Circular No. 51/2004/TT-BTC guiding the implementation of Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government on certain special financial and budget mechanisms for Hanoi

CIRCULAR

Guidelines for implementing Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government on certain special financial mechanisms for Hanoi

concerning some special financial mechanisms for Hanoi

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Pursuant to the State Budget Law No. 01/2002/QH11 dated December 16, 2002 and Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government detailing and guiding the implementation of the State Budget Law;

Pursuant to Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government on certain special financial mechanisms for Hanoi;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance guides the implementation of special financial mechanisms for Hanoi as follows:

A. GENERAL PROVISIONS:

1. This Circular provides guidance on the regulations regarding special financial mechanisms for Hanoi (hereinafter referred to as the City), including: mechanisms for budget management and mechanisms for mobilizing financial resources for the development of Hanoi.

2. In addition to the special financial mechanisms stipulated in Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government and guided in this Circular, the City implements general provisions on financial management stipulated in the State Budget Law, Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance, and other legal documents on financial management.

B. SPECIFIC PROVISIONS:

I. ON BUDGET MANAGEMENT OF THE CITY

1. On revenue classification:

Based on the provisions on the allocation of revenue sources for provinces and centrally-administered cities as stipulated in Article 32 of the State Budget Law, Article 22 of Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, the People's Committee of the city shall submit to the People's Council of the city for decision on the specific allocation of revenue sources from the budget for each level within the city (city, district, county, ward, commune) to suit the actual situation, economic and social development requirements, national defense, security, and social order and safety of the city. For village and town budgets, they shall enjoy at least 70% of revenues from: land transfer tax; property tax; business license fee collected from individuals and households; agricultural land use tax collected from households; stamp duty on property.

2. The percentage (%) distribution of revenue items divided between the central budget and the city budget shall be decided by the Government upon submission to the Standing Committee of the National Assembly; the duration of stability of the percentage (%) distribution shall be decided by the Government upon submission to the National Assembly.

3. On expenditure assignment:

Based on the expenditure tasks of local budgets as stipulated in Article 33 of the State Budget Law, Article 24 of Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, the specific division of expenditure tasks among budgets at various levels within the city shall be decided by the People's Committee of the city upon submission to the People's Council of the city based on the principle of ensuring compatibility with the management of economic and social affairs, national defense, security, and the economic, geographic, and demographic characteristics of each region, as well as the capacity of the cadre workforce, to ensure efficiency.

4. Annually, based on the city budget estimate assigned by the Prime Minister and the guidelines of the Ministry of Finance, the People's Committee of the city shall submit to the People's Council for decision: the city budget revenue and expenditure estimate; revenue and expenditure tasks for each agency and unit under the city budget; the amount of supplementary funding from the city budget to lower-level budgets in accordance with the requirements of economic and social development of the city and to ensure compliance with the overall direction of the state budget.

5. To use effectively the land fund managed by the city, the People's Committee of the city may temporarily borrow from the city budget or from funds raised in accordance with Clause 1.2 Section 1 Part III of this Circular for infrastructure construction projects under the investment task of the city budget to organize the auction of land use rights. After completing the auction of land use rights, the borrowed funds will be recovered and returned to the budget or the raised funds will be returned. The implementation must comply with the following regulations:

- Based on the planning for the use of the land fund managed by the city and infrastructure investment projects under the investment task of the budget that have been approved by the competent authority.

- The People's Committee of the city decides to temporarily borrow from the city budget or from raised capital for projects. The borrowing amount for projects is based on the volume and progress of implementation, not exceeding the approved budget estimate; the management and disbursement follow the state regulations on managing state budget capital.

- The proceeds from the sale of land use rights through auctions shall be used to repay the temporarily borrowed funds from the city budget or from raised capital, with the remainder being fully deposited into the city budget (land use fee) for investment in infrastructure development under the investment task of the budget as prescribed.

- The accounting of budget revenue and expenditure for these tasks shall be carried out in accordance with the prescribed regulations.

II. ON INCENTIVE AND TARGETED SUPPORT MECHANISMS FROM THE CENTRAL BUDGET'S SURPLUS REVENUE GENERATED IN THE CITY

1. On incentive for overbudget revenues:

Annually, in cases where there is an increase in central government budget revenue compared to the estimate assigned by the Prime Minister from revenue items allocated between the central budget and the city budget as stipulated in Clause 2 Article 30 of the State Budget Law, the city budget shall receive a reward of 30% of the increased revenue from the central budget, but not exceeding the increase compared to the previous year's actual performance. The method of determination, purpose of use, and accounting of the reward amount shall be implemented according to the provisions in Section 17 Part IV of Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance.

2. The central budget shall provide targeted supplements to the city budget corresponding to the entire amount of increased central government budget revenue compared to the estimate assigned by the Prime Minister for remaining revenue items allocated between the central budget and the city budget (after rewarding surplus revenue as stipulated in Section 1 Part II of this Circular) and corresponding to the entire amount of increased revenue compared to the estimate assigned by the Prime Minister for revenue items enjoyed by the central budget at 100%, excluding revenue items specified in Clause 2.2 Section 2 Part II of this Circular.

2.1. The determination of the amount of increased revenue from divisible revenues shall be calculated based on the principle that the total amount of divisible revenues exceeding the budget estimate shall be considered, without specifying each individual divisible revenue item.

2.2. For central government budget revenues that are entitled to 100% according to Clause 1, Article 20 of Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, the following shall not be included:

- Value-added tax on imported goods;

- Revenues not assigned for management and collection by the city, which do not arise within the city's territory but are only recorded and paid at the city level;

- Recorded income and expenditure as prescribed by law; revenues retained by units under the budget management according to the provisions of law.

The determination of the targeted supplementary funds mentioned above shall be based on the results of the total revenue from items subject to 100% central budget allocation exceeding the forecast; it shall not be calculated separately for each revenue item.

3. Based on the provisions of Section 1 and Section 2 of Part II of this Circular, the People's Committee of the City shall report to the Ministry of Finance annually, after the end of the fiscal year, on the results of state budget revenue collection on the city's territory related to rewards and targeted supplements for the city before January 31 of the following year for consolidation and reporting to the Government and the Standing Committee of the National Assembly.

4. Based on the rewards and targeted supplements from the increase in central government budget revenues as stipulated in Section 1 and Section 2 of Part II of this Circular, the People's Committee of the city shall submit to the People's Council of the city for decision on the use thereof for investment in infrastructure projects, repayment of mobilized funds, implementation of important tasks aimed at economic and social development, ensuring national defense, security, public order, and social safety of the city, and rewarding lower-level budgets according to prescribed regulations.

III. ON MOBILIZING FINANCIAL RESOURCES FOR CITY DEVELOPMENT INVESTMENTS

1. Regarding mobilizing capital for projects under the city budget investment scope.

1.1. For official development assistance (ODA) funding:

- Annually, based on the budget estimate for ODA loan capital and the commitments made with donors; on the basis of the proposal of the People's Committee of the City, the Ministry of Planning and Investment, and the Ministry of Finance shall develop a plan for allocating the budget expenditure from ODA capital for investment in projects under the budgetary expenditure responsibilities, to be submitted to the Government for submission to the National Assembly for decision, prioritizing the allocation of ODA capital for investment in urban infrastructure construction, environmental protection, and public welfare programs within the city.

- The allocation of counterpart funds for ODA projects shall be implemented according to the principle:

+ For projects and works where the central ministry or agency is the project owner, the central budget shall ensure funding.

+ For projects and works where the People's Committee of the city is the project owner, the city shall be responsible for arranging funds from the city budget to implement them.

The management of ODA investment funds shall be carried out in accordance with the laws on the management and use of ODA loans.

1.2. On mobilizing investment capital:

1.2.1. Mobilizing domestic capital:

a) The city mobilizes investment capital through the issuance of local government bonds in accordance with Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government, and other forms of mobilization as prescribed by law; the city budget shall be responsible for paying the principal, interest, and related expenses.

b. When there is a need to mobilize investment capital, the People's Committee of the City shall prepare a plan to submit to the People's Council of the City for decision in accordance with the guidance provided in Point 1.3.4 Subsection 1.3 Section 1 Part II of Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance.

1.2.2. Mobilizing foreign capital: The city may mobilize foreign loans for investment in infrastructure construction under the city budget's expenditure responsibilities according to the principle that the People's Committee of the city shall develop a plan, seek loan sources, solicit opinions from the Ministry of Finance, the Ministry of Planning and Investment, and the State Bank of Vietnam before submitting to the Prime Minister for consideration and decision under the mechanism whereby the Government lends to the city, which then lends back to implement projects and works as proposed by the People's Committee of the city. The city shall be responsible for arranging funds from the city budget to repay the principal and interest in accordance with the law.

2. The total outstanding debt mobilized through the methods specified in Points 1.2.1 and 1.2.2 Subsection 1.2 Section 1 Part III of this Circular shall not exceed 100% of the total basic construction investment capital of the city budget as decided by the People's Council of the city for the current fiscal year (excluding investment capital from mobilized funds and projects from unstable targeted supplements from the central government budget to the city budget - if any).

3. The mobilization of investment capital for constructing infrastructure within the city budget's scope as stipulated in Points 1.2.1 and 1.2.2 Subsection 1.2 Section 1 Part II of this Circular must be carried out in accordance with Article 6 of Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government.

4. The aforementioned mobilized capital shall be recorded as revenue in the city budget for the designated purpose and must be allocated in the city budget balance to proactively repay debts when due.

5. Mobilizing investment capital for projects capable of recovering capital:

- Based on the socio-economic situation and actual conditions regarding the need for technical infrastructure development in the city, for projects capable of recovering capital, the People's Committee of the city shall decide or submit to the competent authority for decision in accordance with the law. Investment mobilization shall be conducted through various forms such as BOT (build-operate-transfer), BTO (build-transfer-operate), BT (build-transfer), and other forms. Financial measures to support interest rates on borrowed investment capital and subsidize part of the difference between costs and service prices shall be implemented in accordance with the law.

- The mobilization and organization of investment in projects: BOT (build-operate-transfer), BTO (build-transfer-operate), BT (build-transfer), and other forms shall be carried out in accordance with the law; the People's Committee of the city shall prepare an annual budget estimate for interest rate subsidies and cost-price subsidies to be submitted to the People's Council of the city for decision to allocate in the city budget to implement.

C. IMPLEMENTATION

This Circular shall take effect fifteen days after its publication in the Official Gazette. Based on the provisions of this Circular, the People's Committee of the city shall direct the Department of Finance to coordinate with relevant agencies to organize its implementation; during the implementation process, if there are difficulties, they should be reported to the Ministry of Finance for consideration and resolution./.