Circular No. 08/TC-NSNN guiding the implementation of certain points on policies and measures for managing the state budget plan for 1997.

CIRCULAR

Guidance on implementing certain points regarding

policies and measures for managing the state budget for the year 1997

The Prime Minister has issued Decision No. 984/TTg dated December 30, 1996 concerning certain policies and measures for planning economic and social development and managing the state budget for the year 1997.

The Ministry of Finance provides specific guidance on certain points regarding policies and measures for managing the state budget as follows:

1. On budget decentralization:

a. Revenue sources and expenditure responsibilities at each level of government shall be implemented in accordance with the State Budget Law and Decree No. 87/CP dated December 19, 1996 of the Government. In all cases, provinces and centrally-administered cities (referred to collectively as provinces) shall not change revenue sources and expenditure responsibilities at each level, including portions of revenue divided according to percentage rates (%). When decentralizing, it is necessary to note that from 1997 onwards, revenues from enterprises under the Party will be accounted for and divided among budget levels according to percentage rates (%) like state-owned enterprises.

b. Encourage localities to create capital for investment in infrastructure construction and socio-economic development from the following sources:

- 100% of revenue from land use rights and land rental fees, including land rental fees from foreign-invested enterprises (excluding land rental fees from oil exploration and exploitation activities managed by the central government), to be used for infrastructure construction.

- 100% of revenue from the sale of state-owned housing to develop housing funds and construct community infrastructure projects such as water supply and drainage systems, street lighting systems, public sanitation facilities...

- Lottery revenue: to be retained entirely by the local state budget, of which the locality may use the entire amount or a portion for new investments, upgrading, and repairing educational, health, and welfare facilities according to the principle: revenue up to 20 billion VND is fully used for investment; revenue exceeding 20 billion VND can additionally use 50% of the excess revenue for investment.

- Agricultural land use tax revenue: mountainous provinces may use 100%, while other provinces may use 50% for agricultural investment and rural economic restructuring such as building, improving, upgrading, and repairing irrigation works, developing rural infrastructure, and restructuring rural economies...

- Forest resource taxes, including standing tree sales revenue (if applicable), to be used for forest protection, afforestation, and constructing infrastructure projects.

- Television advertising revenue: to be used entirely or partially for upgrading, repairing, renovating, and purchasing equipment for television stations according to Circular No. 81/TC-HCSN dated December 23, 1996 of the Ministry of Finance.

All revenue from land funds, housing funds, lottery revenue, agricultural land use tax revenue, business income tax, profit tax, post-tax profits from television advertising, forest resource taxes, and standing tree sales revenue must be included in the revenue budget to allocate expenditures according to approved projects, ensuring proper and economical use; simultaneously, they need to be monitored separately to ensure alignment with progress and potential revenue generation, avoiding overspending and causing passivity in budget management.

c. Penalties and confiscations for violations of the law.

Administrative penalty revenues in various fields (including fines for overweight at weigh stations), confiscation revenues from smuggling, and revenues from fines for smuggling shall be retained entirely by the local state budget; of which the locality may use 70% to purchase equipment and supplies to combat smuggling, ensure traffic safety, and fund forces performing tasks within their jurisdiction according to regulations (including police, transportation, customs, market management, treasury...). Administrative penalties and confiscation of evidence due to previous violations contrary to the above regulations are no longer valid. The needs of ministries and central agencies to implement these tasks shall be allocated according to the approved regular budget of the agency.

d. Rewards for exceeding revenue targets:

To encourage localities to manage revenue effectively and prevent revenue loss, the Government implements rewards for exceeding revenue targets for provinces in the following areas:

+ Special consumption tax on imported goods, export tax, import tax not through land border gates.

+ Special consumption tax on imported goods, export tax, import tax not through land border gates.

+ Special consumption tax collected from domestically produced goods.

- Conditions and principles for rewarding:

+ The locality must be assigned revenue targets for the aforementioned revenue sources and achieve an excess over the assigned target.

+ The locality must consistently direct and organize revenue collection in accordance with laws and regulations.

+ Rewards shall be considered separately for each revenue source, without offsetting between them.

- Reward levels:

+ Reward the provincial budget 100% of the excess revenue over the assigned target for special consumption tax on imported goods and export tax, import tax through land border gates.

+ Reward the provincial budget a portion of the excess revenue over the assigned target for special consumption tax on domestically produced goods; special consumption tax on imported goods and export tax, import tax not through land border gates. The specific reward rate is determined by the Prime Minister.

For provinces not assigned revenue targets for domestic special consumption tax, special consumption tax on imported goods, export tax, and import tax, if there is revenue from these taxes during implementation, they will not be eligible for rewards.

- The reward money from the above excess revenue can only be used for investment in infrastructure projects in the locality.

-The Ministry of Finance will allocate from the Central State budget of the followingyear to reward provincial state budgets, in all cases, localities shall not self-allocate rewards. To have grounds for rewarding, provinces with revenue exceeding the assigned budget must be responsible for consolidating the total amount of export tax, import tax, special consumption tax (analyzed by item, sub-item) actually paid to the Central State budget in the year and send it to the Ministry of Finance before January 31 of the following year. The report must be confirmed by the tax authority (for domestic special consumption tax), customs (for imported special consumption tax, export tax, import tax) and the Provincial Treasury; the reward money shall be used and recorded in the fiscal year of the following year. Beyond this deadline, the Ministry of Finance shall not be responsible for the reward assessment.

2. Regarding budget revenue:

a.Ministries, central agencies, provinces, and customs general departments need tourgently perform well the work of allocating revenue budgets to subordinate unitsand lower levels. The minimum level must equal the revenue budget allocated by thePrime Minister to the Ministry and locality.

Inorder to achieve and exceed the revenue budget target, within their respectivepowers, all levels and sectors need to take practical measures:

-Allocate revenue targets for sectors and units to ensure they are higher thanlegislative standards by 3% to 5%, especially in revenue items that still havepotential for increased revenue.

-Establish mechanisms and policies to concentrate on resolving difficulties forenterprises, creating conditions to boost production and product consumption.Reorganize state-owned enterprises, improve business efficiency, and focus capitalon those enterprises that are profitable.

-Create close cooperation between revenue collection agencies and internal securityagencies and mass organizations to strengthen revenue management, particularlyin the non-state economic sector.

b.The Tax and Customs sectors need to urgently assess the results of implementingthe state budget revenue tasks in 1996, thereby drawing lessons and experiences toimplement corrective measures in revenue management in 1997. First, it is necessaryto seek leadership and guidance from local party committees and authorities inpromoting revenue collection activities. Regularly conduct inspections and auditsagainst revenue losses, especially in areas where there are still losses and potentialrevenue sources such as export tax, import tax; taxes in the non-state economicsector, enterprises with foreign investment, and housing and land. ImplementDirective No. 657/TTg dated September 13, 1996 of the Prime Minister onstrengthening the management of non-state commercial and service enterprises.

-Organize guidance for businesses and households outside the state sector, initiallylarge households, to properly implement accounting systems to determine revenuestatements and calculate taxes; adjust taxable revenues closely with actualbusiness operations.

3. Regarding budget expenditure and cost savings:

a.On expenditure from the state budget:

-To create conditions for gradually implementing payment through the NationalTreasury, budget expenditures must be detailed and specific according to theState Budget Item List for budget-using units and distributed progressivelyaccording to the budget item list towards detailed distribution; detaileddistribution according to the item list must be gradually expanded to fully distributefollowing the State Budget Item List.

Duringimplementation, ensure expenditure is in accordance with objectives, recipients,and within approved budgets. Heads of Ministries, sectors, Chairmen of People'sCommittees at all levels, and heads of agencies and grassroots units areresponsible for managing and using state budget funds effectively.

-Budget-using agencies must prepare quarterly expenditure budgets (monthlybreakdowns), and submit quarterly final reports or usage statements to the samerank financial agency as stipulated; if there is no quarterly report without avalid reason, the financial agency has the right to suspend the next quarter'sbudget allocation (except for salary-related payments) until the units provide areport.

-Expenditures already budgeted and guaranteed by revenue sources, Ministries,sectors, and localities may not reduce or reallocate from one item to another.Financial agencies at all levels are responsible for allocating according to theprogress of work (including supplementary allocations to lower-level budgetsaccording to plans), and may not make lump-sum allocations at the end of thequarter or year. At the beginning of the year and each quarter, the upper levelmust announce supplementary allocations from the upper-level budget to thelower-level budget to proactively manage each level's budget.

-Only allocate expenditures within the scope of certain revenue sources, within thetotal budgeted amount. If revenue does not meet the budget, local governmentsmust rearrange expenditures. For localities with increased revenue, the additionalrevenue can be used to increase investment in infrastructure and other essentialtasks that were not adequately budgeted at the beginning of the year or aroseoutside the plan.

-In accordance with the State Budget Law, any changes to revenue or expenditureregimes that reduce revenue or increase expenditure can only be implemented withguaranteed revenue sources and must be approved by the competent authority.Ministries, sectors, and localities may not arbitrarily issue revenue andexpenditure regimes contrary to national regulations causing difficulties inbudget management.

-For unexpected tasks outside the plan (including disaster relief, post-disasterrecovery...), ministries, sectors, localities, and units must proactively arrangewithin the contingency reserve and total annual budget allocation to meetrequirements. In cases of difficulty due to delayed revenue concentration, theymay request higher levels to accelerate budget allocation progress andsupplementary amounts to lower levels. Only in some special cases with largeswings in revenue and expenditure will higher levels consider solutions.

-To enhance program effectiveness, related program targets should be integrated.

To arrange and allocate funds in accordance with the progress of implementing theprogram's objectives, provinces and ministries responsible for target programs shallprepare quarterly plans for target programs for their respective parts and submitthem to the Ministry of Finance. Financial agencies at all levels shall prioritizeallocating funds to implement program objectives according to schedule.

The managing agency of the program shall proactively coordinate with the Ministryof Finance, the Ministry of Planning and Investment to provide regular guidance,inspection, supervision, ensuring that expenditures are made to the correctrecipients, in accordance with regulations, and towards the set objectives. ThePeople's Committees of provinces and centrally-administered cities shall directlymanage and direct the implementation of programs within their jurisdictions,publicizing the allocation of funds for each program to ensure proactiveimplementation.

b-On cost-saving expenditures:

In order to use funds from the State budget economically and effectively:

-Continuing to limit expenditures on constructing new headquarters, purchasingcars, and expensive interior equipment in administrative and public serviceagencies, Party organizations, mass organizations, and agencies using funds fromthe State budget. Agencies need to actively rearrange, allocate, and use existingheadquarters and means reasonably to serve their work. In special cases where itis necessary to purchase cars or construct headquarters, relevant Ministries,sectors, central agencies, and localities must report specifically to the Ministryof Finance (for car purchases) and the Ministry of Planning and Investment (forheadquarters construction). These reports must explain clearly the necessity ofpurchase or construction, the specific amount and source of funding, and can onlybe implemented with the approval of the Ministry of Finance and the Ministry ofPlanning and Investment. Specifically regarding car purchases, the conditions andprocedures are as follows:

+Ministries, sectors, and localities must compile comprehensive reports on themanagement and use of transportation means serving the operational needs ofadministrative and public service agencies, Party organizations, massorganizations, and agencies using funds from the State budget under theirjurisdiction up to December 31, 1996, and submit them to the Ministry of Finance,along with estimates of the budget for car purchases in the approved 1997 budget.

+Central Ministries and sectors must aggregate the demand for new car purchasesor replacement of old cars for each administrative and public service agency,Party organization, mass organization, and agency using funds from the Statebudget under their jurisdiction quarterly and submit these to the Ministry ofFinance for review and decision.

+For administrative and public service agencies, Party organizations, massorganizations, and agencies using funds from the State budget managed by localauthorities with standards for car purchases, they must aggregate car purchasesfor the Provincial Department of Finance and Price Control. The ProvincialDepartment of Finance and Price Control must aggregate the demand for new carpurchases or replacement of old cars for agencies and units under provincialmanagement quarterly and submit these to the People's Committee of the provincefor consideration and then to the Ministry of Finance for review and decision.

+Initially, in the first quarter of 1997, the Ministry of Finance will not consideror resolve requests for car purchases from administrative and public serviceagencies, Party organizations, mass organizations, and agencies using the Statebudget funds.

-Ministries, sectors, localities, agencies, and units shall strictly comply withnational financial policies and expenditure regulations. Financial agencies at alllevels have the right to refuse to allocate, settle, or pay expenses that violateregulations. If an agency or unit violates regulations, the head of the agency orunit shall bear material responsibility for their decisions.

-Ministries, sectors, localities, and grassroots units including administrative andpublic services, basic construction, national defense security, and other unitsusing State budget funds, upon receiving the assigned budget, shall promptlydevelop cost-saving plans. The development of cost-saving plans by Ministries andprovinces must be completed before March 20, 1997, and reported to the Ministryof Finance for consolidation and reporting to the Government and NationalAssembly. The plan content must be comprehensive (basic construction, procurement,maintenance, conferences, ceremonial events, etc.), and the implementationmeasures must be practical and specific.

-Funds saved may be retained by the unit for essential tasks not included in theinitial plan; the unit must develop a specific usage plan and report it to thesame-level financial agency for monitoring and management.

4- Implementation organization:

This Circular takes effect from January 1, 1997. Ministries, sectors, andProvincial People's Committees shall organize and guide agencies and units andlocal government levels under their jurisdiction to implement this Circular basedon Decision No. 984/TTg dated December 30, 1996, of the Prime Minister and thisCircular./.