 period. An adequate explanation of the reasons for this fluctuation has not been found.

Investment in housing and for social and cultural purposes has been minimal—8.1 and 3.7 percent, respectively, in the 1961-65 period and 6.1 and 8.1 percent, respectively, under the plan for 1966-70. As in the case of agriculture, actual investment in 1966-67 was substantially below the planned levels and amounted to less than 5 percent for housing and 2 percent for social and cultural needs. This capital starvation has been largely responsible for the dismal housing situation and for the inadequacy of other essential amenities.

Money and Banking

The lek, divided into 100 quintars, is a nonconvertible paper currency with multiple official exchange rates. The basic official rate since August 10, 1965, has been 5 leks for 1 United States dollar, a rate that has no applicability in practice. Up to 1965 the exchange value had been 50 leks per US$1. The change in par value had no economic significance because prices, wages, and all other monetary values were reduced by the same ratio.