Circular No. 30/TC-NSNN guiding certain provisions on finance and budget in Decision No. 60-TTg dated February 8, 1994 of the Prime Minister.

CIRCULAR

DIRECTIVE NO. 30-TC/NSNN OF THE MINISTRY OF FINANCE ON APRIL 5, 1994 GUIDING CERTAIN PROVISIONS REGARDING FINANCE AND BUDGET IN DECISION NO. 60-TTG OF THE PRIME MINISTER ON FEBRUARY 8, 1994

Pursuant to Decision No. 60/TTg dated February 8, 1994 of the Prime Minister on certain policies and measures for managing the economic and social development plan for 1994, the Ministry of Finance hereby provides detailed guidance on the following points.

I. ON THE EXPENDITURE TASKS OF LOCAL BUDGETS

In the expenditure tasks of local budgets, there are some changes compared to the provisions stipulated in Decision No. 168-HĐBT dated May 16, 1992 of the Council of Ministers (now the Government) regarding amendments and supplements to Resolution No. 186-HĐBT dated November 27, 1989 and Circular guiding No. 15a-TC/NSNN dated May 28, 1992 of the Ministry of Finance, specifically:

1. Investment Expenditure:

This is the investment expenditure for constructing basic infrastructure projects, recorded annually in the local budget plan. Within the total investment capital index, apart from centralized construction investment capital within the country, it also includes the equipment capital from foreign sources for projects (mainly water projects) with foreign investment capital. When this occurs, the Central Budget will record revenue and expenditure for the local budget. Only investment capital from basic depreciation contributions to the budget will be invested in enterprises that are profitable, have technological upgrade needs, and expansion requirements, and have been approved by the competent authority. The objects eligible for reinvestment are determined by the Chairman of the People's Committee of the province or centrally-administered city.

2. In economic public service expenditure starting from 1994, forestry public service expenditure (including expenditure for people's forest rangers) is included in the expenditure tasks of the locality. However, according to Directive No. 364-CT dated November 6, 1991 of the Chairman of the Council of Ministers (now the Prime Minister), at the request of the Government Organization and Cadre Department, the cost for measuring administrative boundaries of provinces, districts, and communes will be transferred to the Central Budget for expenditure and will be allocated through the authorized budget (through the Department of Finance and Price Control).

3. Cultural, Health, and Social Expenditure:

In cultural, health, and social expenditure tasks of the local budget, they basically remain as currently regulated. For malaria control and goiter prevention expenditures, which are mainly funded by the Central Budget, additional support will only be provided to the provinces based on Circular Joint No. 5-TT/LB dated April 11, 1992.

4. Expenditure for state management machinery at the local level: basically remains as currently regulated, except for the expenditure for the machinery of the Population and Family Planning Commission at the local level, which will be transferred to the Central Budget and implemented according to the national program.

5. Infrastructure Construction Expenditure from Land Use Revenue:

In 1994, to encourage localities to have additional sources for infrastructure investment, the Government allowed localities to use land use revenue for infrastructure investment. Provinces and cities need to have planning and specific project proposals for infrastructure construction to ensure effective implementation and prevent loss of revenue. Therefore, in 1994, the budget has allocated infrastructure construction expenditure for localities corresponding to the land use revenue plan. This expenditure can only be implemented when revenue is generated, thus to avoid affecting the local budget balance, this revenue may be tracked separately in the Treasury account, and reflected in the budget (recorded as revenue and expenditure).

6. Contingency Fee:

In 1994, local budgets were allocated contingency fees to proactively address sudden expenditure needs during implementation such as disaster relief, crop failure, famine relief, and other emergencies. Only when large-scale famine or disasters occur will the Central Budget consider providing support. Thus, the contingency fund cannot be used to supplement expenditures already planned, and its use must be decided by the Chairman of the Provincial People's Committee.

7. Regarding programs managed by the central government but recorded on the local territory, specific notifications will be made to each locality and funds will be allocated through the Department of Finance. It is requested that the Chairmen of the Provincial People's Committees direct relevant sectors to implement allocation and notify districts, counties, and subordinate units, and regularly monitor and strictly supervise to ensure that expenditures are made for their intended purposes and are effective, complying with the requirements stipulated in Circular No. 80-TC/NSNN dated September 24, 1993 of the Ministry of Finance.

II. MECHANISM FOR FORMING LOCAL BUDGET REVENUE SOURCES

According to Decision No. 60-TTg dated February 8, 1994 of the Prime Minister, local budget revenue has been supplemented with the following main points:

1. Revenue items retained entirely by localities in 1994 have been newly identified.

- All resource taxes (except oil resources). Thus, even large hydropower resources from the Hoa Binh, Tri An, Da Nhim, and Thac Ba hydropower plants are retained by the respective localities (Tri An for Dong Nai, Da Nhim for Lam Dong, Hoa Binh retains 60% and Son La retains 40% of the revenue, Thac Ba for Yen Bai).

- Land use revenue.

- AGRICULTURAL LAND USE TAX.

- Income tax from high-income individuals (except income tax in Ba Ria-Vung Tau).

Additionally, for profit tax (excluding profits of industry-wide accounting units), the retention rate is adjusted to 50% for the budgets of Hanoi, Ho Chi Minh City, Ba Ria-Vung Tau, Long An, Kien Giang, Dong Nai, Song Be, and Quang Ninh, while the remaining 50% is transferred to the Central Budget to provide additional support to mountainous regions. For the tax on repatriated profits, the retention rate for local budgets is applied similarly to profit tax (except for the part of joint ventures in the oil sector).

For small-scale import and export duties, in 1994, they are uniformly collected by Customs and recorded under import and export tax revenue, hence not retained by local budgets (100% paid into the Central Budget).

In the revenues from public services managed by localities, starting from 1994, the revenue from forest cultivation products shall be collected as agricultural land use tax and retained under the general mechanism.

2. The revenue designated to be retained in the local budget at a percentage rate (revenue adjustment) depends on the annual expenditure tasks of the local budget: in 1994, only business income tax will be implemented according to the decision of the Minister of Finance.

3. Implementation of additional sources for the Central Government Budget:

For provinces and cities that have determined to retain 100% of business income tax but still do not meet the balanced needs according to the central plan, the Central Government Budget will provide additional funding to the local budget. Starting from 1994, to create conditions for localities to utilize local revenues proactively, the process of providing additional funding will be carried out as follows:

- First, it will be offset by the absolute amount of revenues of the Central Government Budget within the territory (including import and export taxes). The offset for each province will be separately guided.

- If the above offset is insufficient, the Central Government Budget will directly provide additional funding as currently practiced.

Based on the government's budget plan regarding the Central Government Budget supplementary indicators allocated to the local budget and the detailed plan of Central Government Budget revenues within the territory, the Ministry of Finance will determine and notify the locality of the offset amount of the Central Government Budget within the territory and the direct supplementary amount for the local budget in 1994. During the implementation process, the notification will be sent quarterly to the Department of Finance and the Treasury Sub-Office of the locality for implementation purposes.

The Treasury Sub-Offices will implement monthly offsets to ensure normal operation of the local budget. In cases where Central Government Budget revenues in the quarter are insufficient for the offset, the Department of Finance may temporarily borrow idle Treasury funds to meet spending needs. If at year-end, the actual Central Government Budget revenues fall short of the notified offset due to inaccurate planning, the Central Government Budget will directly supplement to make up the difference. The State Treasury has the responsibility to guide accounting procedures and reporting systems to implement the offset method.

III. REGARDING REVENUES EXCEEDING THE PLAN SET BY THE GOVERNMENT.

In 1994, the National Assembly and the Government decided on a bonus mechanism for provinces and cities with excess revenues. To implement this, the Ministry of Finance provides specific guidance as follows:

- Retain 100% of the excess revenue for the local budget for revenues already designated to be fully retained by the locality. However, for the excess revenue from corporate income tax in Hanoi City, Ho Chi Minh City, Ba Ria-Vung Tau Province, Long An Province, Kien Giang Province, Dong Nai Province, Song Be Province, and Quang Ninh Province, the allocation remains at 50% for the local budget and 50% for the Central Government Budget according to Decision No. 60-TTg dated February 8, 1994, of the Prime Minister.

- For business income tax, if the revenue exceeds the assigned plan, it will be handled as follows:

+ For localities with a 100% share of business income tax, when the business income tax revenue exceeds the plan, the excess will be paid to the Central Government Budget: 40%, and the local budget: 60%.

+ For localities with a business income tax share below 100%, when the business income tax revenue exceeds the plan, the excess will be paid to the Central Government Budget: 40%, and the local budget: 60%.

The Treasury Sub-Offices need to base their adjustments on the business income tax plans assigned to each province to regulate the revenue adjustment ratio for excess revenue according to the above regulations.

The State Treasury has the responsibility to guide accounting procedures and specifically allocate revenue sources between the Central Government Budget and the local budget for revenues exceeding the plan when the excess revenue is submitted to the State Budget.

The excess revenues retained as mentioned above can only be used for building economic and social infrastructure, supplementing working capital for state-owned enterprises as stipulated, and repaying foreign debt (if any). Localities are not allowed to use excess revenues for unnecessary wasteful purchases or rewards for sectors and units contrary to state regulations.

IV. IMPLEMENTATION

Provincial People's Committees and municipalities directly under the Central Government shall base their organization and guidance for agencies, units, and local authorities under their management to implement this Circular based on Decision No. 168-HĐBT dated May 16, 1992, of the Council of Ministers (now the Government), Decision No. 60-TTg dated February 8, 1994, of the Prime Minister, and this Circular issued by the Ministry of Finance.

This Circular takes effect from January 1, 1994. Any difficulties encountered during implementation should be reported to the Ministry of Finance for further guidance.