Circular No. 56/2006/TT-BTC guiding the preparation of the state budget estimate for 2007

CIRCULAR

Guidelines for preparing the state budget estimate for 2007

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Pursuant to Directive No. 19/CT-TTg dated June 12, 2006 of the Prime Minister on the development plan and state budget estimate for 2007; the Ministry of Finance guides the work of evaluating the implementation of state budget tasks in 2006 and preparing the state budget estimate for 2007 as follows:

A. EVALUATION OF THE IMPLEMENTATION OF STATE BUDGET TASKS IN 2006:

Based on the state budget tasks for 2006 decided by the National Assembly, based on the goals, tasks of economic and social development and the state budget revenue and expenditure estimates for 2006 assigned by the Prime Minister, leveraging the significant achievements obtained in the first six months of the year, ministries, central agencies, and localities in the second half of 2006 focus on implementing fully the measures according to Resolution No. 47/2005/QH11 of the National Assembly on the state budget estimate for 2006, Resolution No. 01/2006/NQ-CP dated January 16, 2006 of the Government on key measures to guide the implementation of the socio-economic development plan and state budget for 2006, and Circular No. 100/2005/TT-BTC dated November 17, 2005 of the Ministry of Finance guiding certain points on the organization and implementation of the state budget estimate for 2006. Strive to comprehensively exceed all targets and tasks of economic and social development and the state budget for 2006.

Along with the implementation of state budget tasks for 2006, ministries, central agencies, provincial and municipal people's committees shall conduct an evaluation of the results of implementing state budget tasks for 2006 as the basis for building the state budget estimate for 2007 according to the following main contents:

I. Evaluation of the implementation of state budget revenue tasks in 2006:

Based on the results of the first six months, evaluate the results of state budget revenue in 2006 on the basis of implementing measures to strive to complete and exceed the state budget revenue estimate assigned; focusing on analyzing the following main issues:

- The results of implementing state budget revenue in 2006 compared to the tasks assigned by the Prime Minister and the state budget revenue tasks assigned by the People's Councils. In 2006, strive to achieve an increase in state budget revenue of at least 3% over the estimate assigned by the Prime Minister, including domestic revenue (excluding oil revenue) increasing by at least 5%, and revenue from import-export activities according to the system of policies and actual import-export turnover.

- Evaluate and analyze the factors influencing and affecting the results of revenue implementation in 2006 such as: new production and business capacity due to new investment, expanded investment, deepened investment; the transformation of state-owned enterprises through forms such as shareholding, establishment of corporate groups, mother companies - subsidiary companies...; joint ventures; reviewing and evaluating the results of revenue from domestic and foreign investment projects that have commenced operations and have completed their period of preferential treatment; the results of achieving key product production and consumption targets; cost; selling price, profit; the results of implementing land use fee auction plans; real estate transaction situation;...

- Evaluate and analyze the impact of amendments and supplements to the revenue management system and policies in 2006 on the implementation of state budget revenue tasks such as: value-added tax, special consumption tax under the Law on Amending and Supplementing, water resource tax, hydropower tax, lottery revenue, fees and charges, revenues related to real estate; expanding pilot methods of revenue management under self-declaration and self-payment mechanisms; entrusting some taxes and fees to village, town people's committees for management; implementing preferential import tariffs of Vietnam to implement the Common Effective Preferential Tariff (CEPT) Agreement of ASEAN countries and other commitments (GATT Agreement)...

- Evaluate and analyze the results of economic and social management measures implemented by the Government, ministries, and provincial and municipal people's committees on the production and business plans of units within their jurisdiction, state budget revenue management work; the results of coordination among relevant levels and sectors in state budget revenue management and the organization of inspection, supervision, collection of overdue taxes, prevention of tax evasion, smuggling, and commercial fraud,...

- The situation of overdue taxes in 2006: clearly identify the amount of outstanding taxes carried over from 2005, the revenue generated in 2006, the amount collected in 2006, and the amount to be collected in 2007. Summarize accurately the total amount of overdue taxes, classify them by time and cause. Evaluate the results of handling overdue taxes according to Directive No. 15/2005/CT-TTg dated April 15, 2005 of the Prime Minister.

- The situation of VAT declarations and refunds; the amount of VAT refunds generated in 2006; the amount refunded to businesses in 2006; the estimated amount of 2006 VAT refunds to be processed in 2007;...

II. Evaluation of the implementation of state budget expenditure tasks in 2006:

1. For development investment tasks:

1.1. Evaluation of the allocation and implementation of construction investment capital in 2006:

- Evaluation of the allocation and assignment of the construction investment budget (CIB) in 2006:

+ Evaluation of the allocation and provision of funds for the implementation of investment projects and works in 2006, especially important projects ensuring progress, projects completed in 2006 (comparing and analyzing the capital requirements for approved construction projects with the allocated capital for implementation in 2006); allocate funds to settle construction investment debts from the state budget, to repay the full amount temporarily advanced by the budget according to regulations.

+ Evaluation of the implementation of programs and projects using official development assistance (ODA) funds; ensuring counterpart funds for ODA projects according to commitments; disbursement progress of ODA funds and counterpart funds.

+ Evaluate the implementation of regulations ensuring adequate capital allocation for Group C projects to be completed within two years, and for Group B projects to be completed within four years; efforts to prevent dispersion and prolongation of investment time without effectiveness; the execution of reallocation and reduction of expenditures for unallocated funds for other projects and programs.

+ For provinces and centrally-administered cities, evaluate the situation of timely repayment (both principal and interest) of loans and advances due: amounts raised according to Clause 3, Article 8 of the State Budget Law; preferential credit loans for implementing rural canal reinforcement, rural transportation infrastructure, village craft infrastructure, and aquaculture infrastructure programs; central government advances that must be recovered into the state budget estimate for 2006...

- Evaluate the situation and results of investment capital for construction and development:

+ Evaluate the implementation of the 2006 construction and development investment plan according to the following contents: number of projects and works; allocated investment capital; completed construction and development volume; completed construction and development volume accepted for inspection; amount of payments made (including payment for completed construction and development volume); number of completed projects and works, including completed work items;... (classified by Groups A, B, C).

+ Evaluate compliance with regulations on investment capital management: investment procedures; time frame, progress, and final settlement of investment capital... for construction and development projects in 2006; existing issues in the current investment management mechanism and policies.

+ For provinces and cities, evaluate the implementation of Clause 3, Article 8 of the State Budget Law regarding infrastructure investment capital mobilization and the repayment of mobilized amounts due, estimated outstanding debt as of December 31, 2006 (for Hanoi and Ho Chi Minh City, evaluate the mobilization of investment capital under the special financial-budget mechanism of the locality). Evaluate the implementation of land auctions and the allocation and use of land use revenue for local infrastructure construction.

+ Evaluate the allocation and implementation of sources from government bonds, education public debt, and other sources as prescribed.

+ Summarize, evaluate, and analyze the situation of accumulated construction and development investment volume and the results of measures to address accumulated construction and development investment volume.

+ Evaluate and analyze the effectiveness of construction and development investment in 2006 and previous years; existing issues, causes, and solutions; focusing on evaluating and analyzing key national projects and programs, projects using ODA funds; projects from government bond sources, education public debt; projects funded from land use revenue, lottery proceeds (including central government supplements);...

1.2. Evaluate the results of implementing support tasks for production and business development in 2006: implementation of tax exemption and reduction regulations for marine product fishing, unprocessed salt production, enterprises employing ethnic minority labor; support for small and medium-sized enterprises; localities should pay attention to evaluating the establishment, management, and implementation of local financial and credit funds such as: Guarantee Fund for Small and Medium Enterprises Credit, Investment and Urban Development Support Fund... Evaluate the implementation of trade promotion policies, export support, and policies supporting public welfare enterprises,...

2. For regular expenditure tasks:

2.1. Evaluate and analyze the results of budget allocation and management for implementing economic and social development tasks according to each assigned target by the state for ministries, central agencies, localities, and units in 2006; focusing on evaluating the results of important tasks, large programs, and projects in each sector, field, locality, and unit.

2.2. Evaluate the results of implementing mechanisms, policies, and expenditure systems in 2006 for the tasks of ministries, central agencies, localities, and units. Focus on evaluating the results of the following mechanisms and policies:

- Evaluate the results of implementing the Law on Thrift and Anti-Waste and the Government's Action Program on Thrift and Anti-Waste according to Decision No. 25/2006/QD-TTg dated January 26, 2006 of the Prime Minister; evaluate the situation of vehicle procurement expenses, telephone equipment procurement, office rental and purchase expenses, conference and reception expenses, fuel savings, projects using ODA funds...

- Evaluate the implementation of Decree No. 130/2005/NĐ-CP dated October 17, 2005 of the Government on the self-management and responsibility mechanism for staffing and administrative management costs; evaluate the organization and implementation of the self-management and responsibility system for task performance, organizational structure, staffing, and finance for public service units according to Decree No. 43/2006/NĐ-CP dated April 25, 2006 of the Government.

- Evaluate the implementation of health care benefits in 2006 for the poor according to the new poverty standard stipulated in Decision No. 170/2005/QĐ-TTg dated July 8, 2005 of the Prime Minister; free medical examination and treatment for children under six years old according to the Law on Child Protection, Care, and Education; implementation of scholarship systems for boarding and day students from ethnic minorities according to prescribed regulations (including scholarships for ethnic minority vocational boarding students stipulated in Decision No. 267/2005/QĐ-TTg dated October 31, 2005 of the Prime Minister).

- Evaluate the implementation of allowances for non-professional village-level cadres according to Decree No. 121/2003/NĐ-CP dated October 21, 2003 of the Government (evaluate the use of central government support funds and local budget allocation to ensure implementation).

- Evaluate the implementation of subsidy funding for postal and price subsidies, and the provision of certain policy goods without payment in 2006 at localities; implement the policy of providing certain types of newspapers and magazines without payment to ethnic minority and mountainous regions as stipulated in Decision No. 1637/QD-TTg dated December 31, 2001 of the Prime Minister; implement the policy of subsidizing creative works, literary and artistic works, and press.

2.3. Ministries and sector management agencies shall evaluate the implementation of Resolution No. 05/2005/NQ-CP dated April 18, 2005 and Decree No. 53/2006/NĐ-CP dated May 25, 2006 of the Government on promoting socialization in educational, health, cultural, and sports activities within their respective sectors; pay particular attention to evaluating and analyzing the total resources and resource structure invested by society for development in their sectors, the results of mobilizing resources from society for development, existing issues, causes, and solutions to better mobilize resources from society for development in their sectors.

2.4. Evaluate and analyze the regular expenditure budget allocation according to groups of items: salary expenses, allowances with the nature of salary, and other expenses deducted from salary (social insurance, health insurance, trade union fees); regular business expenses; extraordinary or non-regular expenses (purchases, repairs, etc.) in 2006 of ministries, agencies, and localities.

2.5. The situation of allocating and assigning the regular expenditure budget for 2006, the implementation of adjustments and transfers of the state budget among tasks and units during the implementation process.

2.6. Administrative reform work in implementing the state budget in 2006; clearly identify existing issues, causes, and solutions to address them.

3. For national target programs, Program 135 (Phase II), and the project to plant five million hectares of new forests:

Evaluate the allocation and assignment of budgets for target programs in 2006; based on the allocated budget and progress, ministries and agencies responsible for national target programs and projects, and localities shall assess the volume of implementation in 2006 in detail according to each program and project. Pay special attention to assessing the appropriateness, difficulties, and inconsistencies regarding objectives, contents, and methods of implementation with the overall direction, objectives, tasks, and contents of the program for the period 2006-2010, and propose adjustments and measures to overcome these issues in 2006 to ensure the correct implementation of the program's objectives and tasks, and recommend supplements and improvements to the management mechanism of the program and projects.

4. Evaluate the results of the wage reform system:

The results of reviewing and determining the financial needs for implementing wage reform; the results of implementing financial measures to create sources for wage reform from: savings of 10% of regular expenditures (excluding salaries and allowances with the nature of salary); 35-40% of retained revenue according to regulations; from increased revenue (50% for local budgets); and identifying unused surplus revenue from previous years to be carried over to 2007 to continue creating sources for wage reform.

5. For provinces and centrally-administered cities: In addition to the above requirements, it is necessary to focus on evaluating the following tasks:

- Work on mobilizing financial resources at the local level to fulfill the economic and social development tasks of the locality.

- Results of implementing the budget expenditure structure (investment spending, regular spending, etc.) to meet the investment development requirements of the locality; results of implementing the National Assembly's Resolution on preventing scattered and dispersed investments; handling construction debts,...

- Results of implementing infrastructure investment tasks as decided by the Prime Minister such as Decision No. 168/2001/QĐ-TTg dated October 30, 2001, Decision No. 186/2001/QĐ-TTg dated December 7, 2001, Decision No. 120/2003/QĐ-TTg dated June 11, 2003, Decision No. 134/2004/QĐ-TTg dated July 20, 2004 of the Prime Minister,...

- Allocation of the budget (including central support funds for local budgets if applicable) and use of reserves to fulfill security, defense tasks; prevention and control of diseases, natural disasters, droughts, floods, especially avian influenza, foot-and-mouth disease, etc.; implementation of national policies aimed at developing the economy and society, eradicating poverty (implementing national policies on poverty eradication; education, health, culture, socio-economic development in difficult areas, ethnic minority and mountainous regions, etc.); implementation of social policies, policies for those who have rendered meritorious service to the revolution, participants in the resistance war and their children affected by Agent Orange, medical examinations and treatments for the poor, children under six years old, etc., in the locality.

- Allocation of the budget (including central support funds for local budgets if applicable) and use of reserves to fulfill security, defense tasks; prevention and control of diseases, natural disasters, droughts, floods, especially avian influenza, foot-and-mouth disease, etc.

Based on the results of evaluating the implementation of the state budget tasks in 2006, evaluate the implementation of state budget revenue and expenditure policies and related policies; ministries, central agencies, and localities shall proactively propose specific amendments and supplements to state budget revenue and expenditure policies and related policies, and suggest guidance, direction, and organization of state budget tasks, to be sent to the Ministry of Finance and relevant ministries and agencies for study, amendment, and supplementation or submission to competent authorities for timely approval.

B. WORK ON BUILDING THE STATE BUDGET ESTIMATE FOR 2007:

The preparation of the state budget estimate for the year 2007 was carried out concurrently with the implementation of the Resolution of the 10th National Party Congress on the orientation and tasks for economic and social development during the period 2006-2010. It is requested that ministries, sectors, localities, and units base their work on the Resolution of the 10th National Party Congress, the resolutions of the Party congresses at all levels within their respective ministries, sectors, localities, and units, to organize the work of preparing the state budget revenue and expenditure estimates for the year 2007 and the period 2007-2010 (broken down by each year), in accordance with the State Budget Law and related guiding documents, ensuring consistency between the goals, plans, and tasks and the financial resources of the state budget to strive for the successful achievement of the economic and social development targets set forth in the Resolution of the 10th National Party Congress and the resolutions of the Party congresses at all levels. Pay attention to the following main contents:

I. Objectives and Principles:

- The state budget estimate for the year 2007 and the period 2007-2010 must be based on the Resolution of the 10th National Party Congress on the orientation and tasks for the five-year plan of economic and social development from 2006 to 2010, clearly reflecting the viewpoint and goal of accelerating the rate of economic growth, enhancing the effectiveness and sustainability of development, and quickly bringing the country out of underdevelopment through the implementation of reasonable mobilization policies aimed at encouraging and stimulating sources of investment for development, concentrating state budget resources for infrastructure investment and structural economic transformation, increasing the level and proportion of state budget investment in human development and cultural-social affairs in sync with economic development, implementing poverty reduction and enhancing national security and defense to ensure sustainable and comprehensive development.

- The state budget revenue estimate for the year 2007 and the period 2007-2010 will be built on the basis of a scientific and objective analysis and forecast of factors such as economic growth, structural economic transformation, market fluctuations, domestic and international prices, the impact of Vietnam's deepening economic and financial integration, especially after its accession to the WTO. The state budget revenue estimate for the year 2007 must ensure positivity, compliance with tax policies and systems, and international tax commitments, ensuring the implementation of policies to encourage production and business development, market development, maintaining a stable and favorable business environment, promoting fair competition to nurture and develop stable and solid revenue sources; while also implementing effective measures to strengthen revenue management, prevent tax evasion and fraud, smuggling, and commercial fraud, and limit tax arrears.

- The state budget expenditure estimate will be built based on a system of criteria and budget allocation standards for the year 2007, which is the first year of the new budget stabilization period, while focusing on allocating the budget to achieve the strategic goals and tasks of the country in 2007 and the period 2007-2010: Ensuring sufficient funds for key national infrastructure projects; prioritizing funding for the implementation of national target programs, poverty reduction programs, economic and social development programs in mountainous provinces, the Central Highlands, ethnic minority areas, and border regions facing difficulties; increasing the state budget investment in education and training according to Resolution No. 37/2004/QH11 dated December 3, 2004 of the National Assembly; increasing investment in science and technology, healthcare, culture, environmental protection, and poverty reduction; ensuring funding for national defense and security; while continuing to promote socialization in education and training, healthcare, culture, sports, and other fields to expand and improve the quality of services provided to society alongside state budget investment. Strictly implement the Law and guiding documents on thrift and waste prevention; anti-corruption laws; the Government's action program on thrift and waste prevention; and the Government's action program to implement the Anti-Corruption Law according to Decisions No. 25/2006/QD-TTg dated January 26, 2006 and Decision No. 30/2006/QD-TTg dated February 6, 2006 of the Prime Minister; ensuring that the preparation of the state budget, allocation, and use of the budget are truly centralized, tight, thrifty, waste-preventing, and not spread thin or dispersed, thereby improving the quality of the budget estimate and the effectiveness of budget utilization; not including regular expenditures without clear tasks or investment projects outside the planning without approval in the state budget expenditure estimate. Fully implement the policy to create sources for salary reform.

- Ensure a positive, healthy, and solid balance of the state budget and local budgets; guaranteeing national financial security and the safety of local budgets.

II. Main Contents:

The state budget estimate for the year 2007 and the period 2007-2010 is prepared in accordance with the State Budget Law, Government Decree No. 60/2003/NĐ-CP dated June 6, 2003, Prime Minister Directive No. 19/CT-TTg dated June 12, 2006, Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance, and other related documents. Among these, pay particular attention to the following main contents:

1. Work on preparing the financial and budgetary resource plan to implement the development goals and tasks according to the Resolution of the 10th National Party Congress:

The ministries, sectors, localities, and units shall develop specific financial resource plans for the fiscal year 2007 and the period 2007-2010 (in detail for each year) to ensure the achievement of the goals and tasks set forth by the ministries, sectors, localities, and units until 2010 for implementing the Resolution of the 10th National Party Congress, and submit them to the Ministry of Planning and Investment and the Ministry of Finance for consolidation and reporting to the Prime Minister. Among these, it is necessary to analyze, forecast, and specifically build plans for mobilizing resources and implementing measures; prioritizing the allocation of resources for key important tasks, fundamentally addressing the issue of dispersion. Specifically analyze changes and supplements compared to the projected revenue and expenditure of the State budget and investment resources for the period 2007-2010 as established according to Circular No. 44/2005/TT-BTC dated June 3, 2005, issued by the Ministry of Finance, guiding the preparation of the state budget estimate for 2006 and the period 2006-2010.

For the ministries, sectors, and localities (Ministries of Transport, Agriculture and Rural Development, Education and Training, Health; localities of Hanoi, Ha Tay, Binh Duong, Vinh Long), implement pilot programs to develop medium-term financial plans and medium-term expenditure plans according to Decision No. 432/QĐ-TTg dated April 21, 2003, of the Prime Minister, carry out the preparation of medium-term financial plans and medium-term expenditure plans together with the preparation of the state budget estimate for 2007, linking the goals and tasks in the medium-term financial plan and medium-term expenditure plan with those in the five-year plan 2006-2010; among which it is necessary to clearly define the key programs and tasks of the ministries, sectors, and localities in 2007 and subsequent years, proactively mobilize and allocate resources to implement programs and tasks annually and throughout the period to fulfill the five-year plan 2006-2010.

2. Financial work on building the state budget revenue estimate for 2007:

The state budget revenue estimate must be actively and firmly built with high feasibility, aiming to achieve over 22% of GDP, including tax and fee revenue reaching over 21% of GDP. The domestic revenue estimate (excluding oil revenue) must increase by at least 14-16% compared to the estimated actual implementation in 2006 (the estimated actual implementation in 2006 increased by at least 5% compared to the state budget revenue estimate for 2006 assigned by the Prime Minister). In detail:

2.1. Domestic revenue estimate: Build the state budget revenue estimate based on forecasting economic growth in 2007 for each industry and field of revenue, and the economic bases of each locality to accurately and fully calculate each field of revenue and each tax type according to the relevant tax laws and collection regulations. The domestic revenue estimate of each province and centrally-administered city must include all sources of revenue from communes, wards, and towns. The revenue estimate must have economic basis and be detailed to each industry, key unit, and economic sector. On this basis, evaluate the results of implementation in 2006; require efforts to achieve in 2007; ensure the verification of the 2007 revenue estimate as announced, organize the construction and report the 2007 revenue estimate according to the prescribed form in Circular No. 59/2003/TT-BTC dated June 23, 2003, issued by the Ministry of Finance. At the same time, pay attention to the revised and supplemented collection policies in 2007, such as:

- Regarding special consumption tax and value-added tax: Implement according to the guidance in Decree No. 156/2005/NĐ-CP dated December 15, 2005, of the Government amending and supplementing the decrees detailing the implementation of the Special Consumption Tax Law and the Value-Added Tax Law; Circular No. 94/2005/TT-BTC dated October 26, 2005, of the Ministry of Finance amending and supplementing the guidance on calculating and declaring payment of value-added tax for the electricity industry;

- Regarding water resource tax: Calculate and prepare the estimate according to the guidance in Circular No. 05/2006/TT-BTC dated January 19, 2006, of the Ministry of Finance guiding the water resource tax on natural water used for hydropower production.

- Regarding land rental fees and surface water rental fees: Calculate and prepare the estimate according to the guidance in Circular No. 120/2005/TT-BTC dated December 30, 2005, of the Ministry of Finance guiding the implementation of Decree No. 142/2005/NĐ-CP dated November 14, 2005, of the Government on land rental fees and surface water rental fees.

- Regarding land use fees: Based on the land use planning and plan approved by the competent authority, accelerate the progress of allocating land with land use fees, leasing land, auctioning land use rights, or tendering projects using land according to the law; prepare the estimate of land use fees when the State allocates land with land use fees through land use right auctions or without auctions according to Decree No. 198/2004/NĐ-CP dated December 3, 2004, of the Government on land use fees and Decree No. 17/2006/NĐ-CP dated January 27, 2006, of the Government amending and supplementing some articles of the decrees guiding the implementation of the Land Law and Decree No. 187/2004/NĐ-CP on the conversion of state-owned companies into joint-stock companies.

- Regarding fees and charges: Calculate and prepare the estimate according to the guidance in Decree No. 24/2006/NĐ-CP dated March 6, 2006, of the Government amending and supplementing some articles of Decree No. 57/2002/NĐ-CP dated June 3, 2002, of the Government detailing the implementation of the Fees and Charges Ordinance. Focus on strengthening the review, inspection, and supervision of collection to promptly and fully reflect the revenue collected into the state budget.

- Regarding revenue from lottery activities: Calculate and prepare the estimate according to the guidance on value-added tax, special consumption tax, corporate income tax, and Circular No. 77/2005/TT-BTC dated September 13, 2005, of the Ministry of Finance guiding the financial management system for lottery business operations of lottery companies.

2.2. Revenue from import and export activities:

- The revenue budget must be prepared based on the analysis and forecast of the global, regional, and domestic economic situation; evaluation and quantification of the impact of implementing the Agreement on the Framework for the Integration of Goods (CEPT), bilateral trade agreements (BTA), the impact of Vietnam's accession to the World Trade Organization (WTO); state policies on import and export for important goods; factors such as the rate of economic growth, domestic import demand to serve production and consumption; fluctuations in domestic and international market prices... affecting import and export activities.

- The revenue budget must be prepared based on the effective management of revenue collection; strengthening measures to prevent revenue loss such as debt recovery, combating smuggling, tax evasion, and commercial fraud.

3. Work on preparing the state budget expenditure plan for 2007:

Based on the system of criteria and allocation standards for the 2007 state budget according to the Prime Minister's Decision, ministries, sector management agencies at the central level, provincial People's Committees under the central government, and budgetary units at all levels shall prepare the 2007 state budget expenditure within the scope of the approved expenditure budget for 2007 announced by the Ministry of Finance; based on expenditure regulations and standards, taking into account assigned tasks, focusing funds on key and major tasks, strictly implementing thrift and preventing waste. Prepare the 2007 state budget expenditure by sector. Focus on allocating the budget to implement important tasks for economic and social development, ensuring national security and defense, and poverty reduction. Among these:

3.1. Budget for investment and development expenditure:

- Prepare the budget for investment and development expenditure of ministries and central agencies based on ensuring capital for ongoing projects according to their progress; new projects with complete investment procedures as prescribed and within the stipulated time frame. Prepare the budget for investment and development expenditure of provinces and centrally-administered cities based on criteria for allocating construction investment capital for local budgets in 2007, supplementary criteria for targeted development investment from the central budget to local budgets, and other supplementary items as decided by the Prime Minister.

- Concentrate on allocating investment and development expenditure for programs and targets aimed at economic and social development, poverty reduction, promoting structural economic transformation during the period 2006-2010, prioritizing mountainous regions, the Central Highlands, and ethnic minority areas with difficulties; emphasizing infrastructure investment in transportation, water resources, energy development, rural infrastructure, such as: reinforcing irrigation canals, developing rural transportation, infrastructure for flood control zones, tourism infrastructure, village craft infrastructure, market infrastructure, aquaculture infrastructure... while implementing measures to mobilize financial resources to fulfill tasks related to structural economic transformation, accelerating industrialization and modernization in agriculture and rural areas. Prioritize investment in fields related to human health development and care, particularly focusing on funding for medical facilities at the district and commune levels. Allocate funds to implement the National Trade Promotion Program for the period 2006-2010 issued together with Decision No. 279/2005/QD-TTg dated November 3, 2005, of the Prime Minister.

- Ensure capital for ongoing projects and programs according to their progress, especially key and urgent projects, unfinished construction projects expected to be completed and put into use in the year; allocate sufficient counterpart funds for programs and projects using ODA funds according to commitments, planning, and preparatory investment as prescribed.

- Include in the 2007 investment capital plan the final settlement of debts for completed construction projects; prioritize sufficient funds for completed projects with approved investment settlement; repay the state budget for previously advanced funds; and ensure that no new construction project debts are incurred during implementation.

- For Group C projects, ensure completion within two years; for Group B projects, ensure completion within four years; firmly avoid spreading out investments and extending ineffective investment periods. Only include newly completed investment construction projects that have completed the required procedures and been approved before October of the previous year in the annual budget expenditure plan.

- Project sponsors funded through government loans must arrange matching funds for these projects in accordance with signed agreements and domestic financial regulations to not affect implementation schedules.

- For subsidies to cover interest rate differences for development credit and state policy credit, base the preparation of the budget on the actual performance in 2006, anticipated changes in policy and tasks for 2007, and current regulations.

- For tasks supporting trade promotion, base the preparation of the 2007 budget on the need to enhance business capabilities of enterprises, international regulations on government subsidies when Vietnam joins the WTO, increasing enterprise initiative, and reducing dependence on state support policies... focusing on the National Trade Promotion Program for the period 2006-2010 issued together with Decision No. 279/2005/QD-TTg dated November 3, 2005, of the Prime Minister.

- For supplementary state reserve expenditures: based on assigned state reserve tasks, relevant ministries and central agencies shall assess and determine the reserve levels of their sectors and units as of December 31, 2006; estimate the supplementary reserve levels for each type of goods and materials, and prepare the budget for increased state reserve expenditures, goods preservation costs, and plans for rotating and updating reserve stocks for sectors and units in 2007.

- Ministries, central agencies, and localities assigned by the Prime Minister to invest from government bond funds shall prepare budgets for investment expenditures on key transportation, water conservancy projects from these funds in accordance with existing regulations. At the same time, they must focus on directing implementation to ensure compliance with prescribed timelines and objectives.

- Management of investment capital, organization of investment from state development funds, and government bonds must comply with the provisions of the Investment Law, the Public Procurement Law, and other guiding documents.

3.2. Budget for public expenditure on education and training, science and technology, health care, culture and social affairs, physical education and sports, economic public services, national defense security, administrative management of the state, the Party, mass organizations...:

- Establish a budget for developing public expenditure on education and training, culture, health care, environment, science and technology, social affairs; ensuring national defense and security; administrative management of the state, the Party, mass organizations... based on the socio-economic development plans for 2007 of each ministry, central agency, and locality, according to the standard allocation rates for regular budget spending in 2007 as decided by the Prime Minister, and existing policies and standards. Prioritize funding for implemented policies and important tasks assigned by the Prime Minister and competent authorities.

- For regular expenditures without standard allocation rates, establish them based on the assessment of the 2006 budget execution and previous years, the 2007 budget inspection results announced, and the authorized allocation (excluding new expenses in 2006 that will not recur in 2007) and consumption standards. Prioritize funding for established policies and important tasks assigned by the Prime Minister and competent authorities.

- Nationwide, allocate the state budget for 2007 (including development investment, regular spending, and salary reform) for the education and training sector to reach 20% of total state budget spending; the cultural information sector over 1.5%, aiming to reach 1.8% by 2008; the science and technology sector 2%; environmental protection activities over 1%. Allocate the budget for public health services to ensure stipulated policies and systems (funds for free medical examinations and treatments for the poor, free medical examinations and treatments for children under six years old...), prioritizing preventive health care funds to prevent diseases.

- The budget for public expenditure on economic construction is based on the volume of tasks assigned by authorized bodies and the prescribed budget expenditure standards; focusing on funding important tasks: maintenance and repair of critical socio-economic infrastructure systems to extend their service life and investment efficiency; implementing agricultural, forestry, and fisheries promotion tasks; land administration public services... contributing to promoting growth and economic restructuring.

- Administrative agencies managing the state that prepare budgets and implement according to the mechanism of delegated autonomy and responsibility for staffing and administrative management costs as stipulated in Decree No. 130/2005/ND-CP dated October 17, 2005 of the Government to enhance autonomy linked to responsibility, improve financial management efficiency, and operational performance. Public service units implement according to Decree No. 43/2006/ND-CP dated April 25, 2006 of the Government on autonomy and responsibility for task implementation, organizational structure, staffing, and finance for public service units; for public service units whose operating costs are partially or fully covered by the budget, the 2007 budget is established based on continued stability and adjustments according to the increase in budget spending for the sector or field.

State administrative agencies and public service units with income as prescribed by law must prepare full revenue and expenditure budgets for tasks funded from fees, charges, and other retained income according to prescribed regulations.

- For program and project research and development expenditures at the national and ministerial levels, state task implementation expenditures, and other important expenditures, units must prepare budget expenditures according to current regulations and guidelines in this Circular, while providing detailed explanations of the calculation bases.

- The budget for implementing policies of free distribution of certain types of newspapers and magazines to ethnic minority and mountainous regions is carried out according to the Prime Minister's decision. The budget for price subsidies for publishing, seedling preservation subsidies... is implemented according to current regulations. Ministries, central agencies, localities, and units need to calculate price subsidies based on determining quantities, production costs, transportation costs, specific subsidy rates for each item according to prescribed regulations.

For subsidies on freight, price subsidies, and free distribution of certain policy items, starting from 2007, they are allocated according to the budget allocation standards for localities; Provincial People's Committees submit to the People's Councils for decisions on the items, products, subsidy standards, support areas... suitable for specific conditions in each locality.

3.3. For programs and projects using ODA funds, prepare comprehensive budgets strictly following the procedures and state budget decisions as prescribed by the State Budget Law and guiding documents, Government Decrees on investment management and basic construction, and ODA fund management and utilization; particularly detailing ODA and counterpart funds for each program and project, according to the nature of investment and public service expenditures, ensuring alignment with implementation progress; submit to the Ministry of Planning and Investment and the Ministry of Finance as required for consolidation in the 2007 state budget draft to be submitted to the Government and National Assembly for approval.

3.4. Continue allocating the state budget and mobilizing financial resources to implement salary reform according to the approved salary system reform plan:

The allocation standard for the 2007 regular expenditure budget as decided by the Prime Minister has ensured all financial requirements to implement the salary system according to Decree No. 204/2004/NĐ-CP dated December 14, 2004, Decree No. 118/2005/NĐ-CP dated September 15, 2005, and Decree No. 119/2005/NĐ-CP dated September 27, 2005 issued by the Government. Ministries, sectors, central agencies, localities, and units using state budget funds shall proactively calculate and determine accurately in accordance with regulations on measures to create sources for salary reform in the direction of reserving a portion of the revenue retained in 2007 under the current regime to implement, saving at least 10% of regular expenditure in 2007 (excluding salaries and allowances of a similar nature); transferring unused sources from previous years' salary reforms (if any) to 2007 for continued implementation; local budgets shall use at least 50% of annual increased revenue to implement, while also utilizing unspent increased revenue from previous years (excluding land use fee revenue) to implement salary reforms in 2007; all these funds must be accounted for and managed separately to create sources for continued salary reforms and not used for other purposes. The Ministry of Finance will issue specific guidelines on calculating and determining the sources of funds for implementing salary reforms.

3.5. Central and local government budgets at all levels allocate contingency reserves in accordance with the State Budget Law to proactively respond to natural disasters, floods, epidemics, and urgent tasks arising outside the budget estimate.

During the process of preparing the 2007 state budget, ministries, central agencies, localities, and budgetary units at all levels are responsible for proactively forecasting full funding needs to implement new policies, systems, and tasks (if any) that may arise in 2007; based on this, they should allocate the budget to ensure the implementation of assigned important tasks and newly emerging tasks; there should be no situation where, after the state budget is allocated by the competent authority, there is insufficient funding to implement regular tasks, existing policies and systems, and newly emerging tasks. It is firmly decided not to supplement from the contingency reserve for expenditures that ministries, central agencies, and localities did not adequately allocate according to the prescribed regulations when building and allocating the state budget.

3.6. Expenditure for national target programs and important projects:

Based on the goals, tasks, and contents of the national target programs for the 2006-2010 period approved by the Prime Minister, relevant ministries and agencies managing the programs and projects shall specifically define annual targets and tasks, as well as detailed targets and tasks for 2007; based on the current financial regulations, they shall prepare the budget estimates for national target programs, Program 135 (Phase II), the project to plant five million hectares of new forests in 2007, and forecast the entire 2006-2010 period (for 2006 according to the approved budget estimate); propose the budget allocation plan for the national target programs and projects in 2007 for central ministries and agencies and localities, and submit it to the Ministry of Planning and Investment and the Ministry of Finance before July 20, 2006, for consolidation and submission to the Government and the National Assembly for consideration and decision in accordance with the State Budget Law.

3.7. Ministries and central agencies shall issue allocation standards for the 2007 state budget expenditure based on the Prime Minister's decision on the allocation standards for the 2007 regular expenditure budget of the state budget, in accordance with regulations.

Ministries and central agencies shall prepare the state budget expenditure according to the executing unit and important expenditure items (including detailed explanations on the basis, policy, implementation status (results, funding...), the 2007 budget allocation and subsequent years...), and send them to the Ministry of Finance and the Ministry of Planning and Investment for consolidation and reporting to the Prime Minister. Ministries, central agencies, and localities shall proactively prepare detailed explanatory reports on their own 2007 state budget revenue and expenditure plans in accordance with the prescribed regulations.

Based on the verification of 2007 state budget revenue and expenditure, ministries, central agencies, and localities must build detailed budgets for each task and each subordinate budget-using unit; after working and reaching consensus with the Ministry of Finance and the Ministry of Planning and Investment, ministries, central agencies, and centrally-administered cities shall immediately proceed with the work of formulating the budget allocation plan for their respective ministries, agencies, and localities for 2007, so that upon receiving the Prime Minister's allocated state budget, they can promptly submit it to the competent authority for decision-making and allocation to budget-using units before December 31 in accordance with the State Budget Law.

Ministries, central agencies, and localities must focus on directing a thorough review of all aspects of state budget allocation, management, and utilization, particularly capital investment in construction and foreign aid loans, to ensure accurate budget allocation according to objectives, regulations, and intended recipients; budget management and utilization must be strict and effective, with reporting, inspection, and auditing systems in place to prevent loss and waste.

4. Building the state budget to ensure balance in the state budget and local government budgets at all levels in accordance with the State Budget Law and Directive No. 19/CT-TTg dated June 12, 2006, of the Prime Minister:

- The state budget revenue from taxes and fees must cover regular expenditure, repay maturing domestic and foreign debts, and fund salary reforms, with savings for development investment. The state budget deficit should not exceed 5% of GDP, consistent with domestic borrowing capacity and preferential foreign borrowing, without commercial foreign borrowing to offset the state budget deficit.

- The provinces and centrally governed cities shall prepare the local state budget expenditure forecast according to the criteria and allocation standards for the state budget in 2007 decided by the Prime Minister. Based on the local state budget revenue forecast for 2007, the local state budget revenues entitled to 100% in accordance with the State Budget Law shall determine the percentage rate (%) of the division of shared revenues between the central state budget and the local state budget in 2007 and stabilize during the new budget period.

- For those provinces and centrally governed cities that need to mobilize additional capital to increase investment development, they must prepare the budget forecast in accordance with Clause 3, Article 8 of the State Budget Law, ensuring that the total debt mobilization level (including the amount expected to be mobilized in 2007) does not exceed 30% (for Hanoi and Ho Chi Minh City, it is 100%) of the projected investment construction and development expenditure of the provincial state budget of the locality.

5. On the preparation of the local state budget forecast:

2007 is the first year of the new period of stabilization of the local state budget in accordance with the State Budget Law, the preparation of the local state budget revenue and expenditure forecast must closely follow the objectives and tasks of the state budget for 2007 mentioned above and based on the resources according to the allocation standards for the state budget in 2007, referring to the provisions of the State Budget Law and guiding documents implementing the Law to prepare the state budget forecast for 2007 and the period 2007-2010; ensuring that the local state budget forecast for 2007 complies with the provisions of the State Budget Law regarding increasing self-balancing capacity, developing the local state budget, reducing supplements from higher-level budgets or increasing the percentage rate (%) of the redistribution of payments to higher-level budgets compared to the previous stabilization period.

In addition to general guidelines on the preparation of the state budget forecast, the preparation and construction of the local state budget forecast need to pay attention to the following main contents:

5.1. On the preparation of the local state budget revenue forecast:

Based on the results of economic and social indicators, budget revenue and expenditure over the five-year period 2001-2005 of the locality, based on the socio-economic development goals and plans for the 2006-2010 period approved by the Party Congresses at all levels, the ability to achieve socio-economic targets and the state budget in 2006, on the basis of forecasting the economic growth rate and revenue sources in 2007 for each sector, each field, and each economic entity of the locality, and new revenue sources arising on the territory, calculate accurately and comprehensively each revenue field and each revenue item according to regulations; the domestic revenue forecast from tax and fee revenues (excluding oil revenue) in 2007 should increase by a minimum of 14-16% compared to the estimated actual performance in 2006 based on the assessment that the state budget revenue in 2006 increased by a minimum of 5% compared to the Prime Minister's assigned forecast (excluding oil revenue), the revenue forecast from import-export activities should increase by a minimum of 8-9% compared to the estimated actual performance in 2006.

5.2. On the preparation of the local state budget expenditure forecast:

- Based on the state budget revenue forecast on the territory, the local state budget revenue entitled to 100% in accordance with the State Budget Law, the balanced expenditure level of the local state budget according to the allocation standards and criteria for the state budget in 2007 decided by the Prime Minister shall determine the percentage rate (%) of the division of shared revenues between the central state budget and the local state budget, the supplementary balance from the central state budget to the local state budget in 2007 (if any) and be stabilized during the new budget period in accordance with the State Budget Law and guiding documents of the Law. On this basis, based on the socio-economic development tasks of the locality for the 2006-2010 period and the socio-economic development target for 2007, the current expenditure policy system and the actual situation of each locality, the Department of Finance shall coordinate with the Department of Planning and Investment to advise the Provincial People's Council to decide the allocation standards for the local state budget in 2007 for each lower-level administrative authority and ensure the stability of the supplementary balance from higher-level budgets and the percentage rate of the division of shared revenues between the state budgets of various levels of administrative authorities. At the same time, ensure that the allocation standards for the local state budget for important expenditure tasks (education and training and vocational training fields, science and technology fields) are not lower than the levels decided by the National Assembly and assigned by the Prime Minister.

- Prioritize funding for infrastructure construction tasks, focusing on investing in key projects and works of the locality (transportation, water conservancy, works serving economic structure transformation, works to mitigate natural disaster consequences...); proactively allocate the local state budget to implement the goal of solidifying school classrooms, eliminating three-shift classes, temporary classrooms made of bamboo, wood, and leaves, solidifying irrigation canals and rural roads; village industry infrastructure, tourism infrastructure; implementing the development of crop and livestock breeds; economic structure transformation; promoting trade, expanding and seeking export markets; paying special attention to poverty reduction, job creation, and combating social evils;...

- Allocate sufficient counterpart funds for ODA projects or ODA project components implemented on the territory under the responsibility of the locality according to the Prime Minister's decision; projects that must be allocated from the local state budget according to the regulations. Proactively calculate and allocate within the construction and development expenditure forecast sources to settle outstanding construction debts and debts to be repaid when due.

- Allocate the local state budget construction and development expenditure forecast corresponding to land use fee revenue to invest in economic and social infrastructure works.

- Allocate construction and development expenditure from land use fee revenue, including transferred land use fee revenue from the previous year to the next year (if any) in accordance with the prescribed regulations to invest in economic and social infrastructure works and relocation and resettlement projects, site preparation for construction.

- For lottery revenue sources, for the 2007 fiscal year, implement a central budget mechanism with targeted supplementary funding for local budgets corresponding to the projected lottery revenue budget and stabilize it for the period 2007-2010 to invest in social welfare infrastructure, primarily focusing on education and healthcare sectors.

- Develop plans to mobilize capital for local infrastructure investment, allocate local budgets to ensure full repayment of due amounts (both principal and interest) in accordance with Clause 3, Article 8 of the State Budget Law.

- Allocate funds to implement Resolution No. 37/2004/QH11 dated December 3, 2004 of the National Assembly regarding education, Resolution of the Central Committee 2 (Term VIII) concerning the science and technology sector, and Decision No. 41/NQ-TW dated November 15, 2004 of the Politburo regarding environmental protection tasks within the local government budget expenditure items.

- Set aside contingency reserves in the local budget, supplement the financial reserve fund in accordance with the State Budget Law, to proactively respond to natural disasters, floods, epidemics, and urgent tasks at the local level.

- For infrastructure investment tasks pursuant to Prime Minister's Decisions such as Decision No. 168/2001/QĐ-TTg dated October 30, 2001, Decision No. 186/2001/QĐ-TTg dated December 7, 2001, Decision No. 120/2003/QĐ-TTg dated June 11, 2003, and Decision No. 134/2004/QĐ-TTg dated July 20, 2004 of the Prime Minister, based on the objectives, tasks, and investment capital needs specified; based on the results of investments from 2001 to 2005, the ability to implement in 2006, localities should build and calculate the tasks for 2007, actively arrange and organize the local budget and other financial resources according to regulations to carry out these tasks, propose the level of central budget support along with explanations of the calculation bases.

- When preparing the state budget expenditure plan for 2007, localities should proactively calculate the sources to implement salary reform expenditures as stipulated in Point 3.4, Section II, Part B mentioned above.

C. IMPLEMENTATION:

1. Ministries and state agencies, according to their assigned functions and responsibilities, shall be responsible for building economic and social indicators in their respective fields and promptly notify the Ministry of Finance, central ministries and agencies, and localities before July 1, 2006, to serve as the basis for compiling the state budget plan for 2007.

2. The Ministry of Planning and Investment shall take the lead and coordinate with the Ministry of Finance to prepare the 2007 budget for development spending and allocation plans for certain areas of central government spending, to be submitted to the Ministry of Finance before September 10, 2006.

3. Ministries and central agencies managing national target programs, Program 135 (Phase II), and the project to plant five million hectares of new forests shall cooperate with the Ministry of Planning and Investment, the Ministry of Finance, and relevant central ministries, departments, and localities to organize the construction of program contents for the period 2007-2010, and forecast the tasks and funding levels for implementing the program in 2007 and the period 2007-2010, to be submitted to the Ministry of Planning and Investment and the Ministry of Finance before July 20, 2006; develop allocation plans for the 2007 budget for each central ministry and agency and each province and centrally-administered city, to be submitted to the Ministry of Finance and the Ministry of Planning and Investment before July 30, 2006. At the same time, they shall proactively draft and issue guiding documents within their authority to complete in 2006 as the basis for organizing and implementing the programs and projects in accordance with regulations.

4. Ministries, central agencies, and provincial people's committees shall base on this Circular and the verification figures for the state budget revenue and expenditure plan for 2007 announced by the Ministry of Finance, guide and announce the verification figures for the state budget revenue and expenditure to subordinate budget units and lower-level budgets in accordance with regulations.

Ministries, sectors, and localities shall base on the implementation of state budget revenue and expenditure during the period 2001-2005 and in 2006, the development plan for the period 2006-2010 and 2007, organize the preparation of the 2007 state budget plan and the revenue and expenditure plan for the period 2007-2010 for their respective industries and fields (including development investment expenditure, regular expenditure items; budget implementation of assigned target programs) to be submitted to the Ministry of Finance and the Ministry of Planning and Investment for consolidation and reporting to the Prime Minister.

Ministries, central agencies, and localities shall organize the work of building, consolidating, and reporting the 2007 state budget plan and the period 2007-2010 in accordance with the provisions of the State Budget Law, guiding documents, and the contents guided by this Circular; report fully the content and forms as prescribed in Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance and related forms prescribed in this Circular; submit to the Ministry of Finance before July 20, 2006 (for ministries and central agencies) and before July 25, 2006 (for provinces and centrally-administered cities).

5. The Ministry of Finance shall take the lead and coordinate with the Ministry of Planning and Investment to organize meetings to discuss the 2007 state budget plan and the period 2007-2010 with state-owned economic groups and corporations from around the end of June 2006, with ministries and central agencies, and with ministries and agencies managing national target programs, Program 135 (Phase II), and the project to plant five million hectares of new forests from around the end of July 2006 (specific meeting schedules will be announced later).

For localities, the 2007 state budget plan is the first year of the new stable budget period 2007-2010, the Ministry of Finance shall take the lead in organizing meetings with the finance bureaus of provinces and centrally-administered cities from around mid-July 2006, and meetings with provincial people's committees from August 2006 to discuss the 2007 state budget plan (expected to complete discussions before September 1, 2006) to ensure sufficient time for consolidation and reporting to the Government and National Assembly bodies about the 2007 state budget plan.

6. The General Department of Taxation and the General Department of Customs shall be responsible for providing detailed guidance on this Circular to subordinate units to implement the construction, compilation, and reporting of the state budget revenue forecast for the year 2007 and the period 2007-2010 within their respective fields; they shall proactively organize meetings with provincial and municipal tax and customs bureaus regarding the state budget revenue forecast for the year 2007 and the period 2007-2010 as prescribed.

7. Regarding the forms for establishing and reporting the state budget forecast for the year 2007 and the period 2007-2010:

- For Ministries and central agencies, they shall aggregate and report to the Ministry of Finance the state budget forecast according to the forms and timeframes stipulated in Circular No. 59/2003/TT-BTC dated June 23, 2003, of the Ministry of Finance, and the additional forms specified in this Circular (Form Nos. 2 and 4); particularly, they shall prepare a detailed state budget forecast down to each direct budget-using unit (according to Form No. 02 - Annex No. 2 - Circular No. 59/2003/TT-BTC) and the important tasks of the Ministry or agency to prepare explanations for the National Assembly's review of the state budget forecast for each Ministry or central agency; after the Prime Minister allocates the state budget for the year 2007, it shall be distributed and allocated to budget-using units before December 31, 2006, in accordance with the State Budget Law.

- For localities: They shall aggregate and establish the local budget forecast, and report to the Ministry of Finance according to the forms (Form Nos. 01, 02, 06, 07, 10, 12, 13, 14, 16, 17, 18, 19, 20, 21, 22, 23 - Annex No. 6) and the timeframes stipulated in Circular No. 59/2003/TT-BTC dated June 23, 2003, of the Ministry of Finance, and the additional forms specified in this Circular (Form Nos. 1, 3, 5, 6, 7).

8. This Circular shall take effect fifteen days from the date of publication in the Official Gazette.

During the process of constructing the state budget forecast for the year 2007 and the period 2007-2010, especially for the year 2007 when new policies and regulations are issued, the Ministry of Finance will issue supplementary guidance notices; in the organization of constructing the state budget forecast for the year 2007 and the period 2007-2010, if there are any difficulties, Ministries, central agencies, localities, economic groups, and state-owned corporations are requested to report them to the Ministry of Finance for prompt resolution./.