Circular No. 01/TC-NSNN guiding certain points on the mechanism and measures for managing the state budget in 1996.

 

CIRCULAR

OF THE MINISTRY OF FINANCE

Guidelines on some aspects of the mechanism and measures for managing and operating the state budget in 1996

The Prime Minister has issued Decision No.: 861/TTg, dated December 30, 1995, regarding certain mechanisms and measures for managing and operating the state budget in 1996.

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The Ministry of Finance hereby provides detailed guidelines on the following points:

I. ON THE ALLOCATION AND ASSIGNMENT OF INCOME AND EXPENDITURE BUDGET TASKS TO SUBORDINATE UNITS:

1. Provinces, centrally-administered cities, and the General Department of Customs must assign revenue plans to subordinate units at least equal to the revenue plan assigned by the Prime Minister to the locality and sector. Depending on the specific situation of each locality and border gate, it may be possible to assign higher revenue targets to grassroots units than the revenue plan assigned by the Prime Minister.

2. Ministries, sectors, provinces, and centrally-administered cities when allocating and assigning expenditure budgets to subordinate units must align with the expenditure budget plans of the ministries and localities already assigned by the Government.

II. ON THE GRADATION OF STATE BUDGET MANAGEMENT FOR LOCALITIES IN 1996

1. Expenditure tasks of the local state budget:

The expenditure tasks of the local state budget in 1996 will generally continue as in 1995 (as stipulated in Decision No. 829/TTg dated December 30, 1994 of the Prime Minister and Circular No. 06/TC-NSNN dated January 6, 1995 of the Ministry of Finance). Only some points will be supplemented and amended as follows:

a. Transfer the task of supplementing capital for state-owned enterprises managed by localities previously to the central state budget to ensure through the General Department of Capital Management and Assets at Enterprises.

b. Supplement some expenditure tasks of the local state budget:

In investment expenditures for construction and development at the local level, apart from the centralized investment funds allocated by the State, localities can also allocate additional funds from various sources.

+ 100% of the revenue from land use rights transfer for infrastructure construction.

+ 100% of the revenue from the sale of state-owned housing for developing the housing fund.

+ Revenue from lottery: retained entirely for the local state budget, of which the entire amount or part can be used for new investments, upgrading, and repairing educational, health, and welfare facilities according to the principle:

Revenue up to 20 billion dong: can be fully used for new investments, upgrades, and repairs of welfare facilities.

Revenue exceeding 20 billion dong can be additionally used for new investments, upgrades, and repairs of welfare facilities at a rate of 34.7%; the remaining portion (65.3%) can be used by the locality to balance regular expenditures for education, healthcare, culture, and social affairs. Regarding this matter, the Ministry of Finance will issue separate guidance.

Province A with lottery revenue of 15 billion dong can use all 15 billion dong for investment.

Example:

Province B with lottery revenue of 50 billion dong can use 30.41 billion dong for investment {20 billion + (50-20) x 34.7%}.

Revenue from agricultural land use: retained entirely for the local state budget, of which the locality can use 45% of the revenue for agricultural investment and rural development, including basic construction, improvement, upgrading, and repair of irrigation works, agricultural stations, and rural infrastructure (mainly transportation). The remaining portion (55%) can be used to balance regular expenditures.

Localities must incorporate revenues from land funds, housing funds, lotteries, and agricultural land use taxes into their plans to allocate investment expenditures. On one hand, they must strictly manage these expenditures to ensure they are used for their intended purposes and to save costs; on the other hand, they need to monitor them separately to ensure they are consistent with the progress and capacity of revenue generation, avoiding overspending that could disrupt budget management. The investment ratios specified above shall be uniformly implemented during the budget operation process.

In economic service expenditures, additional tasks include:

Subsidizing electricity pumping water expenses beyond the standard limit: this expenditure must be closely monitored and not used for other purposes. If the allocated funds are not fully utilized in a year, the remaining amount can be carried over to the next year for continued use in this task.

Supporting deficit water resource fees for provinces frequently affected by flooding.

In policy price subsidies, in addition to the existing subsidy items for original seed prices, books, and cultural products, the Government has directed the allocation of debt for freight charges of mountainous area policy goods and corresponding funding for the four non-revenue-generating policy goods distributed in mountainous areas (as per Government Circular No. 1960/KTTH dated April 15, 1994) to enable localities to implement mountainous area socio-economic development programs. The Ministry of Finance, the Ministry of Planning and Investment, and the Committee for Ethnic Minorities and Mountainous Areas will provide detailed guidance subsequently.

2. Allocation of revenue sources between the central state budget and the local state budget

To define revenue sources and encourage localities to effectively exploit these revenues, the allocation of revenue sources is as follows:

a. Local state budget revenues include:

Agricultural land use tax

Land use right transfer tax

Property tax, land rent (excluding land and water surface rents for foreign-invested enterprises)

Revenue from the sale of state-owned property

Revenue from land use rights transfer

Revenue from lottery operations

Business license tax

Slaughter tax

Registration and issuance fee for business registration certificates according to the law

Other revenues from the non-state commercial and service sectors

Local fees and charges

Other local state budget revenues (excluding revenues from budgetary fund usage, recovered capital, and other revenues from state-owned enterprises).

b. Local state budget revenues shared according to the general adjustment ratio include:

Income tax

Corporate income tax (excluding corporate income tax of nationwide accounting units) and profit repatriation tax (excluding profit repatriation tax of oil joint ventures). Income tax (excluding income tax of oil workers).

Resource tax (excluding resource tax for hydroelectric power in Hoa Binh).

Revenue from the use of state budget funds.

c. Administrative fines for traffic and urban order violations: Central state budget 30%, Local state budget 70%.

d. Revenues from crude oil exploitation activities, revenues from economic enterprises of the Party (established before July 1, 1992, in cases established after July 1, 1992, must have the consent of the Prime Minister), and other revenues not specified in points (a), (b), and (c) above, shall be fully remitted to the State Treasury.

e. Supplementary sources from the State Treasury: If the revenues stipulated in point (a) and those stipulated in point (b) at maximum 100% still fail to ensure assigned expenditure tasks, the State Treasury will supplement the local budget to cover the required expenditures.

3. Stabilizing expenditure tasks and revenue sources for local budgets Based on the expenditure tasks, revenue sources, and budget balancing methods as stipulated in points (1) and (2) above, stabilize expenditure tasks, revenue sources, and budget balancing for localities for the two-year period of 1996-1997:

a. The ratio of revenues retained by the local budget as stated in items (a), (b), and (c) of point 2 shall be stabilized for the years 1996 and 1997.

b. For localities receiving supplementary funds from the State Treasury: These provinces, due to limited revenue sources, have little potential for increasing revenues; therefore, when determining the supplementary amount for 1997, it will remain stable compared to 1996 with consideration given to additional support. The additional supplementary amount will be calculated based on the ratio between the supplementary amount from the State Treasury and the planned expenditure task for 1996 assigned to the locality, the inflation rate of 1996, and the capacity of the state budget. Thus, the determination of this additional supplementary amount does not rely on the difference between local budget expenditures and local budget revenues as previously done.

Example: Province A:

Plan for 1996:

Local budget revenue share: 50 billion VND

Local budget expenditure: 200 billion VND

Supplementary amount from the State Treasury for the province: 150 billion VND

In 1997, the additional supplementary amount from the State Treasury will be determined as follows: Ratio of supplementary amount to expenditure = 150/200 = 0.75

Assuming the actual inflation rate for 1996 was 12% = 0.12 The additional supplementary amount from the State Treasury will be: 150 billion VND x 0.12 x 0.75 = 13.5 billion VND

c. During the process of managing the budget in 1997, if there are significant fluctuations in revenue and expenditure, they will be handled as follows:

Revenue increases due to positive management efforts by the locality and economic growth will be enjoyed according to the prescribed classification and the locality will have the right to allocate increased spending for development investment, increase financial reserve funds, and to implement important tasks not allocated in the initial budget plan.

Annual revenue increases due to objective factors such as new businesses being established will be considered by the Government to assign additional expenditure tasks to the local budget or adjust the retention ratio or the amount to be supplemented from the State Treasury.

Revenue decreases or significant expenditure increases due to changes in state policies will be reviewed and addressed within the relationship among budget levels according to the principle that if fluctuations exceed the locality's capacity, adjustments should be made appropriately.

From 1996, a mechanism for stabilizing revenue sources and expenditure tasks for each budget level will be implemented; the mechanism of rewarding excess plans from higher-level budgets to lower-level budgets will not be carried out.

d. To facilitate localities in stabilizing their revenue and expenditure tasks, localities have the right:

To collect certain surcharges as prescribed by the Prime Minister.

To issue regulations and collect certain fees and charges as classified by the Prime Minister. To mobilize contributions from the people to build welfare projects in the locality (hospitals, schools, and public welfare projects...).

To mobilize various sources of capital as prescribed by the Prime Minister to meet urgent basic construction needs when revenue is insufficient.

e. Regarding the Construction and Compilation of the State Budget Estimate:

Based on the directive of the Prime Minister regarding the compilation of the 1997 State Budget Project, the Ministry of Finance will issue a circular to guide and estimate revenue and expenditure for each ministry and locality so that ministries and localities can calculate and compile revenue and expenditure estimates according to the general direction of the state.

Within the specified timeframe, ministries and localities will work with the Ministry of Finance on their budget plans so that the Ministry of Finance has a basis to participate in guiding budget allocation with ministries and localities and to consolidate the State Budget Estimate to submit to the National Assembly.

Annual revenue and expenditure estimates at all levels in localities must be submitted to higher authorities; communes send to the Chairman of the People's Committee of the district (through the finance department); districts and communes send to the Chairman of the People's Committee of the province (through the provincial finance department for localities without district budgets), provinces send to the Prime Minister (through the Ministry of Finance) to review whether the revenue and expenditure estimates comply with the national and local directions. Within 15 days, the higher authority must provide comments on the budget estimates of the lower level; beyond this deadline, if there is no feedback from the higher authority, the locality may organize the implementation of its own budget.

III. REGARDING THE IMPLEMENTATION, MANAGEMENT, AND OPERATIONS OF THE BUDGET IN 1996

1. Regarding revenue collection:

Ministries, sectors, and localities need to urgently and effectively allocate revenue plans to subordinate units, thereby providing a basis for good revenue collection guidance from the beginning of the year.

The Customs sector needs to closely cooperate with the Tax sector to organize effective tax collection for import and export, while directing the system to clearly track and account for import and export tax revenue at each customs checkpoint.

The Tax and Customs sectors need to urgently innovate tax collection measures:

Specifically evaluate the results of revenue collection in 1995, draw lessons and experiences to develop measures for tax collection in 1996.

Continue to seek leadership and guidance from superiors, party committees, and local governments in urging and implementing tax collection in the locality.

Guide state-owned enterprises and non-state-owned enterprises (especially large households) to properly implement accounting systems and manage sales invoices to accurately grasp revenue sources, urge the payment of newly generated revenues into the state budget; timely adjust taxable income to effectively prevent revenue loss.

Strengthen and intensify tax revenue inspection work to prevent revenue loss, especially concerning taxpayers, income, and unreasonable expenses.

Continuously strengthen and improve the organization to ensure sufficient manpower to fulfill assigned revenue collection tasks.

2. Regarding budget expenditure:

Budget expenditures must be specifically allocated and directed towards their intended purposes based on the budget expenditure tasks for each Ministry, sector, locality in 1996 as assigned by

the Prime Minister. During implementation, ensure that expenditures are made according to objectives, appropriate recipients, and within approved budgets. Heads of Ministries, sectors, Chairpersons of Provincial People's Committees under the central government, and heads of grassroots units are responsible for managing and using state budget funds effectively.

Units utilizing state budget funds must prepare quarterly spending plans (divided by month) and submit quarterly settlement reports to the finance authority at the same level; in cases where there is no report on the use of state budget funds from the previous quarter without a valid reason, the finance authority must suspend the allocation of the next quarter’s budget (except for salary-related expenses) until the unit provides a report.

Expenditures already planned with guaranteed revenue sources may not be reduced by Ministries, sectors, localities, and units. Finance authorities at all levels must allocate funds promptly according to the progress of work, avoiding accumulation at the end of the quarter or year.

Continue suspending allocations for new office construction, car purchases, and expensive interior furnishings in administrative and public service agencies, party organizations, and mass organizations funded by state allocations. In exceptional cases requiring such expenditures, localities and agencies must provide detailed reports for review by the Ministry of Finance and the Ministry of Planning and Investment before submitting to the Prime Minister for decision.

Budget allocations and expenditures should only be arranged within confirmed revenue limits, within the total amount assigned. If revenues fall short of targets, corresponding reductions in expenditures must be made. For localities with increased revenues, the surplus can be used for development investment, increasing financial reserves, and fulfilling important tasks not included in the initial annual budget plan.

Any modifications or supplements to policies that reduce revenue or increase expenditures must be implemented only when assured revenue sources are available and must be approved by the competent authority. Ministries, sectors, localities, and units may not arbitrarily establish revenue and expenditure regulations contrary to general provisions.

For unforeseen tasks arising outside the plan, if they are justified and urgent (including fire incidents, famine, small-scale natural disasters), Ministries, sectors, localities, and units must rearrange their spending tasks within the total annual budget allocation to ensure funding availability.

Revenue from health insurance and hospital fees, as established by existing policies, are crucial sources to support medical examination and treatment activities and must be strictly managed to ensure effective use. Concentrate state budget funds on preventive and curative healthcare for policy beneficiaries, extremely poor individuals, and the implementation of significant national programs.

Social Insurance agencies must quickly complete their organizational structure and closely cooperate with the finance sector to ensure full collection of social insurance contributions as prescribed, and properly manage payments according to policy for retirees and other social groups.

Regarding cost savings:

After receiving the budget plan, Ministries, sectors, localities, and grassroots units including administrative and public service areas, construction projects, national security, and defense must develop specific cost-saving plans. The content and measures for cost savings must comply with Government Decree No. 368/TTg dated June 22, 1995; the saved funds should be retained by the unit for effective and practical uses not initially planned for the year; the unit must submit a specific usage plan to the same-level finance authority for monitoring and management. State-owned enterprises must register their cost-saving levels and methods; additional profits generated from cost savings, after tax payment, can be retained by the enterprise for production and business operations.

The development of cost-saving plans must be completed by January 1996 by Ministries and provinces, and reported to the Ministry of Finance. The Ministry of Finance will compile a national report to submit to the Government and National Assembly.

3. Regarding national target programs:

Chapter Program Objectives: Universal primary education and eradication of illiteracy, implementation of educational policies for mountainous regions and ethnic minorities, strengthening material infrastructure of educational institutions, division of secondary schools, teacher training, recompilation of training curricula, upgrading training institutions (including repair and upgrade of training equipment, computerization, phonetics), upgrading hospitals, restoration of historical sites, bringing cultural information to grassroots levels, developing film broadcasting coverage in mountainous, highland border areas, islands, remote regions; combating drug abuse, prostitution; supporting particularly disadvantaged ethnic groups; bringing television to mountainous, highland border areas and islands. The above program objectives are allocated by the Central Government.

The responsibilities of the managing agencies of the program objectives and the responsibilities of Ministries and localities in managing and implementing the program objectives are as follows:

Managing agencies of the programs coordinate with the Ministry of Finance and the Ministry of Planning and Investment to assist the Government in allocating budgetary tasks for implementing the program objectives to each Ministry and locality; guiding and supervising the implementation situation; terminating detailed examination of each item and project within the total amount of program objectives assigned to Ministries and localities to reduce cumbersome administrative procedures.

Ministries and localities are responsible for allocating, examining, and deciding on specific items and projects within the total amount of program objectives assigned; reporting the allocation results to the managing agencies of the program objectives, the Ministry of Finance, and the Ministry of Planning and Investment for the basis of coordinated supervision and monitoring of the program implementation process; settling accounts according to current regulations.

For the part implemented by Ministries and central agencies, the funds are allocated within the regular expenditure budget plans of Ministries and agencies; for the part implemented by localities, the funds are included in the Local State Budget (as a budgetary task of the Local State Budget) and managed by localities for implementation. Localities are responsible for detailed allocation to units tasked with implementation in accordance with the overall framework of each program and objective announced by the Central Government, while strictly managing each program objective to achieve its purpose effectively.

Program Objectives: Malaria control, goiter prevention, leprosy control, tuberculosis control, HIV/AIDS control, population and family planning, assistance to malnourished and disadvantaged children, expanded immunization, labor resettlement and employment resolution, afforestation of bald mountains (327), information technology development, nutrition program, managed by the Ministries overseeing these programs in coordination with the Ministry of Finance and the Ministry of Planning and Investment, allocate and notify localities for coordinated management. The Central State Treasury directly disburses funds for programs implemented by central agencies and authorizes provincial treasuries through provincial finance departments. Programs for afforestation of bald mountains and labor resettlement and employment resolution implement disbursement through state banks as in 1995. The program for afforestation of flat land and coastal tidal flats (773) will be guided separately.

Financial agencies prioritize fund disbursement for programs and objectives to ensure work progress (for localities receiving supplementary funding from the Central State Treasury, quarterly implementation plans must be submitted to the Ministry of Finance to supplement provincial budgets with sufficient funds for implementation). Managing agencies of the programs coordinate with the Ministry of Finance and the Ministry of Planning and Investment to strengthen guidance, inspection, and supervision to ensure correct expenditure targets, according to established standards, and objectives. Provincial People's Committees directly manage, direct, and operate programs within their jurisdictions and publicly announce the funding allocated to each program for proactive implementation.

4. Regarding the national financial reserve fund and the use of the State Budget contingency reserve:

a) National Financial Reserve Fund:

Only the Central Government budget and provincial government budgets can form financial reserve funds; the Central Government's financial reserve fund is formed from annual Central Government expenditures and managed by the Minister of Finance; the provincial government's financial reserve fund is formed from annual provincial revenue increases and surpluses and managed by the Chairman of the Provincial People's Committee.

The national financial reserve fund (central financial reserve fund, provincial budget financial reserve fund) is managed under the principle of preservation and continuous increase, the fund may only be temporarily used when budget balance encounters difficulties due to delayed revenue collection and must be repaid at year-end.

b) Use of the State Budget Contingency Reserve:

All levels of budget are allocated contingency reserves (emergency reserves). Contingency reserves at each level can only be used for urgent budgetary tasks and decided upon by the competent authority based on ensuring budget balance approved by the National Assembly and People's Councils at all levels.

Authority to decide on expenditure from the State Budget Contingency Reserve is carried out as follows:

For the Central State Budget contingency reserve, the Minister of Finance, after consulting with the Minister of Planning and Investment, decides to supplement the budget for Ministries and localities with expenditures up to 1 billion VND to address the consequences of natural disasters, epidemics, and other urgent needs, or those already planned but insufficiently funded, then reports to the Prime Minister and assumes responsibility before the Prime Minister for such decisions; for expenditures without prior planning or exceeding 1 billion VND, they are submitted to the Prime Minister for consideration and decision.

For the use of the Local State Budget contingency reserve to supplement expenditures for agencies and units under local management and lower-level budgets, after consulting relevant departments, it is reported to the Chairman of the Provincial People's Committee for consideration and decision or implemented according to the delegation of the Chairman of the Provincial People's Committee.

5. Control of State Budget Expenditure:

5. Control of State budget expenditures:

In principle, all expenditures from the State Budget must be strictly monitored at each stage before, during, and after disbursement. Depending on the nature and content of each expenditure, appropriate measures and methods for disbursement, inspection, and control should be applied. The Ministry of Finance will issue detailed regulations on procedures, conditions, methods of disbursement, payment, accounting records for each expenditure to ensure compliance with regulations, purpose, and economy.

IV. IMPLEMENTATION

1. Ministries, sectors, People's Committees of provinces and centrally governed cities shall base themselves on Decision No. 861/TTg dated December 30, 1995 of the Prime Minister and this Circular to organize and guide agencies, units, and local levels of government to implement.

2. This Circular takes effect from January 1, 1996. Any difficulties encountered during implementation should be reported to the Ministry of Finance for supplementary guidance.