Circular No. 114/2003/TT-BTC guiding the implementation of certain policies and measures for organizing and implementing the state budget for the year 2004.

CIRCULAR

Guidelines for implementing certain points on policies and measures to organize and implement the state budget for 2004

State budget for 2004

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Pursuant to Resolution No. 17/2003/QH11 dated November 4, 2003 of the National Assembly, 11th term, fourth session, on the state budget for 2004;

Pursuant to Resolution No. 18/2003/QH11 dated November 10, 2003 of the National Assembly, 11th term, fourth session, on the allocation of the central state budget for 2004;

Pursuant to Resolution No. 423/2003/NQ-UBTVQH11 dated November 12, 2003 of the Standing Committee of the National Assembly on the percentage ratio of revenue distribution between the central and local state budgets for the first year of the stabilization period;

Pursuant to Decision No. 242/2003/QĐ-TTg dated November 17, 2003 of the Prime Minister on the allocation of the state budget for 2004;

The Ministry of Finance issues guidelines for certain points on policies and measures to organize and implement the state budget for 2004 as follows:

I. ON THE LEVELS OF MANAGEMENT OF THE STATE BUDGET:

1. Revenue sources and expenditure responsibilities between the central state budget and local state budgets shall be implemented according to the provisions of the State Budget Law. Within the scope of revenue sources and expenditure responsibilities allocated to local state budgets, the People's Councils of provinces and centrally-administered cities (referred to as provincial level) shall decide on the allocation of revenue sources and expenditure responsibilities among local state budgets at various levels according to the provisions of the State Budget Law and in accordance with the actual conditions of their respective localities.

Starting from the 2004 fiscal year, all revenues and expenditures under the village-level state budget shall be fully managed and accounted for within the state budget from the stage of preparing the budget estimate to the final settlement of the budget.

2. The stabilization period for local state budgets is three years, from the 2004 fiscal year to the end of the 2006 fiscal year. During this stabilization period for local state budgets, the following shall be implemented: stabilization of the percentage ratio of revenue distribution between the central state budget and local state budgets; stabilization of supplementary balanced transfers from the central state budget to local state budgets (if applicable); localities shall use the revenue allocated to them and supplementary balanced transfers from the central state budget (if applicable) to ensure the implementation of expenditure responsibilities allocated to local state budgets.

3. For special consumption taxes on goods and services produced domestically, domestic fuel fees generated and payable to the state budget in 2003 according to the prescribed regulations, the central state budget shall enjoy 100%. Special consumption taxes on goods and services produced domestically, domestic fuel fees payable to the state budget starting from January 1, 2004 according to the prescribed regulations, shall be distributed between the central state budget and local state budgets according to the percentage ratio already assigned by the Prime Minister in Decision No. 242/2003/QĐ-TTg dated November 17, 2003.

4. Starting from 2004, the mechanism of returning and reinvesting all or part of the revenues generated locally or revenues paid by enterprises to the state budget for ministries, central agencies, provinces, centrally-administered cities, state-owned corporations, and units shall be abolished. For important projects, tasks previously returned and reinvested that are currently being implemented and need continued investment, ministries, central agencies, state-owned corporations shall organize implementation within the allocated state budget estimates in 2004; localities shall implement within the supplementary targeted transfers from the central state budget to local state budgets assigned by the Prime Minister. Specifically, land revenue shall be balanced within the local state budget for infrastructure investment and land clearance for development purposes, not for regular expenditure responsibilities.

5. The method of balancing the state budget and the form of authorized funding shall be changed to supplementary targeted transfers from the central state budget to local state budgets for subsidy tasks, price subsidies for policy items, preparation for mobilization, and the East Sea - Island Program.

For subsidy funds for transportation costs, price subsidies, and free provision of certain policy items without charge, based on the level of support from the central state budget and the balance within the local state budget estimate, the People's Committees of provinces shall submit to the People's Councils for decision on the objectives and contents of implementation (items, products, subsidy standards, areas, beneficiaries of transportation cost and price subsidies, and free provision of certain policy items without charge) in accordance with the specific circumstances of their respective localities, and report to the Ministry of Finance and the Committee for Ethnic Minorities for monitoring and guidance during the implementation process.

II. ON THE BASIS, REQUIREMENTS, CONTENTS OF ALLOCATION AND ASSIGNMENT OF THE STATE BUDGET ESTIMATE:

1. On the allocation and assignment of state budget revenue estimates:

Based on tax laws, revenue collection systems, national policies to encourage production and business development; economic growth rates of each sector and field; the potential for production and business development and service provision by organizations and individuals; requirements to implement measures to combat revenue loss and commercial fraud. Ministries, central agencies, People's Committees of provinces and centrally-administered cities shall assign revenue tasks to subordinate units and lower-level authorities to ensure and strive to exceed the state budget revenue estimates for 2004 assigned by the Prime Minister and guided by the Ministry of Finance.

2. On the allocation and assignment of state budget expenditure estimates.

a) For ministries, ministerial-level agencies, government agencies, and other central agencies, when allocating and assigning expenditure estimates to agencies and units, they must match the total and detailed expenditure estimates assigned by the Prime Minister; prioritize important tasks as stipulated by law; ensure capital for tasks decided by the Prime Minister; allocate expenditure estimates in accordance with regulations, standards, and quotas; follow procedures as prescribed by law.

b) In 2004, when ministries, central agencies, and localities allocate and assign construction expenditure estimates, they must comply with regulations on construction investment management and meet the following requirements:

Allocate a portion of the capital investment from the 2004 budget to settle the construction investment debt belonging to the state budget from before 2003; repay loans for preferential credit programs to implement the program of reinforcing irrigation canals, rural transportation infrastructure, village craft infrastructure, and aquaculture infrastructure; allocate funds to implement important ongoing projects, counterpart funds for ODA projects; after prioritizing funding for these tasks, allocate funds for newly initiated projects. Projects must be consistent with planning, ensure complete investment procedures, and not exceed the allocated budget estimates; Group B projects should be completed within a maximum of four years from commencement to completion, while Group C projects should be completed within a maximum of two years.

c) For provinces and centrally-administered cities when allocating and assigning the 2004 budget estimate, ensure the following main requirements:

- The budget estimate for expenditures allocated to agencies, units, and subordinate levels in the fields of education-training, vocational training, and science and technology (including both development and recurrent expenditures) shall not be lower than the level assigned by the Prime Minister. The higher-level budget estimate unit allocating and assigning budget estimates to subordinate units must match the budget estimates assigned by the People's Committee in total amount and detail according to each expenditure category.

- Allocate funds to implement tasks decided by the Prime Minister, focusing on ensuring the implementation of the following important decisions:

+ Decision No. 168/2001/QĐ-TTg dated October 30, 2001 of the Prime Minister on long-term orientation, five-year plan 2001-2005, and basic solutions for economic and social development in the Central Highlands region; Decision No. 132/2002/QĐ-TTg dated October 8, 2002 of the Prime Minister on resolving production land and residential land for ethnic minorities in place in the Central Highlands.

+ Decision No. 186/2001/QĐ-TTg dated December 7, 2001 of the Prime Minister on economic and social development in six particularly difficult mountainous northern provinces during the period 2001-2005.

+ Decision No. 173/2001/QĐ-TTg dated November 6, 2001 of the Prime Minister on economic and social development in the Mekong Delta region during the period 2001-2005.

+ Decision No. 120/2003/QĐ-TTg dated June 11, 2003 of the Prime Minister on approving the strategy for economic and social development along the Vietnam-China border until 2010.

+ Decision No. 253/QĐ-TTg dated March 5, 2003 of the Prime Minister on approving the project "Some measures to consolidate and improve grassroots administration in the Central Highlands region during the period 2002-2010".

+ Decision No. 159/2002/QĐ-TTg dated November 15, 2002 of the Prime Minister on approving the project to implement the Program of Reinforcing School Buildings and Classrooms.

+ Decision No. 139/2002/QĐ-TTg dated October 15, 2002 of the Prime Minister on providing medical examination and treatment for the poor.

+ Resolution No. 40/2000/QH10 dated December 9, 2000 of the National Assembly on reforming the general education program.

+ Decision No. 161/2002/QĐ-TTg dated November 15, 2002 of the Prime Minister on some policies for developing preschool education.

+ Decision No. 155/2003/QĐ-TTg dated July 30, 2003 of the Prime Minister on amending and supplementing certain special allowances for civil servants and employees in the health sector.

- Allocate national target program budgets, projects, and tasks to agencies, units, and subordinate budgets to organize implementation in an integrated manner to ensure efficiency and avoid overlap; in accordance with the total budget already assigned by the Prime Minister, guided by the Minister of Finance; do not use supplementary funds from the central budget for purposes contrary to the assigned objectives and tasks.

- Allocate contingency reserves at all levels of local government budgets in accordance with the State Budget Law, not lower than the level of contingency reserve already assigned.

3- On budget allocation and implementing financial mechanisms to create sources for salary reform in 2004:

Ministries, central agencies, and localities shall allocate budgets and implement financial mechanisms to create sources for salary reform in 2004 as follows:

- The salary reform task for 2004 will be implemented in the fourth quarter of 2004; however, budget allocation and implementation of financial mechanisms to create sources must start from the budget allocation and assignment stage in 2004 and continue throughout the year 2004.

- Ministries, central agencies, and localities, in allocating and assigning budgets, must determine and assign the task of saving at least 10% of recurrent expenditures (excluding salaries and salary-like items, contributions to international organizations, national target program expenditures, price subsidies, and freight subsidies for policy goods) not lower than the level announced by the Ministry of Finance. Local government budgets at all levels shall manage and concentrate the 10% savings of their affiliated agencies and units (excluding public service units operating under Circular No. 10/2002/NĐ-CP dated January 16, 2002 of the Government and units implementing administrative cost contracts under Decision No. 192/2001/QĐ-TTg dated December 17, 2001 of the Prime Minister) and harmonize between units under their jurisdiction.

- Administrative agencies with revenue and revenue-generating units shall use at least 40% of retained revenue (except for the health sector which shall use at least 35%) to implement salary reform.

- Local budgets shall allocate at least 50% of the increase in local budget revenue in 2003 and 2004 compared to the estimates assigned by the Prime Minister (excluding revenue allocated for infrastructure investment according to prescribed regulations) to implement salary reform.

After implementing the above measures, if there is still insufficient funding, the central budget will provide support to ensure the source for implementing salary reform in 2004. In cases where the funding for salary reform determined according to the above provisions exceeds the actual needs for salary reform as stipulated, this funding may be carried over to the next year to create sources for salary reform and not used for other purposes.

III- ON THE PROCEDURE FOR DECIDING AND ASSIGNING THE STATE BUDGET ESTIMATE:

1- The provincial People's Committee bases on the Prime Minister's decision regarding the assignment of revenue and expenditure tasks, submits to the same-level People's Council for deciding the local budget estimate, provincial budget allocation plan, and the level of supplementary funding from the provincial budget to lower-level budgets before December 10, 2003; at the same time, the provincial People's Committee bases on the People's Council Resolution, assigns revenue and expenditure tasks to each agency and unit under its jurisdiction; the revenue and expenditure tasks, the percentage (%) distribution of revenue among different levels of local government, and the level of supplementary funding from the provincial budget to each district, county, town, and city within the province. The provincial People's Committee is responsible for reporting the results of the budget allocation to the Ministry of Finance no later than five days after the People's Council decides the budget estimate according to the provisions of Circular No. 59/2003/TT-BTC dated June 23, 2003, issued by the Ministry of Finance.

- The district People's Committee bases on the provincial People's Committee's decision regarding the assignment of revenue and expenditure tasks, submits to the same-level People's Council for deciding the budget estimate and allocation plan of its own budget before December 20, 2003; at the same time, based on the People's Council Resolution, assigns revenue and expenditure tasks to each agency and unit under its jurisdiction, and the level of supplementary funding from the district budget to each commune, ward, and town.

- The commune People's Committee bases on the district People's Committee's decision regarding the assignment of revenue and expenditure tasks, submits to the same-level People's Council for deciding the budget estimate and allocation plan of its own budget before December 31, 2003.

2- The 2004 budget estimate, after being assigned by the Prime Minister and the People's Committees, state agencies and first-level budget units proceed to allocate and assign the budget expenditure to subordinate budget-using units in accordance with the principles and contents stipulated in Circular No. 59/2003/TT-BTC dated June 23, 2003, issued by the Ministry of Finance, guiding Decree No. 60/2003/NĐ-CP dated June 6, 2003, of the Government detailing and guiding the implementation of the State Budget Law; first-level budget units must prepare detailed budget allocation plans for subordinate budget-using units down to specific types of expenditures and major expenditure categories, to be sent to the same-level financial authority for review (according to attached forms 1a, 1b, and 1c). Expenditures for salaries, salary-like payments, and regular expenses serving professional duties should be evenly distributed across quarters according to regulations; for procurement, large-scale repairs, and economic service expenditures, they should be allocated according to quarterly progress. In cases where the People's Committee directly assigns tasks to budget-using units, the budget-using units must send detailed allocation plans by major expenditure categories and quarterly progress to the financial authority for review.

Within seven working days from receiving the budget allocation plan, the financial authority issues a notification of the review results. If the financial authority agrees with the allocation plan, the head of the allocating agency or unit immediately assigns the budget to subordinate budget-using units, sending copies to the same-level financial authority, the State Treasury (summary version for all units), and the State Treasury where transactions take place (detailed version sent through the budget-using unit for individual units) (according to attached forms 2a, 2b, and 2c). If the financial authority proposes adjustments, within three days from receiving the financial authority's document, the allocating agency or unit must accept and adjust; if there is disagreement over the adjustment content, report to the People's Committee for consideration and decision.

3- The budget allocation and assignment work must ensure that by January 1, 2004, budget-using units and the State Treasury where transactions take place have received the budget estimates of the budget-using units.

IV- ON THE ORGANIZATION AND MANAGEMENT OF STATE BUDGET EXECUTION:

1- Revenue management work:

a) Organize and manage the collection of state budget revenues in accordance with national revenue policies and systems, including newly amended and supplemented tax laws (value-added tax, corporate income tax, and special consumption tax). At the same time, implement the bidding system when assigning land use rights for urban development and housing construction. Implement measures to check and control revenue loss, while preventing excessive taxation, especially for agricultural land use taxes, fees, and charges.

b) Ministries and People's Committees at all levels strengthen guidance to agencies and sectors on their territory to cooperate with Tax and Customs authorities in inspecting and combating tax evasion, trade fraud, focusing on areas and sectors currently experiencing significant revenue loss. Regularly inspect all revenue payers on the territory according to established procedures to ensure full and accurate collection of all revenues as prescribed by law.

c) Strengthen the inspection of value-added tax refunds, strictly managing and inspecting each case of deduction and refund according to established procedures. Strictly enforce the management and use of invoices and documents to prevent and combat fraud in VAT refunds to embezzle state budget funds; promptly and severely handle violations.

d) Expand pilot programs to entrust communes with the collection of certain non-state-owned revenues such as construction project revenues, fresh seafood sales, and commercial and industrial business revenues.

2- On the organization and implementation of the budget at ministries, central agencies, and localities:

a) Ministries, central agencies, and provincial People's Committees issue measures and organize guidance for subordinate units to effectively manage and use the budget in accordance with regulations, efficiently and economically, and in line with the goals and tasks assigned by the Prime Minister.

b) Ministries, localities, units must use the budget within the scope of the allocated estimate, in accordance with regulations, standards, and expenditure norms; strictly prohibit cases of misappropriation, borrowing, and lending contrary to legal provisions. During the process of managing the state budget, they must strictly manage the capital of the state budget, prevent loss and waste, especially in basic construction investment, and severely handle all violations.

c) The Minister, head of agencies at the level of ministries, agencies under the Government, other central agencies, Chairmen of People's Committees at all levels, and heads of budget-using units shall be responsible for the occurrence of investment construction debt within their jurisdiction. From 2004, the central budget will not allocate separate sources of funds to settle investment construction debts that violate legal provisions for ministries, central agencies, and localities.

3- Regarding the implementation of disbursement according to the estimate for budget-using units:

Starting from 2004, the payment and settlement will mainly be carried out based on the budget-using units' actual workload and tasks, the budget estimate allocated, and the financial system, standards, and norms. Units will withdraw funds from the State Treasury to cover expenditures. Financial agencies, the State Treasury, and budget-using units shall implement the following main provisions:

a) For budget-using units:

At the beginning of the year, send to the State Treasury where the unit has an account the documents serving as the basis for implementing the budget expenditure estimate of the unit, including:

- Decision allocating the budget estimate issued by the superior agency.

- Quarterly expenditure requirements (according to Form No. 4 attached).

- Register of salaries and internal expenditure standards issued within the authority (if applicable).

- Other necessary documents as prescribed.

b) For first-level budget units:

Aggregate quarterly expenditure requirements of subordinate budget-using units (according to Forms No. 5a, 5b, and 5c attached) and submit them to the same-level financial agency.

c) For financial agencies:

Prepare a budget balance plan to ensure sources for implementing the tasks according to the budget estimate decided by the competent authority and the expenditure requirements registered by the units. In case of difficulty in sourcing, the measures provided in Point 16, Part IV, Circular No. 59/2003/TT-BTC dated June 23, 2003, of the Ministry of Finance shall be implemented. In special cases, temporary imbalance in the quarter regarding the budget source in ensuring the expenditure requirements in the unit's budget estimate, it is necessary to ensure the normal operation expenses of the unit, only temporarily delay or postpone the purchase of equipment and major repairs, but must notify the reduction or postponement of the purchase of equipment and major repairs to the supervising agency (according to Form No. 6 attached); the supervising agency notifies the subordinate budget-using units. Simultaneously, to proactively ensure the source at each level of the budget in spending, in 2003, actively reserve surplus funds to bridge the gap for the start of 2004.

d) For the State Treasury:

- The Central State Treasury and the Provincial State Treasury coordinate with the same-level financial agency to balance sources and allocate indicators for each lower-level State Treasury according to regions.

- The State Treasury where the budget-using unit conducts transactions ensures timely payment and settlement to budget-using units according to the estimate, policies, and systems, and the progress of tasks.

During the process of making payments and settling accounts from the state budget, the State Treasury has the right to refuse payment for budget expenditures that do not meet the conditions stipulated or temporarily suspend payment if the expenditures exceed the allowed sources, violate policies and systems, and the unit does not comply with reporting systems, and the State Treasury bears responsibility for its decisions.

4- Regarding advance payment when budget-using units and public service units have not yet been allocated estimates:

The allocation and issuance of the 2004 budget estimate for budget-using units must be completed before December 31, 2003. In special cases, if budget-using units do not receive the budget estimate from the competent authority at the beginning of the year, the State Treasury may provide advance payments for the units to carry out the following tasks:

- Paying salaries and other amounts with the nature of salaries;

- Paying business fees and public service fees;

- Paying some necessary amounts to ensure the operation of the machinery;

- Regular expenses of national target programs.

Advance payments can only be made in January and February 2004, with each month's advance equal to 1/12 of the actual amount spent in 2003. When making advance payments, the budget-using unit directly requests the State Treasury where it conducts transactions to implement.

Project sponsors under national target programs, while waiting to receive notifications of investment capital from the State Treasury, may temporarily advance funds according to the prescribed regulations for ongoing projects.

If during the implementation process, the budget unit is supplemented with the budget from increased revenue or from the reserve fund according to the decision of the competent authority (as stipulated in Article 54 and Article 57 of Decree No. 60/2003/NĐ-CP dated June 6, 2003, of the Government detailing and guiding the implementation of the Law on State Budget), then the first-level budget unit decides to supplement the budget estimate for subordinate units (according to Forms No. 3a, 3b, and 3c attached).

5- Regarding management of revenue sources, investment tasks for infrastructure development from land use revenue:

Localities proactively organize the implementation of investment tasks according to the progress of land use revenue collection. Land use revenue is promptly submitted to the state budget according to the corresponding chapters, types, items, and sub-items of the state budget; when implementing infrastructure investment tasks and land clearance, follow the investment management regulations and accounting system; at the end of the year, any remaining land use revenue shall be transferred to the next year to continue implementing infrastructure development tasks as prescribed.

6- Regarding the method of transferring additional funds from the central budget to local budgets:

BASED ON THE SUPPLEMENTARY BALANCE FUNDS FROM THE STATE BUDGET TO THE LOCAL BUDGET FOR THE YEAR 2004 AS ASSIGNED BY THE PRIME MINISTER, THE MINISTRY OF FINANCE SHALL ISSUE MONTHLY BEFORE THE 25TH DAY OF EACH PRECEDING MONTH; FOR LOCALITIES WITH SEASONAL AND IRREGULAR INCOME AND EXPENSES THROUGHOUT THE YEAR, THE MINISTRY OF FINANCE SHALL DETERMINE THE MONTHLY SUPPLEMENTARY BALANCE FUNDS BASED ON THE PROGRESS OF REVENUE AND EXPENDITURE TASKS TO SUIT THE LOCAL SITUATION; FOR TARGETED SUPPLEMENTS, FUNDS WILL BE TRANSFERRED TO THE LOCALITY ACCORDING TO THE REQUIREMENTS OF THE SPECIFIED OBJECTIVES. FOR PREPARATION AND MOBILIZATION FUNDS AND THE EAST SEA ISLAND PROGRAM, TEMPORARY FUNDS WILL BE ISSUED ACCORDING TO THE REGULATED PROCEDURE AND AFTER RECEIPT OF THE LOCALITY'S REPORT ON THE QUANTITY COMPLETED, PAYMENT WILL BE MADE.

7- REGARDING MANAGEMENT OF BASIC CONSTRUCTION EXPENSES, TARGET PROGRAMS:

THE FINANCIAL AUTHORITY SHALL ISSUE FUNDS FROM THE END OF 2003 FOR PROJECTS AND PROGRAMS IN ACCORDANCE WITH REGULATIONS, PRIORITY BEING GIVEN TO IMPORTANT ONGOING PROJECTS, REPAIR WORKS ON DAMS, IRRIGATION SYSTEMS, DISASTER PREVENTION, FLOOD MITIGATION, AND FOREST PLANTING.

- ORGANIZE FULL AND TIMELY MANAGEMENT, DISTRIBUTION, AND PAYMENT OF INVESTMENT FUNDS ACCORDING TO REGULATIONS; FOR PROJECTS THAT DO NOT FOLLOW THE SCHEDULE, REPORT TO THE AUTHORIZED AUTHORITIES TO ADJUST AND TRANSFER FUNDS TO PROJECTS WITH A FAST IMPLEMENTATION PROGRESS AND CAPABILITY TO COMPLETE BUT ARE NOT FULLY FUNDED TO PROMPTLY COMMISSION THE PROJECTS INTO USE.

- IMPLEMENT THE FINAL ACCOUNTING OF INVESTMENT FUNDS ACCORDING TO THE GUIDELINES SET OUT IN CIRCULAR NUMBER 45/2003/TT-BTC DATED MAY 15, 2003, ISSUED BY THE MINISTRY OF FINANCE.

8- REGARDING FUNDS RAISING FOR INFRASTRUCTURE INVESTMENT BY THE PROVINCIAL LOCAL BUDGET:

IF THE PROVINCIAL BUDGET NEEDS TO RAISE FUNDS FOR INFRASTRUCTURE INVESTMENT, IT IS PERMITTED TO RAISE DOMESTIC INVESTMENT FUNDS, ENSURING THAT THE LEVEL OF DEBT FROM FUNDS RAISED DOES NOT EXCEED 30% OF THE ANNUAL DOMESTIC BASIC CONSTRUCTION INVESTMENT BUDGET OF THE PROVINCIAL BUDGET, EXCLUDING ADDITIONAL FUNDS FOR NON-STABLE AND REGULAR TARGETS FROM THE CENTRAL BUDGET TO THE LOCAL BUDGET. THE PRINCIPLES, PROCEDURES, AUTHORITY, ETC., SHALL BE IMPLEMENTED IN ACCORDANCE WITH ARTICLE 26 OF DECREE NUMBER 60/2003/NĐ-CP DATED JUNE 6, 2003, ISSUED BY THE GOVERNMENT, PROVIDING DETAILED REGULATIONS AND GUIDELINES FOR THE IMPLEMENTATION OF THE NATIONAL BUDGET LAW.

9- ORGANIZING THE EXECUTION OF THE NATIONAL BUDGET ESTIMATE WHEN INCOME INCREASES OR DECREASES SHALL BE ACCORDING TO THE PRINCIPLE:

a) FOR THE CENTRAL BUDGET:

- WHEN THE CENTRAL BUDGET INCOME EXCEEDS THE ESTIMATE, AT LEAST 50% OF THE SURPLUS INCOME SHALL BE USED FOR SALARY REFORM; THE REMAINING PORTION SHALL BE USED TO ENHANCE THE BUDGET RESERVE TO PREVENT AND MITIGATE NATURAL DISASTERS, FIRES, ESSENTIAL NATIONAL DEFENSE AND SECURITY TASKS, REDUCE THE BUDGET DEFICIT, INCREASE DEBT REPAYMENT, INCREASE DEVELOPMENT INVESTMENT, INCREASE THE FINANCIAL RESERVE FUND, AND OTHER CRUCIAL AND EMERGENCY TASKS.

- IF THE INCOME FALLS SHORT OF THE ESTIMATE APPROVED BY THE NATIONAL ASSEMBLY, THE GOVERNMENT SHALL DEVELOP A PLAN TO ADJUST THE NATIONAL BUDGET ESTIMATE AND REPORT TO THE STANDING COMMITTEE OF THE NATIONAL ASSEMBLY TO REDUCE CERTAIN EXPENSES ACCORDING TO THE NATIONAL BUDGET LAW.

b) FOR THE LOCAL BUDGET:

- WHEN THE LOCAL BUDGET INCOME EXCEEDS THE ESTIMATE, AT LEAST 50% OF THE INCREASED INCOME (EXCLUDING INCOME FROM LAND USE) SHALL BE USED FOR SALARY REFORM; THE REMAINING PORTION SHALL BE USED TO ENHANCE THE BUDGET RESERVE TO PREVENT AND MITIGATE NATURAL DISASTERS, FIRES, ESSENTIAL NATIONAL DEFENSE AND SECURITY TASKS, INCREASE DEBT REPAYMENT, INCREASE DEVELOPMENT INVESTMENT, INCREASE THE FINANCIAL RESERVE FUND, AND OTHER CRUCIAL AND EMERGENCY TASKS. THE PEOPLE'S COMMITTEE SHALL DEVELOP A PLAN FOR USING THE INCREASED LOCAL BUDGET INCOME, CONSULT WITH THE STANDING COMMITTEE OF THE PEOPLE'S COUNCIL AT THE SAME LEVEL, AND REPORT THE RESULTS TO THE PEOPLE'S COUNCIL AT THE NEXT SESSION.

- IF THE INCOME FALLS SHORT OF THE ESTIMATE APPROVED BY THE PEOPLE'S COUNCIL, THE PEOPLE'S COMMITTEE SHALL DEVELOP A PLAN TO REDUCE EXPENSES, FOCUSING ON CUTTING OR POSTPONING LESS CRITICAL TASKS, AND REPORT TO THE STANDING COMMITTEE OF THE PEOPLE'S COUNCIL FOR REVIEW AND DECISION.

10- REGARDING INCENTIVES FOR EXCESSIVE INCOME:

WHEN THE CENTRAL BUDGET INCOME FROM DIVIDED TAXES EXCEEDS THE ESTIMATE ASSIGNED BY THE PRIME MINISTER, INCENTIVES FOR EXCESSIVE INCOME SHALL BE PROVIDED TO THE LOCALITIES. THE INCENTIVE AMOUNT SHALL BE 30% OF THE EXCESS INCOME SUBMITTED TO THE CENTRAL BUDGET EXCEEDING THE 2004 ESTIMATE BUT NOT MORE THAN THE INCREASE IN INCOME COMPARED TO THE 2003 PERFORMANCE. FOR LOCALITIES THAT DID NOT SUBMIT ANY INCOME TO THE CENTRAL BUDGET FROM DIVIDED TAXES IN 2003, THEY SHALL RECEIVE AN INCENTIVE OF 30% OF THE EXCESS INCOME SUBMITTED TO THE CENTRAL BUDGET EXCEEDING THE 2004 ESTIMATE.

a) THE PROCESS OF INCENTIVE FOR EXCESSIVE INCOME SHALL BE BASED ON THE PRINCIPLE:

THE EXCESS INCOME IS CALCULATED BASED ON THE TOTAL OF DIVIDED TAXES, NOT INDIVIDUALLY FOR EACH TAX, AND AFTER EXCLUDING INCOME GENERATED IN OTHER LOCATIONS BUT RECORDED IN THE LOCALITY.

BASED ON THE INCOME SUBMITTED TO THE CENTRAL BUDGET UNTIL DECEMBER 31, 2004, THE PROVINCES AND DIRECTLY-GOVERNED CITIES SHALL SUMMARIZE THE ACTUAL INCOME SUBMITTED TO THE CENTRAL BUDGET FROM THE DIVIDED TAXES BETWEEN THE CENTRAL BUDGET AND THE LOCAL BUDGET, DETAILING BY EACH TAX TYPE AND SECTOR, AND SEND TO THE MINISTRY OF FINANCE AS THE BASIS FOR INCENTIVE EVALUATION. THE REPORT SHALL BE SENT TO THE MINISTRY OF FINANCE BY JANUARY 31, 2005, AND CONFIRMED BY THE STATE TREASURY OF THE PROVINCE OR CITY.

b) BASED ON THE INCENTIVE AMOUNT ANNOUNCED, THE PROVINCIAL PEOPLE'S COMMITTEE SHALL DEVELOP A PLAN FOR USING THE INCENTIVE FUNDS, REPORT TO THE PROVINCIAL PEOPLE'S COUNCIL FOR DECISION TO SUPPLEMENT CAPITAL FOR THE CONSTRUCTION OF ECONOMIC AND SOCIAL INFRASTRUCTURE PROJECTS AND OTHER IMPORTANT TASKS OF THE LOCALITY, INCENTIVES FOR LOWER-LEVEL BUDGETS, AND RECORD AND SETTLE ACCORDING TO THE REGULATIONS IN CIRCULAR 59/2003/TT-BTC DATED JUNE 23, 2003, ISSUED BY THE MINISTRY OF FINANCE.

11- REGARDING MANAGEMENT AND USE OF THE BUDGET RESERVE:

The central budget reserve and local government budget reserves are used to prevent and mitigate natural disasters and fires, to address important national defense and security tasks, and other urgent tasks arising outside the budget estimate. In cases where natural disasters or fires occur on a wide scale with severity exceeding the financial capacity of localities, after localities have utilized their budget reserves and part of the financial reserve fund but still cannot meet the needs, the central government will provide support to the localities to carry out the task of mitigating the consequences of natural disasters and fires.

Quarterly, the People's Committee reports to the Standing Committee of the People's Council on the results of using the local budget reserve and reports to the People's Council at the nearest session.

12. Regarding payment, capital investment for construction projects, and contributions to trade union funds: The Ministry of Finance will issue separate guidance documents.

13. Regarding the implementation of thrift measures, waste prevention, and financial transparency:

- Fully implement all thrift and waste prevention measures as stipulated in the Decree on Thrift and Waste Prevention, the Decree on Anti-Corruption, and related guiding documents; all expenditures, procurement of equipment, and assets must comply with state regulations, standards, and quotas; it is strictly prohibited to use state budget funds for hospitality, gifts, bonuses, etc., contrary to established regulations. Heads of units are responsible for using state budget funds for their intended purposes, in compliance with regulations, effectively, and economically. State Treasury ensures the inspection and control of state budget spending to ensure compliance with budget expenditure regulations, standards, and quotas, and within the approved budget. Financial agencies and state management bodies at all levels, according to their assigned functions and responsibilities, shall plan to organize inspections and audits of financial budget usage in budgetary units; promptly and strictly handle violations concluded by inspection, audit, and auditing agencies. Regularly compile and report the results of handling to the National Assembly, the Standing Committee of the National Assembly, and the People's Committee at the nearest session. Strengthen the supervision of elected bodies, political-social organizations, and the public over state budget revenues and expenditures, fundraising from the people, and the implementation of grassroots democratic regulations.

- Implement the system of state budget transparency at all levels and units for the 2004 budget estimates and the 2003 budget settlement of the unit and its level according to prescribed regulations.

14. Implement the financial mechanism for all revenue-generating public service units as stipulated in Government Decree No. 10/2002/NĐ-CP dated January 16, 2002; expand pilot programs for staffing quotas and administrative management expenses for state administrative agencies as stipulated in Decision No. 192/2001/QĐ-TTg dated December 17, 2001 of the Prime Minister.

15. Organize the implementation of preferential policies on credit, land, social insurance systems, etc., as provided, and promote the socialization of education, healthcare, culture, sports, etc., especially in cities, towns, and areas with favorable conditions.

16. Strictly adhere to the reporting and information dissemination system as stipulated in Decision No. 130/2003/QĐ-BTC dated August 18, 2003 of the Ministry of Finance regarding the accounting system for the state budget and the operations of the state treasury, ensuring regular and timely exchange of information between financial agencies, treasuries, and relevant agencies.

17. Organize training and capacity building for financial management cadres, focusing on grassroots levels (communes, wards, towns) to ensure they have the capability to fulfill advisory and financial management functions for commune budgets and implement grassroots democratic regulations.

V. IMPLEMENTATION

This Circular takes effect during the 2004 fiscal year. Ministries, central agencies, provincial People's Committees, and centrally-administered city People's Committees shall base themselves on this Circular to guide agencies, units, and local governments in implementation; any difficulties encountered during implementation should be reported to the Ministry of Finance for timely guidance and resolution./.