Circular 40a/TC-NSNN

CIRCULAR No. 40a-TC/NSNN OF JUNE 30, 1997 GUIDING THE ELABORATION OF THE 1998 STATE BUDGET DRAFT In furtherance of Directive No. 416-TTg of June 14, 1997 of the Prime Minister on the elaboration of the socio-economic development plan and the 1998 State budget draft, the Ministry of Finance hereby provides the following guidance for evaluating the 1997 State budget execution and elaborating the 1998 State budget draft: A. Organization and evaluation of the 1997 State budget execution: In implementation of the socio-economic development plan for the first six months of 1997, the socio-economic growth rate was maintained; good results were obtained in industrial and agricultural production, goods circulation and export activities, inflation was curbed, many positive changes were seen in various aspects of the social life. Since early this year many ministries and localities have actively performed their budget revenue and expenditure tasks assigned by the Government, expeditiously implemented the Law on the State Budget and the guiding documents thereof. Revenues from a number of fields were relatively good (revenues from foreign invested enterprises, income taxes, traffic fees...); Expenditure administration and control were better. Yet, there have appeared constraints and problems: slow production and consumption of a number of essential goods, ineffective control of smuggling and tax evasion which has resulted in low budget revenues in some fields compared with the targets approved by the National Assembly (revenues from the non-State sector, agricultural land use tax, import and export taxes; the delay in the allocation of capital to and the execution of capital construction works and national programs which has led to low budget expenditures in these domains), and a prevailing situation of inefficient and wasteful spendings. The ministries and localities shall base themselves on the socio-economic development objectives, the draft State budget revenues and expenditures assigned to them, and their performances in the first six months to work out direction and execution measures to be taken in the last six months of 1997 with a view to accomplishing the 1997 State budget revenue and expenditure tasks already approved by the National Assembly. They shall simultaneously evaluate the execution of the entire 1997 State budget under their management, which shall serve as the basis for elaborating the 1998 State budget draft. Specifically: I. With regard to revenues 1. For the State enterprises: - To thoroughly understand the situation of production and business of enterprises. - To categorize enterprises for specific concrete policies: Enterprises which effectively operate and need to be maintained and developed and measures should be sought to support their development; enterprises which need to be rearranged and equitized; and enterprises which must be dissolved or declared bankrupt. - To regularly urge the payment and collection of budget revenues, to intensify the inspection of the enterprises� accounting and balance of final accounts so as to exclude all irrational costs from the product prices and circulation fees and increase accumulation for paying budget revenues. To closely supervise the increasing of basic depreciation deductions to ensure compliance with the set regulations. The advance deductions and reserve fund should be closely monitored, if there is actually no need to make advance deductions or contributions to the reserve fund, it is necessary to reduce expenses proportionally so as to re-determine taxable profits and profit tax to be paid to the State budget. - To strictly observe the tax management procedures (declaration, notice of collection, inspection), to fully collect any arising taxes and resolutely not to allow any newly arising tax arrears. - To issue orders to collect and impose fines on evaded taxes and due debts which units deliberately delays in remitting them to the budget. 2. For the foreign invested enterprises: - To list all investment projects in each territorial area and categorize them into: those which are being constructed, those which have been put into operation, and those with their tax grace periods having expired, the land area and land use duration of each project so as to fully calculate and collect taxes and land, water surface and sea surface rents as prescribed. To make a dossier for managing each project�s tax payment, to thoroughly grasp all data related to the tax payment and financial situation of each project. - To concentrate on checking the tax settlement, ensuring that 100% of enterprises already put into operation have their taxes settled. To pay attention to checking the costs of imported supplies and materials, duty-free imported supplies and equipment, to impose fines and collect taxes if they are not used for the set purposes. 3. For the non-State economic sector: - To sum up the implementation of business re-registration under Directive No. 657-TTg of September 13, 1996 of the Government. To combine the business registration with the management of tax payment; to gradually put the management of non-State industrial production, trading and service units into order; to put an end to the situation of doing business without registration or with improper registration, doing businesses without tax payment or with improper tax payment; to closely supervise the households which have applied for giving up their business activities; to make and post a list of households engaged in business activities at the office of the ward/commune People�s Committee and the tax office so that the people can help detect those subject to taxes. - To closely follow the fluctuation of the market prices, the actual business situation of each tax payer and each commodity line for each period of time and season; to conduct sample surveys and re-calculate precisely the turnover and turnover tax rates so as to prevent losses in turnover tax revenues. For business households that pay tax according to the declaration method: it is necessary to closely supervise their observance of the regime on accounting records and making of vouchers for sale and purchase of goods, the signing of economic contracts; to discover and handle in time cases of false declaration of business activities such as deliberately failing to declare turnover, declaring expenses higher than actual ones, loss or illegal sale of invoices or receipts, disparities among copies of invoices, receipts , vouchers. To expand the application of accounting system to large business households and companies. For business households that pay tax according to the tax assignment method: turnover must be determined according to the procedure prescribed in Official Dispatch No. 240-TCT/NV6 of February 21, 1995 of the General Department of Taxation; to conduct sample surveys of commodity items and business lines or geographical areas so as to project taxable turnover precisely; to consult the ward and commune People�s Committees and tax counseling councils to ensure a fair and objective determination of turnover and turnover tax rates whilst making public the tax rates applied to tax payers in each area at the office of the commune/ward People�s Committee. - To get to know thoroughly the production and business situation of non-State enterprises so as to precisely, fully and promptly collect the prescribed revenues. 4. For import and export taxes: - To collect all tax arrears according to Directive No. 575-TTg of August 24, 1996 of the Prime Minister. To intensify the measures to fight against tax evasion, especially tax on imported consumer goods. To enhance the management of and to fight against the evasion of tax on goods of foreign invested enterprises, gifts, presents, processed products and goods temporarily imported for re-export as well as cases of tax refunding. - To supervise the collection of import and export taxes at the border gates where taxes are paid in large amounts. 5. For revenues related to land and residential houses: - With regard to the fee on the assignment of land-use right and the tax on the transfer of land use right: To immediately collect all land related revenues which have not yet been paid or misappropriated according to inspection and supervision results. The People�s Committees of various levels shall direct the tax office in coordinating with the land administration agencies and concerned agencies to ensure timely collection of revenues for cases where land use or land lease permits are granted, cases of land-use right registration and application for land use right certificates, application for construction permits, certification of altered purposes or assignment of land use right so as to manage collections according to the prescribed regime. - For the agricultural land use tax: To fully collect tax on the land areas which are due to 1997 tax payment, particularly those areas under perennial plants in the eastern South and the Central Highlands; the paddy price for tax calculation must be close to the market price. - For residential land tax: To quickly complete the residential land tax bracket, to fully collect tax on this type of land. - To make recommendations to the competent agencies to simplify the procedures for and properly adjust the selling price in order to promote the sale of houses under the State ownership. 6. For fees and charges: - Fees and charges at the ward/commune level: To thoroughly know the collected fees and charges at the ward/commune level, to request the full payment or inclusion of such fees and charges into the State budget. - Fees and charges collected by units and branches: By supervising the use of receipt vouchers to thoroughly know the collected fees and charges, to request the full and timely payment or inclusion thereof into the State budget. - Traffic fees: shall be collected according to Circular 29-TC/TCT of June 9, 1997 of the Ministry of Finance adjusting and supplementing Circular No. 117-TC/TCT of December 24, 1994 of the Ministry of Finance on the collection of traffic fees which are included in the petrol price. To check the petrol volumes put into warehouses and already sold out and to inventorize the volumes of petrol and diesel still left at warehouses of companies and their affiliates which are subject to the payment of traffic fees, to urge them to promptly pay traffic fees to the State budget. II. With regard to expenditures: On the basis of the assigned annual budget drafts and the progress in performance of the tasks, budget expenditures must be made according to the prescribed regime and only for the assigned tasks in an economical manner and with priority given to the important tasks. The evaluation of expenditures must be based on the results of the performance of the assigned tasks, analysis shall be made in those fields with wasteful spendings to find out causes and remedy solutions for the last six months, which shall serve as the basis for elaborating the 1998 State budget draft. 1. From now till the end of the year, additional budget expenditures outside the budget draft shall not be approved, except in really urgent cases such as control and overcoming of natural calamities, including floods. The ministries, localities and units must practice thrift, rearrange the spending tasks so as to meet newly arising urgent spending needs, immediately cut down unnecessary expenses on meetings and receptions. For spending needs which have been already decided but not yet included in the budget draft approved at the beginning of the year, they should be re-examined so as to reschedule the spendings and put them in the 1998 budget draft. For the provinces and cities directly under the Central Government which are able of collecting their local budget revenues more than the 1997 budget drafts, such excess revenues should be used as additional allocations for education, training and scientific development in an effort to immediately realize the Resolution of the second plenum of the Party�s Central Committee in 1997; the rest shall be added to the fund for the construction of socio-economic infrastructure works, but not to the administrative expenditures. For the provinces and cities directly under the Central Government which may not achieve the local budget revenues set in 1997 budget drafts, they should take initiative in rearranging expenditure items to suit the revenue source of the local budgets while still ensuring funds for the localities� significant socio-economic development tasks, including education, training and scientific development. 2. For capital construction expenditures: The ministries, branches and localities shall concentrate on directing the fulfillment of their assigned budget drafts for capital construction investment, which shall serve as the basis for making budget allocations according to the volume of work done and the payment procedures. For the construction projects which are expected to be funded by the 1997 budget draft, if until July 30, 1997 they have not yet completed the capital construction investment procedures under Decree No. 42-CP of the Government they shall be removed from the 1997 capital construction investment plan and considered for inclusion in the 1998 plan. On the basis of the volume of work done in the first six months and the projected volume to be fulfilled in the whole year as well as the allocated expenditures and the possible allocations for the last six months so as to determine the construction volume of each project that must be shifted into the 1998 budget draft. 3. For construction investment expenditures for socio-economic infrastructure works, social welfare facilities, for development of the housing fund, investment in agricultural and rural development, as well as expenditures for reforestation from the local budget revenues comprised of levy on the land-use right transfer, land rents and proceeds from the sale of residential houses, revenues from public lotteries, levy on the use of agricultural land for rice cultivation and royalty on forest natural resources; the localities shall rely on the amount of revenues to make expenditures in consistence with the set objectives. If revenues fail to reach the planned targets, expenditures shall be curtailed proportionally, expenditures shall be made only upon the availability of revenues so as to avoid unpayable debts. 4. For the national programs: Funding shall be allocated to the national programs according to their estimated budgets and implementation plans. The agency that manages national programs shall review and evaluate the impact of each program in terms of its objectives, implementation timetable, results achieved by the end of 1997, thereby making specific recommendations on the management mechanism and rearrangement of programs. 5. For current expenditures: On the basis of the budget drafts assigned from the beginning of the year, the progress in the performance of the tasks and the budget abilities to estimate current expenditures for the whole year in close accord with the actual situation of each ministry or locality. Each field of current expenditures should be analyzed according to various expenditure items in the list of the State budget; to analyze the expenditures for wages, wage allowances, compulsory expenses extracted from wages, current operational expenditures as well as non-current expenditures such as purchase and repair, poverty relief, overcoming of natural calamities, floods..., which shall serve as the basis for elaborating the 1998 budget draft. III. Evaluation of the implementation of the State Budget Law and its guiding documents: The ministries, central agencies, local administration of various levels and units shall evaluate their implementation of the Law on the State Budget and its guiding documents in the first months of 1997 in the following aspects: delegation of the budget management, allocation of the budget drafts, observance of the budget drafts, budget accounting, management of commune/ward budgets, observance of the regulations and policies on budget revenues and expenditures, thereby making recommendations to the competent levels to amend and supplement the documents guiding the implementation of the Law and other concrete regulations and policies related to the management and execution of the State budget. B. Elaboration of the 1998 State budget draft The elaboration of the State budget draft must fully comply with the provisions in Decree No. 87-CP of December 19, 1996, Circular No. 09-TC/NSNN of March 18, 1997 and Circular No. 14-TC/NSNN of March 28, 1997. On the basis of the requirements set forth in Directive No. 416-TTg of June 14, 1997 of the Prime Minister and the actual situation, the Ministry of Finance provides guidance on the following issues: I. Requirements and objectives: The year 1998 is the third year executing the 1996-2000 five-year plan, the second year implementing the State Budget Law. The situation of 1997 and the recent years has shown that: - The economic growth rate has been maintained but some branches have experienced stagnation and difficulties in marketing their products. - Inflation has been curbed and tends to be on the decline. - The demand for development investment expenditures, current expenditures for education, healthcare, culture, social affairs, defense and security has been growing day by day. In light of the above-mentioned situation, the elaboration of the 1998 State budget draft must meet the following requirements and objectives: 1. Requirements: - To continue enhancing the national financial potential, consolidate the national finance and create a further improvement in the materialization of the policy of restructuring the State budget. - The draft of State budget revenues must be made in accordance with law, in such a way that they cover and calculate all sources of revenues, effectively fight against failures in collecting revenues, ensure equality among enterprises in their production and business activities; and at the same time encourage the development of business and production activities, generate more revenues for the present as well as long time. To increase the percentage of budget expenditures for development investment, education and training, science, technology and environmental protection as compared to 1997; to properly execute the policy that the State and the whole society join efforts in developing education, training, culture and social welfare. The increasing rate of current expenditures must be lower than that of development investment expenditures. The 1998 State budget draft must be elaborated in detail down to the level of each budget-using unit and including all items in the List of the State Budget. - The elaboration of the State budget draft must comply with the provisions of the Law on the State Budget, Decree No. 87-CP of December 1996 of the Government, Circular No. 09-TC/NSNN of may 18, 1997 and Circular No. 14-TC/NSNN of March 28, 1997 of the Ministry of Finance regarding: bases, general requirements and forms for elaborating the budget draft, notice of the budget draft�s examination serial number; discussions on the draft budget; time limit for submitting reports on the draft budget; tasks, powers and procedures for elaborating, summing up and deciding the budget draft. - To stabilize the percentages for distributing revenues among the various budget levels and additional allocations from the higher-level budget to the lower-level budget as in 1997. Only the additional allocations from the higher-level budget to the lower-level one shall be increased by 6% compared with those in 1997. 2. Objectives: - To maintain a GDP growth rate of 9.0% - 9.2% on the basis of stepping up production, . - To strive for a total State budget revenue of approximately 21% of GDP, of this figure revenues from taxes and charges account for