ABSTRACT
This chapter discusses the role of taxation in price policy under the command steering mechanism and in reforms of the steering mechanism. In the command steering mechanism, turnover tax is an instrument of retail pricing policy, and is used to create a two-tier price structure. This two-tier price structure reflects two sets of principles of centralised pricing policy, one for retail prices, and the other for producer prices. The traditional turnover tax system appears inefficient, from the viewpoint of conventional economics, since it distorts consumer choice. The chapter outlines several different functions of the traditional turnover tax. Five main functions were detected: as an instrument of pricing policy; as an instrument for securing market equilibrium; as a revenue-raiser for the State Budget; as part of the system of financial planning, information and control; and to regulate interpersonal income distribution. In 'neutral pricing' policy, taxes can be used to equalise profit margins, and to eliminate 'producers' preferences'.
