Circular No. 01-TC/NSNN of the Ministry of Finance guiding certain points on the mechanism and measures for managing the State Budget in 1996

MINISTRY OF FINANCE ********	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ********
NUMBER: 01TC/NSNN	HA NOI, January 30, 1996

 

CIRCULAR

DIRECTIVE NO. 01 TC/NSNN OF THE MINISTRY OF FINANCE ON JANUARY 3, 1996 GUIDING CERTAIN POINTS REGARDING THE MECHANISMS AND MEASURES FOR MANAGING AND OPERATING THE STATE BUDGET IN 1996

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

The Ministry of Finance provides specific guidance on the following points:

I. ON THE ALLOCATION AND ASSIGNMENT OF REVENUE 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 revenue targets to grassroots units higher than the Prime Minister's revenue plan index.

2. Ministries, sectors, provinces, and centrally-administered cities when allocating and assigning expenditure budget plans to subordinate units must align with the expenditure budget plans of the ministry or locality that have been assigned by the Government.

II. ON THE GRADATION OF 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 basically continue to be implemented 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 guarantee through the General Department of Capital Management and Enterprise Assets.

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 other 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 sales: retain 100% 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 VND: can be fully used for new investments, upgrading, and repairing welfare facilities.

Revenue above 20 billion VND can additionally be used for new investments, upgrading, and repairing welfare facilities at a ratio 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 a separate directive.

Example:

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

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

+ Revenue from agricultural land use: retain 100% for the local state budget, of which the locality can use 45% of the revenue for agricultural investment and rural development, including building, improving, upgrading, and repairing water conservancy 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 construction and development 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 potential revenue generation, avoiding overspending and causing instability in 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 costs for flood drainage exceeding the standard: this expenditure must be closely monitored and not used for other purposes. If the allocated funds in the plan 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 subsidies to offset losses from water resource fees for provinces frequently affected by flooding.

- In policy price subsidy expenditures, in addition to expenditures on seedling subsidies, books, cultural products, and implementing the Prime Minister's directives in Notification No. 132/TB dated October 4, 1995 of the Government Office, a debt for transportation costs of mountainous area policy goods and corresponding funding for the four non-revenue-generating policy goods in mountainous areas (Circular No. 1960/KTTH dated April 15, 1994 of the Government) have been arranged to provide localities with conditions to implement mountainous area socio-economic development programs. The Ministry of Finance - Planning Investment - Ethnic Minorities Commission will issue detailed guidelines 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 various revenue sources, the allocation of revenue sources is implemented as follows:

a. Local state budget revenues that enjoy 100%, including:

- Agricultural land use tax

- Land use right transfer tax

- Property tax

- Land rental fees (excluding land rental fees and surface water rental fees for foreign-invested enterprises)

- Proceeds from the sale of state-owned property

- Revenue from land use rights transfer

- Lottery revenue

- Business license fee

- Stamp duty

- Other taxes from the non-state commercial and service sectors

- Local fees and charges

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

b. Local state budget revenues that are shared according to the general adjustment rate, including:

- Business 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).

- Individual income tax (excluding individual income tax of oil workers).

- Resource tax (excluding resource tax on hydropower water from Hoa Binh).

- Budgetary fund usage fees.

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

c. Impose administrative fines for traffic秩序和城市安全违规：NSTW 30%，NSĐP 70%。请注意，"NSTW"和"NSĐP"在直接翻译中可能需要进一步解释或确认其具体含义，但根据指令，我仅翻译给出的文字内容，不添加任何解释或补充。此处可能存在表述上的不准确，因为"NSTW"和"NSĐP"未被定义为标准的英文法律术语。严格遵循指令，不做额外处理。

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 prescribed in point (a) and those prescribed 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 expenditure tasks, revenue sources, and budget balancing methods according to points (1) and (2) above, stabilize expenditure tasks, revenue sources, and budget balancing for localities over the two-year period 1996-1997:

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

b. For localities receiving supplements from the State Treasury: Provinces in this category, due to limited revenue sources, have little potential for increasing revenue; therefore, when determining the additional supplement for 1997, it will remain stable compared to 1996 and will take into account additional support. The amount of additional supplement 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 supplement does not rely on the difference between local budget expenditures and local budget revenues enjoyed previously.

Example: Province A:

- Plan for 1996:

+ Local budget revenue share: 50 billion VND

+ Local budget expenditure: 200 billion VND

+ Supplement from the State Treasury for the province: 150 billion VND

- In 1997, the additional supplement from the State Treasury is determined as follows:

+ Ratio of supplement to expenditure = 150/200 = 0.75

+ Inflation rate for 1996 was 12% = 0.12

+ Additional supplement 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 shall be enjoyed according to the prescribed classification and the locality has the right to allocate increased expenditure for development investment, increase financial reserve funds, and to implement important tasks not allocated in the initial budget estimate.

- 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 in the relationship between different levels of budgets 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 level of budget 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 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. They can mobilize contributions from the people to build welfare projects in their locality (hospitals, schools, and public welfare projects...).

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

e. Regarding the preparation and consolidation of the State Budget estimates:

- Based on the directive of the Prime Minister regarding the preparation of the State Budget project for 1997, the Ministry of Finance will issue a circular guiding and estimating revenue and expenditure checks for each ministry and locality so that ministries and localities can calculate and prepare revenue and expenditure estimates according to the general direction of the State.

- Within the prescribed timeframe, ministries and localities will work with the Ministry of Finance on their budget plans so that the Ministry of Finance can participate in directing budget allocations with ministries and localities and have a basis for consolidating the State Budget estimates 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 provinces without district budgets), and 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. Higher authorities must review and provide comments within 15 days; if no comments are received beyond this period, the locality may organize the implementation of its own budget.

III- IMPLEMENTATION, MANAGEMENT, AND OPERATIONS OF THE BUDGET IN 1996

1/ On 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 work 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 instructing the collection system to clearly record import and export tax revenue at each customs checkpoint.

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

+ Specifically assess the results of revenue collection in 1995, draw lessons and experiences to implement tax collection measures in 1996.

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

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

+ Strengthen and intensify tax revenue inspection work to prevent revenue loss and unreasonable tax payments and costs.

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

2/ On budget expenditure:

- Budget expenditures must be specifically allocated and in accordance with their intended purposes based on the budget expenditure tasks for each Ministry, sector, locality for the year 1996 assigned by the Prime Minister. During implementation, management must ensure that expenditures are made according to objectives, to the correct recipients, and in accordance with approved budgets. Heads of Ministries, sectors, Chairmen of Provincial People's Committees under central jurisdiction, 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 (excluding salary-related expenses) until the unit provides a report.

- Expenditures already planned and guaranteed by 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, and must not concentrate allocations at the end of the quarter or year.

- The allocation of funds for constructing new headquarters, purchasing cars, and expensive interior furnishings in administrative agencies, party organizations, and mass organizations funded from the state budget remains suspended. In exceptional cases requiring such expenditures, localities and organizations 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 expenditure plans and allocations must be within the scope of certain revenues and within the total amount assigned. If revenue targets are not met, corresponding reductions in expenditures must be made. For localities with increased revenues, the additional income should be allocated for development investment, increasing financial reserves, and implementing important tasks not included in the initial annual budget.

- Any amendments or supplements to policies that reduce revenue or increase expenditures can only be implemented if there are assured revenue sources and must be approved by the competent authority. Ministries, sectors, localities, and units may not arbitrarily issue revenue and expenditure regulations contrary to general provisions.

- For unforeseen tasks arising outside the plan, if they are justified and urgent (including fires, famine, minor natural disasters), Ministries, sectors, localities, and units must rearrange their expenditure tasks within the total annual budget allocation to have sufficient resources to address these needs.

- Revenue from health insurance and hospital fees, as established by existing regulations, are important sources of funding for medical examination and treatment activities and must be strictly managed to ensure effective use. State budget funds should be concentrated on disease prevention, treatment 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 social welfare recipients.

- Regarding cost savings:

+ Ministries, sectors, localities, and grassroots units including administrative, construction, security, and defense fields, upon receiving expenditure plans, must develop specific cost-saving plans. The content and measures of cost savings must comply with Government Directive No. 368/TTg dated June 22, 1995; the saved funds should be retained by the units for effective and practical uses not initially planned for the year; units must have specific usage plans reported to the same-level finance authority for monitoring and management. State-owned enterprises must register their cost-saving levels and methods; any additional profits resulting from cost savings, after tax payment, may be retained by the enterprise for production and business operations.

+ The development of cost-saving plans must be completed by ministries and cities by January 1996, and reports submitted to the Ministry of Finance. The Ministry of Finance will compile nationwide reports to the Government and National Assembly.

3/ Regarding national target programs:

- Target Programs: Universal primary education and literacy eradication, implementation of educational policies in mountainous areas and ethnic minorities, strengthening material infrastructure of schools, secondary school division, teacher training, textbook compilation for training, upgrading training institutions (including repair and upgrade of training equipment, computers, phonetics), upgrading hospitals, restoration of historical sites, bringing cultural information to the grassroots, developing cinema broadcasting in mountainous, border highlands, islands, remote areas; drug control, prostitution suppression; support for particularly disadvantaged ethnic groups; bringing television to mountainous, border highlands, and island regions. These target programs are centrally allocated.

The responsibilities of the program management agency and the responsibilities of Ministries and localities in managing and implementing target programs are as follows:

+ Program management agencies must collaborate with the Ministry of Finance and the Ministry of Planning and Investment to assist the Government in allocating expenditure tasks for target programs to each Ministry and locality; guide and inspect the implementation situation; terminate the detailed review of individual items and projects within the total target program budget assigned to Ministries and localities to reduce cumbersome administrative procedures.

+ Ministries and localities are responsible for allocating, reviewing, and deciding on specific items and projects within the total target program budget assigned; report the allocation results to the program management agency, the Ministry of Finance, and the Ministry of Planning and Investment for coordinated inspection and supervision of the program implementation process; settle expenditures according to current regulations.

+ As for the portion to be implemented by central ministries and agencies, the budget will be allocated within the regular expenditure plan of those ministries and agencies; as for the portion to be implemented by localities, the budget will be included in the State Budget (as a budgetary task of the State Budget) and assigned to the locality for management and implementation. Localities are responsible for detailed allocation to each unit tasked with implementation in accordance with the overall framework of each program and target announced by the central government, while strictly managing each program and target to ensure that they are carried out according to their intended purpose and effectively.

- Programs and targets: Malaria control, goiter prevention, leprosy control, tuberculosis control, HIV control, population and family planning, assistance for malnourished and disadvantaged children, expanded immunization, labor resettlement and employment resolution, afforestation of denuded hills (327), information technology development, nutrition programs managed by relevant ministries in coordination with the Ministry of Finance and the Ministry of Planning and Investment, which will allocate and notify localities to coordinate in management. The Central State Budget directly disburses funds for programs implemented by central agencies and authorizes through provincial finance departments. The afforestation of denuded hills and labor resettlement and employment resolution programs will implement disbursement through state treasuries as in 1995. The afforestation of flatlands and coastal tidal flats (773) program will have further guidance.

- Financial authorities prioritize the disbursement of funds for programs and targets to ensure project progress (for localities receiving additional supplements from the Central State Budget, quarterly plans for implementing the program and target must be established and sent to the Ministry of Finance to supplement the provincial budget with sufficient funding). Program managers in coordination with the Ministry of Finance and the Ministry of Planning and Investment strengthen guidance, inspection, and supervision to ensure proper spending on the intended recipients and in accordance with regulations, as per set goals. Provincial People's Committees directly manage, direct, and oversee programs within their jurisdiction and publicly announce the budget allocation for each program to enable 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 budget and provincial budgets can establish a financial reserve fund; the central government’s financial reserve fund is formed from annual central budget expenditures and managed by the Minister of Finance; the provincial financial reserve fund is formed from annual increases in provincial budget revenues 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, and it 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 budget tasks and decided upon by the competent authority based on the principle of ensuring budget balance approved by the National Assembly and People's Councils at all levels.

- Authority to decide on expenditures from the State Budget contingency reserve is as follows:

+ For the central 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 aftermath of natural disasters and epidemics and other urgent needs, or where there is a plan but insufficient funds, then reports to the Prime Minister and assumes responsibility before the Prime Minister for these decisions; for expenditures without a plan or exceeding 1 billion VND, submit to the Prime Minister for consideration and decision.

+ For the use of the provincial contingency reserve to supplement expenditures for units under local management and lower-level budgets, after consulting related departments, report to the Chairman of the Provincial People's Committee for consideration and decision or implement according to the delegation of the Chairman of the Provincial People's Committee.

5/ Control of State Budget Expenditures:

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

IV- IMPLEMENTATION

1. Ministries, sectors, and People's Committees of provinces and centrally-administered cities shall base their organization and guidance of subordinate agencies and units and local authorities on Decision No. 861/TTg dated December 30, 1995 of the Prime Minister and this Circular.

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

Hồ Tế (Signed)