Circular No. 52/2004/TT-BTC guiding the implementation of Government Decree No. 124/2004/NĐ-CP dated May 18, 2004 on certain special financial and budget mechanisms for Ho Chi Minh City

CIRCULAR

 Guidelines for implementing Decree No. 124/2004/NĐ-CP dated May 18, 2004 of the Government

on certain special financial mechanisms for Ho Chi Minh City

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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. 124/2004/NĐ-CP dated May 18, 2004 of the Government on some special financial mechanisms for Ho Chi Minh City;

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 hereby guides the implementation of the special financial mechanisms for Ho Chi Minh City as follows:

A- GENERAL PROVISIONS:

1. These Circulars provide guidelines for the regulations on special financial mechanisms for Ho Chi Minh City (hereinafter referred to as the City), including: mechanisms for budget management and mechanisms for mobilizing financial resources for the City's development investment.

2. In addition to the special financial mechanisms stipulated in Decree No. 124/2004/NĐ-CP dated May 18, 2004 of the Government and guided herein, the City shall implement general regulations on financial and budget management as prescribed 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 finance and budget.

B. SPECIFIC PROVISIONS:

I. ON BUDGET MANAGEMENT OF THE CITY

1. On revenue classification:

Based on the provisions regarding 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 for each level within the city (city, district, county, ward, commune) in accordance with the actual situation, economic and social development requirements, ensuring national defense and 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 tax collected from individuals and households; agricultural land use tax collected from households; real estate registration fee.

2. The percentage ratio (%) for dividing revenue items between the central budget and the city budget shall be decided by the Government upon submission to the National Assembly Standing Committee; the duration of stability for this percentage ratio (%) 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 on the principle of ensuring compatibility with economic and social management decentralization, national defense, security, and the characteristics of the economy, geography, population, and the capacity of cadres in each region, while ensuring efficiency.

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

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

- Based on the land use planning managed by the city and infrastructure investment projects under the city budget investment program that have been approved by competent authorities;

- The People's Committee of the city decides to temporarily borrow from the city budget or from mobilized 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 distribution follow the state's regulations on managing state budget capital;

- The proceeds from selling land use rights through auctions must be used to repay the temporarily borrowed funds from the city budget or from mobilized capital, with the remainder being fully deposited into the city budget (land use fee) for investment in infrastructure under the city budget's investment tasks 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 OVERBUDGET REVENUES 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 Prime Minister's assigned budget from revenue items divided between the central and city budgets as stipulated in Clause 2, Article 30 of the State Budget Law, the city budget shall receive a bonus of 30% of this increased revenue, but not exceeding the increase compared to the previous year's actual performance. The method of determination, purpose of use, and accounting treatment of this bonus 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 government shall supplement the city budget with targeted funds corresponding to 70% of the increase in central government budget revenue compared to the Prime Minister's assigned budget for remaining revenue items divided between the central and city budgets (after implementing the bonus for excess revenue as stipulated in Section 1, Part II of this Circular) and corresponding to 30% of the increase in central government budget revenue items that the central government enjoys 100%, excluding revenue items specified in Clause 2.2, Section 2, Part II of this Circular.

2.1. The determination of the revenue increase for shared revenue items shall be based on the total amount of shared revenue exceeding the forecast, without calculating separately for each shared revenue item.

2.2. For revenues allocated 100% to the central budget as provided for in Clause 1, Article 20 of Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, the following are excluded:

- Value-added tax on imported goods;

- Revenues not managed by the city for collection, 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 in Sections 1 and 2, Part II of this Circular, annually after the end of the fiscal year, the People's Committee of the city shall report to the Ministry of Finance on the results of state budget revenue collection in the city related to the bonus and targeted supplementation for the city before January 31 of the following year for consolidation and reporting to the Government and the National Assembly Standing Committee.

4. BASED ON THE AMOUNT OF AWARDS AND TARGETED SUPPLEMENTARY FUNDS FROM THE INCREASED STATE BUDGET REVENUE AS PROVIDED FOR IN SECTIONS 1 AND 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 OF SUCH FUNDS FOR INVESTING IN INFRASTRUCTURE PROJECTS, REPAYING LOANS, AND IMPLEMENTING IMPORTANT TASKS TO PROMOTE ECONOMIC AND SOCIAL DEVELOPMENT, ENSURE NATIONAL DEFENSE, SECURITY, ORDER, AND SOCIAL SAFETY IN THE CITY, AND AWARDS TO LOWER LEVEL BUDGETS IN ACCORDANCE WITH THE REGULATED SYSTEM.

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 FUNDS AND THE CONTENTS ALREADY AGREED UPON WITH SPONSORS; 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 FUNDS TO INVEST IN PROJECTS UNDER THE BUDGET EXPENDITURE TASKS TO BE SUBMITTED TO THE GOVERNMENT FOR SUBMISSION TO THE NATIONAL ASSEMBLY FOR DECISION, WITH PRIORITY GIVEN TO ALLOCATING ODA FUNDS FOR INVESTING IN PROGRAMS AND PROJECTS TO BUILD TECHNICAL INFRASTRUCTURE, ENVIRONMENT, AND PUBLIC WELFARE FACILITIES IN 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 the counterpart funds.

+ For projects and works where the People's Committee of the City is the project owner, the city shall be responsible for allocating 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 RAISES CAPITAL FOR INVESTMENT THROUGH THE ISSUE OF LOCAL GOVERNMENT BONDS IN ACCORDANCE WITH DECREE NO. 141/2003/ND-CP OF THE GOVERNMENT DATED NOVEMBER 20, 2003, AND OTHER METHODS OF RAISING FUNDS AS PROVIDED BY LAW; THE CITY BUDGET IS RESPONSIBLE FOR PAYING PRINCIPAL, INTEREST, AND RELATED COSTS.

b. WHEN THERE IS A NEED TO RAISE CAPITAL FOR INVESTMENT, THE PEOPLE'S COMMITTEE OF THE CITY SHALL PREPARE A PLAN TO BE SUBMITTED TO THE PEOPLE'S COUNCIL OF THE CITY FOR DECISION IN ACCORDANCE WITH 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. RAISING FOREIGN CAPITAL: THE CITY IS PERMITTED TO RAISE FOREIGN LOANS FOR INVESTMENT IN INFRASTRUCTURE UNDER THE BUDGET EXPENDITURE TASKS OF THE CITY'S BUDGET IN ACCORDANCE WITH THE FOLLOWING PRINCIPLE: THE PEOPLE'S COMMITTEE OF THE CITY SHALL DEVELOP A PLAN, SEEK LOAN SOURCES, SEEK THE OPINION OF 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 IN ACCORDANCE WITH THE MECHANISM OF THE GOVERNMENT LOANING TO THE CITY TO RELOAN TO IMPLEMENT PROJECTS ACCORDING TO THE REQUEST OF THE PEOPLE'S COMMITTEE OF THE CITY. THE CITY IS RESPONSIBLE FOR ARRANGING FUNDS FROM THE CITY BUDGET TO REPAY PRINCIPAL AND INTEREST IN ACCORDANCE WITH THE LAWS.

2. THE TOTAL DEBT LEVEL RAISED THROUGH THE METHODS PROVIDED FOR IN POINT 1.2.1 AND POINT 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 ACCORDING TO THE BUDGET ESTIMATE DECIDED BY THE PEOPLE'S COUNCIL OF THE CITY FOR THE CURRENT BUDGET YEAR (EXCLUDING FUNDS FROM RAISED CAPITAL AND CAPITAL INVESTMENTS IN PROJECTS FROM TARGETED SUPPLEMENTARY FUNDS FROM THE CENTRAL BUDGET TO THE CITY BUDGET - IF ANY).

3. THE RAISING OF CAPITAL FOR INVESTMENT IN INFRASTRUCTURE WITHIN THE SCOPE OF THE CITY BUDGET AS PROVIDED FOR IN POINT 1.2.1 AND POINT 1.2.2 SUBSECTION 1.2 SECTION 1 PART II OF THIS CIRCULAR MUST BE IMPLEMENTED IN ACCORDANCE WITH ARTICLE 6 OF DECREE 124/2004/NĐ-CP OF THE GOVERNMENT DATED MAY 18, 2004.

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 capital for projects with the potential to recover investment:

BASED ON THE SITUATION OF THE ECONOMY AND SOCIETY AND THE ACTUAL CONDITIONS REGARDING THE NEED FOR DEVELOPING TECHNICAL INFRASTRUCTURE IN THE CITY, FOR PROJECTS THAT HAVE THE ABILITY TO RECOVER CAPITAL, THE PEOPLE'S COMMITTEE OF THE CITY SHALL DECIDE OR SUBMIT TO THE AUTHORIZED AUTHORITIES FOR DECISION IN ACCORDANCE WITH THE LAWS. THE RAISING OF INVESTMENT THROUGH THE FORMS: BOT (BUILD-OPERATE-TRANSFER), BTO (BUILD-TRANSFER-OPERATE), BT (BUILD-TRANSFER), AND OTHER FORMS. IMPLEMENT FINANCIAL MEASURES TO SUPPORT INTEREST RATES ON LOAN INVESTMENT, COMPENSATE FOR A PORTION OF THE DIFFERENCE BETWEEN COSTS AND SERVICE PRICES IN ACCORDANCE WITH THE LAWS.

THE RAISING AND ORGANIZATION OF IMPLEMENTATION OF INVESTMENT IN PROJECTS: BOT (BUILD-OPERATE-TRANSFER), BTO (BUILD-TRANSFER-OPERATE), BT (BUILD-TRANSFER), AND OTHER FORMS SHALL BE IMPLEMENTED IN ACCORDANCE WITH THE LAWS. THE PEOPLE'S COMMITTEE OF THE CITY SHALL DEVELOP AN ANNUAL BUDGET ESTIMATE FOR INTEREST RATE SUPPORT AND COMPENSATION FOR A PORTION OF THE DIFFERENCE BETWEEN COSTS AND SERVICE PRICES TO BE SUBMITTED TO THE PEOPLE'S COUNCIL OF THE CITY FOR DECISION TO BE ARRANGED IN THE CITY BUDGET ESTIMATE TO IMPLEMENT.

C. IMPLEMENTATION

THIS CIRCULAR SHALL TAKE EFFECT 15 DAYS AFTER ITS PUBLICATION IN THE GAZETTE. BASED ON THE PROVISIONS OF THIS CIRCULAR, THE PEOPLE'S COMMITTEE OF THE CITY SHALL DIRECT THE DEPARTMENT OF FINANCE TO COORDINATE WITH RELATED AUTHORITIES TO ORGANIZE ITS IMPLEMENTATION; DURING THE IMPLEMENTATION PROCESS, IF THERE ARE ANY ISSUES, THEY SHALL BE REPORTED TO THE MINISTRY OF FINANCE FOR CONSIDERATION AND RESOLUTION.

Note: On June 16, 2004, the Ministry of Finance issued Circular No. 6617 TC/NSNN regarding the correction of Circular No. 52/2004/TT-BTC dated June 9, 2004 as follows:

- Remove the title of Point 1, Section I: classification of revenue sources and expenditure responsibilities for budgets at various levels of local government under the City.

- Paragraphs 1.1, 1.2, 1.3, 1.4, 1.5 shall be amended correspondingly to Points 1, 2, 3, 4, 5.

THE MINISTRY OF FINANCE REQUESTS CORRECTION FOR THE PEOPLE'S COMMITTEE OF HO CHI MINH CITY TO BE AWARE AND ORGANIZE ITS IMPLEMENTATION./.