Some Issues Related to Service Income and Payment
By professor Chong Gwang Yong of Kim Il Sung University
An in-depth study of income in service charges in the socialist society is significant in that it creates financial sources needed for the betterment of the country.
This is related to the fact that service income is an economic lever by which the growing consumption demand of the people is fulfilled and which assure revenues for the State Budget.
Service income is part of net earnings contained in service income of organs and enterprises in the service sections, that is paid to the State.
Service income is created when organs and enterprises in the service sections provide services to working people and receive service charges for them.
The State in the socialist society develops various service activities to meet the consumption demand of the working people.
The fees workers pay for the services they receive are based on their earned income as a result of their labor. This indicates that the service fee is a redistribution of private income.
Service income redistributed to the state and enterprises compensate for running costs, and the remainder becomes profit of organs and enterprises in the service sections. And the main part of this profit is delivered to the State and others to concerned organs and enterprises in the service sections as their net earnings.
Service income in the socialist society has some peculiar characteristics, which are distinct from business income in the industrial sections.
To begin with, service income differs from business income in its foundation. The latter is based on net income while the former on net earnings.
Although net income is created by the labor of working people, it is different from net social earnings.
Net social earnings are a value newly created by the labor of working people in the industrial sections. On the other hand, net income is created when workers in service sections redistribute the private income created through their service process. Thus, the latter is not newly created value.
Secondly, service income is different from business income in its charging .
Charging units concerning business income are organs and enterprises in the industrial sections including state-run enterprises operating an independent accounting system.
Charging units concerning service income are non-industrial state service organs, enterprises, etc.
Thirdly, service income is different from business income in the objects who or which are charged.
If products manufactured through an industrial process is defined as the chargeable objects for business income, the source of service income is service itself.
In general, service activities themselves can not produce a new product. But they fulfil material and cultural demand of the working people. Thus, service activities can be termed as a chargeable object in service income.
Unlike capitalist service income, which is designed for expropriating people from their private income, socialist income contains a people-centered characteristics. This is because service income is created in the process of fulfilling the consumption demand of the working people.
Service income in the socialist society is a major economic lever by which management of organs and enterprises is improved and the material and cultural life of the people is upgraded.
Service income, first of all, plays its role as a means of guaranteeing revenue for the State Budget.
Utilizing service income as a lever for guaranteeing income for the budget is related to the specific feature of a transitional socialist system.
The socialist society has not enough industrial power to implement a communist distribution system in which a job is given in accordance with people’s ability and materials are distributed in accordance with their demand.
Thus, it is difficult for the state to provide funds needed for the service. Under the condition that a tax system is abolished, it is no burden on workers to pay service fees. If the state should take over this burden, people would rely on the state and weaken their spirit of independence.
Service income, secondly, plays its role as financial means of management activities of organs and enterprises in the service sections.
Service income is utilized as a means of control for increasing jobs, diversifying their kinds and improving their quality. Service income also works on improving the management activities of organs and enterprises in the service sections and saving running cost. Operating cost is one of the main factors which directly affect service income.
Saving management costs increases profit and raises workers service earnings.
Service income, thirdly, plays an important role in satisfactorily guaranteeing the material and cultural life of the people.
Service income constitutes one of the main structural factors of service charges. As service charges are directly related to the consumption life of the people, the scale of service income, which constitutes one of the main structural factors of service charges, influences income for the Stage Budget as well as it improves people’s living standard.
In order to ensure people’s convenience, service activities should be boosted. The positive development of service activities will increase jobs and improve their quality.
An increase in service activities results in accumulating service income, improves jobs and diversify the kinds of jobs. In addition, an upgraded quality of service raises service income per service enterprise unit.
What is important in increasing service income is to thoroughly carry out the service policy of the party. To increase service facilities and develop active service business and improve their quality is the basic way of thoroughly carrying out the party’s service line and is precondition for the growth of service income.
In order to vigorously develop service activities and increase service income, first of all, public service establishments should be constructed more and their quality be decisively enhanced.
Belonging to the category of public service establishments are public health service facilities such as barbers, beauty salons and baths, processing service centers such as cloth-processing, noodle-processing and bakeries, and centers for people’s convenience such as the repairing of daily utensils, etc.
In order to vigorously develop service activities and increase service income, secondly, public caring facilities should be increased and their quality enhanced.
The growth of public service establishments in quantity and their enhancement in quality will improve the working people’s food life and decrease a burden on housewives.
For this reason, restaurants of large and small scales and soft drink shops should be increased.
In order to vigorously develop service activities and increase service income, thirdly, home welfare service networks should be further extended.
A home welfare service is the way of socially or privately offering services on the streets or in people’s resident units by making good use of available manpower, idle materials and facilities. Home welfare services meet those areas of demand which are not covered by public facilities, playing a supplementary role.
While priority should be given to the networks of state organs and cooperative groups, home welfare service networks should be correctly combined with them.
In the socialist society, the State is responsible for the living of the working people. In guaranteeing convenience for the working people, the basic element is the service activities of the state and cooperative organizations. Thus, a home welfare service system should be formed on the premise that the state infinitely enlarges and develops service establishments for cooperative groups.
What is important next in increasing service income is to improve the management of service organs and enterprises and considerably curtail their running costs.
The management costs of service organs and enterprises are made up of service facilities and labor expenses.
If service organs and enterprises improve their management and effectively decrease service facilities and manpower in accordance with the demand of the independent accounting system, they are able to decrease their spending, enlarge profit and increase their service income.
The percentage of structural factors in managing costs varies with the peculiar character of each service section.
For example, raw materials, labor expenses account for a high percentage in the welfare service section, machinery and facilities in the travel and communication service section, and raw materials and facilities in the public caring service section.
Thus, service income is increased when cost-saving factors are specified and cost-saving measures are rationally taken in accordance with the peculiar characteristics in the service sections.
In order to substantially hold down expenditures needed for service activities, the servicing means including machinery and equipment should be modernized, their utilization rate enhanced and the consumption of materials be curtailed, and man power be rationally utilized and secured under an independent accounting system.
It is one of the basic methods of satisfactorily guaranteeing income for the State Budget that organs and enterprises promptly and correctly deliver their service income to the State.
One of the important issues raised in the delivery of service income is to correctly define delivery units. Delivery units mean the organs and enterprises, which are obliged to deliver their service income to the State.
It is rational to term delivery units in the socialist society as organs and enterprises in the welfare service sections, the service sections, the travel service sections, the communication service sections, and the cultural service sections. This definition meets the fundamental demand of service income.
Service income is, in essence, to be mobilized by the State Budget and be utilized for the good of entire society. That is related to the fact that service income is part of the net earnings created by the labor of working people for the society.
Thus, if service income is to be utilized on an entire social scale in accordance with its character, service organs and enterprises which directly create net earnings, should be service income delivery units. This definition will ensure prompt delivery of income for the budget.
In order to pay service income for the State Budget at a right time, it is important to correctly define the objects of payment.
In general, service activities can be divided into the one related to the production of material wealth and the one to people’s living.
The service related to material wealth integrates separate production processes tocomplete the production process while services related to people’s living serve the consumption life of the working people.
The redistribution of private earnings through the lever of service charges can be made only in the service sections.
In view of this, the object of payment for service income should be termed as and applied firstly to, service income of the state-run and cooperative groups, facilities of organs and enterprises, and public welfare services including accommodation fees of hotels, secondly, to fares and transportation fees, sight-seeing fees, and income from sales of food and drinks in the public caring section, and thirdly, to entrance fees of museums, parks, recreation facilities, etc.
It is important to correctly determine the scale of payment of service income. If the hurdle is too high, service organs and enterprises will be in financial straits, and if the hurdle is too low, income for the State Budget is threatened.
The principle that should be adhered to in setting the scale of service income is, firstly, to thoroughly embody the party’s price policy. It is rational to fix the service fees at low levels for children and for the types of business which are of a mass character, and at high levels for the high-ranking business types.
The principle to be adhered to in setting the scale of service income is, secondly, to thoroughly take into consideration social labor cost needed for service activities in setting service charges.
As the prices of products are set by social labor costs, service charges should be decided on the basis of social labor cost.
Based on this principle, it is rational to set the levels of service income according to the following formula;
Service Income = Business-related Service Charges x Payment Rate
In order to ensure income for the State Budget, it is also important to improve payment procedures and methods of service income. In particular, how to set a payment period is important for improving the procedures and methods. If there is a mistake here, net income can not be realized for the budget at a right time, and the calculation of service income may be complicated.
It is rational to set a period of payment in accordance with the scale and the time of realization of service income and to recalculate it at the end of each month. This method ensures a prompt mobilization of net income and prevents the complexity in calculation.
Thus, service income should be paid in the middle of each month and recalculated at the end of it to figure out additional payments or returns.
All the clerks and workers in the financial sections should enhance their functions and roles by theoretically recognizing the essence and characters of income from the service charges.
(Volume 44, No. 1, 1998 of the Kim Il Sung University Gazette)
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