Circular No. 6617 TC/NSNN amending Circular No. 52/2004/TT-BTC dated June 9, 2004 of the Ministry of Finance.

CIRCULAR

CIRCULAR NO. 52/2004/TT-BTC OF THE MINISTRY OF FINANCE DATED JUNE 9, 2004 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT'S DECREE NO. 124/2004/NĐ-CP DATED MAY 18, 2004 ON SOME SPECIAL FINANCIAL MECHANISMS FOR HO CHI MINH 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. 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. This Circular guides the provisions 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.

2. In addition to the special financial mechanisms prescribed in Decree No. 124/2004/NĐ-CP dated May 18, 2004 of the Government and guided in this Circular, the City shall implement general provisions on financial management as stipulated in the State Budget Law, Decree No. 60/2003/NĐ-CP dated June 6, 2003 of the Government, Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance, and other legal documents on financial management.

B. SPECIFIC PROVISIONS:

I. ON BUDGET MANAGEMENT OF THE CITY

1. On revenue classification:

Based on the regulations on revenue classification for provinces and centrally-administered cities 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 classification of budget revenues for each level within the city (city, district, county, ward, commune) in accordance with actual conditions, economic and social development requirements, national defense and security needs, and public order and safety. Specifically, for commune and town budgets, they shall enjoy at least 70% of revenues from: land transfer tax; property tax; business license tax from individuals and households; agricultural land use tax from households; and stamp duty on property transactions.

2. The percentage (%) of revenue distribution 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 the stability of this percentage (%) shall be decided by the Government upon submission to the National Assembly.

3. On expenditure assignment:

Based on the expenditure assignments of local budgets 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 assignment of expenditure responsibilities among budgets at various levels within the city shall be decided by the People's Committee of the city upon submission to the People's Council of the city, based on the principle of ensuring consistency 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, to ensure effectiveness.

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 estimates; 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 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 as specified in Clause 1.2, Section 1, Part III of this Circular for infrastructure construction projects under the city budget investment program to organize land use rights auctions. After the auction, the proceeds will be recovered and returned to the budget or the source of funds raised. 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 raised capital for these projects. The borrowing amount for each project is based on the volume and progress of implementation, not exceeding the approved budget estimate; the management and disbursement shall 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 capital, with the remainder being fully deposited into the city budget (land use fee) for investment in infrastructure development under the city budget investment program 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 revenues compared to the Prime Minister's assigned budget estimate from revenues shared between the central and city budgets as stipulated in Clause 2, Article 30 of the State Budget Law, the city budget shall be rewarded with 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 of this reward amount shall be implemented according to the provisions in Section 17, Part IV of Circular No. 59/2003/TT-BTC dated June 23, 2003 of the Ministry of Finance.

2. The central budget shall supplement the city budget with targeted funds corresponding to 70% of the increase in central budget revenue compared to the forecast approved by the Prime Minister for revenues shared between the central budget and the city budget (after implementing the excess revenue bonus as stipulated in Section 1, Part II of this Circular) and corresponding to 30% of the increase in revenue from items subject to 100% central budget allocation, excluding revenues 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, the People's Committee of the City shall report to the Ministry of Finance annually, after the end of the fiscal year, on the results of state budget revenue collection related to the bonuses 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 bonus amounts and targeted supplements from the increase in central budget revenue as stipulated in Sections 1 and 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 on the use of these funds 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 budgets according to the prescribed regulations.

III. ON MOBILIZING FINANCIAL RESOURCES FOR CITY DEVELOPMENT INVESTMENTS:

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

1.1. For official development assistance (ODA) funding:

- Annually, based on the budget forecast for ODA loan sources and 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 ODA budget for investment in projects within 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 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 shall mobilize investment capital through the issuance of local government bonds in accordance with Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government, and other forms of mobilization as prescribed by law; the city budget shall be responsible for paying the principal, interest, and related 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 in accordance with the guidance provided in Point 1.3.4, Clause 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, seek loan sources, obtain 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 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 stipulated in Points 1.2.1 and 1.2.2, Clause 1.2, Section 1, Part III of this Circular shall not exceed 100% of the total basic construction investment capital of the city budget as decided by the People's Council of the City for the current fiscal year (excluding investment capital from mobilized sources and projects funded by targeted supplements from the central budget to the city budget that are unstable - if any).

3. The mobilization of capital for building infrastructure within the city budget's scope as stipulated in Points 1.2.1 and 1.2.2, Clause 1.2, Section 1, Part II of this Circular must be carried out in accordance with Article 6 of Decree No. 124/2004/NĐ-CP dated May 18, 2004 of the Government.

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

5. Mobilizing capital for projects with the potential to recover investment:

- On the basis of the economic and social situation and the actual conditions regarding the demand for development of 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 according to the provisions of the 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 shall prepare the annual budget estimate for interest rate support, subsidizing part of the difference between costs and service prices, and submit it to the People's Council of the City for decision to allocate within the city budget to implement.

C. IMPLEMENTATION

This Circular takes effect fifteen days after its publication in the Official Gazette. 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. 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 the correction to be known and implemented by the People's Committee of Ho Chi Minh City.