Circular No. 6616 TC/NSNN amending Circular No. 51/2004/TT-BTC dated June 9, 2004 of the Ministry of Finance.

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 51/2004/TT-BTC ON JUNE 9, 2004 GUIDING THE IMPLEMENTATION OF DECREE NO. 123/2004/NĐ-CP OF THE GOVERNMENT ON SOME SPECIAL FINANCIAL MECHANISMS FOR THE STATE BUDGET OF HANOI CAPITAL CITY
REGARDING SPECIAL FINANCIAL MECHANISMS FOR THE STATE BUDGET OF HANOI CAPITAL CITY

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 some special financial mechanisms for the state budget of Hanoi Capital 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 special financial mechanisms for the state budget of Hanoi Capital City as follows:

1. This Circular guides the provisions on special financial mechanisms for Hanoi Capital City (hereinafter referred to as the City), including mechanisms for state budget management and mechanisms for mobilizing financial resources for the development of Hanoi Capital City.

A. GENERAL PROVISIONS:

2. In addition to the special financial mechanisms for the state budget stipulated in Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government and guided in this Circular, the City shall implement general provisions on financial management of the state budget 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 financial management of the state budget.

SPECIFIC PROVISIONS:

B. I. ON STATE BUDGET MANAGEMENT OF THE CITY

1. Allocation of revenue sources and expenditure tasks for budgets at various levels of the City's administration:

1.1. On allocation of revenue sources:

Based on the regulations on the allocation of revenue sources for provinces and centrally-administered cities as stipulated in Article 32 of the State Budget Law and 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 the budgets of the City's levels (city, district, county, ward, commune) in accordance with actual conditions, economic and social development requirements, national defense, security, and social order and safety of the City. For commune and town budgets, they shall enjoy a minimum of 70% of revenues from: land transfer tax; property tax; business license tax collected from individuals and households; agricultural land use tax collected from households; stamp duty on property registration.

1.2. The percentage (%) of revenue distribution between the central government budget and the City budget shall be decided by the Government and submitted to the National Assembly Standing Committee for approval; the duration of stability of this percentage (%) shall be decided by the Government and submitted to the National Assembly for approval.

1.3. Allocation of expenditure tasks:

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

1.4. Annually, based on the city budget estimate 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 city budget revenue and expenditure estimate; revenue and expenditure tasks for each unit under the city 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 ensuring compliance with the overall direction of the state budget. 1.5. To effectively utilize the land fund managed by the City, the People's Committee of the City may temporarily borrow from the city budget or from sources as specified in Clause 1.2, Section 1, Part III of this Circular for infrastructure construction projects under the city budget investment tasks to organize land use rights auctions. After completing the auction, the proceeds will be recovered and returned to the budget or repaid the raised funds. 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 tasks that have been approved by competent authorities.

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

- The proceeds from selling land use rights through auctions shall be used to repay the temporary borrowing from the city budget or raised funds, with the remainder being fully deposited into the city budget (land use fee) for investment in infrastructure development under the city budget investment tasks as prescribed.

- Accounting for budget revenue and expenditure for these tasks must comply with the prescribed regulations.

II. ON INCENTIVE AND TARGETED SUPPORT MECHANISMS FROM SURPLUS REVENUE OVER THE CENTRAL BUDGET ESTIMATE GENERATED

IN THE CITY

1. On incentives for surplus revenue over the central budget estimate:
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 government 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 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 for 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.

1. Regarding rewards for exceeding the state budget estimate:

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

2. The central budget shall supplement the city budget with targeted funds corresponding to the entire amount of increased revenue of the central budget compared to the approved estimate by the Prime Minister for the remaining revenue items shared between the central budget and the city budget (after rewarding excess revenue according to Point 1, Part II of this Circular) and corresponding to the entire amount of increased revenue compared to the approved estimate of revenue items that the central budget enjoys 100%, except for revenue items specified in Subpoint 2.2, Section 2, Part II of this Circular.

2.1. The determination of the amount of increased revenue for shared revenue items shall be calculated based on the total amount of shared revenue exceeding the estimate, without specifying each individual shared revenue item.

2.2. For revenue items that the central budget enjoys 100% according to 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;

- Revenue items 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;

- Revenue and expenditure items recorded according to the provisions of the law; revenue items retained by units for management through the budget according to the provisions of the law.

The determination of the targeted supplementary amount mentioned above is based on the results of the total revenue of the central budget items enjoying 100% exceeding the estimate; it does not separately calculate each individual revenue item.

3. Based on the provisions in Section 1 and Section 2, 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 about the results of state budget revenue 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 reward amounts and targeted supplements from the increase in central budget revenue as stipulated in Section 1 and Section 2, Part II of this Circular, the People's Committee of the city shall submit to the People's Council of the city for decision to use 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 the lower-level budget according to the prescribed regulations.

III. ON MOBILIZING FINANCIAL RESOURCES FOR
INVESTMENT AND DEVELOPMENT OF THE CITY:

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

1.1. For official development assistance (ODA) funding sources:

- Annually, based on the budget estimate for ODA loan funds and the commitments made 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 to allocate the budget for spending from ODA funds to invest in projects under the city budget's expenditure responsibilities to be submitted to the Government for submission to the National Assembly for approval, prioritizing the allocation of ODA funds for urban infrastructure construction programs, environmental protection, and public welfare projects within the city.

- The allocation of counterpart funds for ODA projects shall be carried out 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 shall mobilize investment capital through the issuance of local government bonds according to Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government, and other forms of mobilization according to the law; the city budget shall be responsible for paying the principal, interest, and related costs.

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 according to the guidance provided in Point 1.3.4, Subpoint 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 development within the city budget's expenditure responsibilities according to the principle: the People's Committee of the city shall develop a plan, find loan sources, seek 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 according to the mechanism of the Government lending to the city for relending to implement projects and works as proposed by the People's Committee of the city. The city shall be responsible for allocating funds from the city budget to repay the principal and interest according to the law.

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

3. The mobilization of capital for investment in infrastructure development within the city budget's scope as specified in Subpoint 1.2.1 and Subpoint 1.2.2, Subsection 1.2, Part II of this Circular must be implemented according to Article 6 of Decree No. 123/2004/NĐ-CP dated May 18, 2004 of the Government.

4. The financial resources mobilized as mentioned above shall be recorded as income 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 investment in projects with the potential to recover capital:

- On the basis of the economic and social situation and the actual conditions regarding the demand for developing technical infrastructure of the City, for projects with the potential to recover capital, the People's Committee of the City decides or submits to the competent authority to decide according to the provisions of the law. Investment mobilization shall be carried out through forms such as: BOT (build - operate - transfer), BTO (build - transfer - operate), BT (build - transfer) and other forms. Implement financial measures to support interest rates on investment loans, subsidize part of the difference between costs and service prices as prescribed by law.

- The mobilization and organization of implementation of investments in projects: BOT (build - operate - transfer), BTO (build - transfer - operate), BT (build - transfer) and other forms shall be carried out in accordance with the provisions of the law; the People's Committee of the City prepares the annual budget estimate for interest rate support, subsidizing part of the difference between costs and service prices to submit to the People's Council of the City for decision to allocate in the city budget to implement.

C. IMPLEMENTATION

This Circular takes effect after 15 days from the date of publication.Based on the provisions of this Circular, the People's Committee of the City directs the Department of Finance to coordinate with relevant agencies to organize its implementation; during the implementation process, if there are difficulties, they are requested to report to the Ministry of Finance for consideration and resolution.

Note: On June 16, 2004, the Ministry of Finance issued Circular No. 6616 TC/NSNN to amend Circular No. 51/2004/TT-BTC dated June 9, 2004 as follows:

- Remove the title of Point 1, Section I: decentralization of revenue sources and expenditure tasks for budgets at all levels of local government within the City.

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