Balance budget: Effort on the race to increase revenue, reduce expenditure.

Domestic revenues have to increased to fill the reduction in revenues from exported crude oil. Photo: H.Vân

Difficulty in balance

According to the statistics of the Ministry of Finance, the State budget balance of the first 10 months in 2016 reached 821 trillion VND, equal to 80.9% of the cost estimate, an increase of 6.1% over the same period in 2015. In fact, although the total State Budget achieved good progress over the estimate, the State budget balance has many difficulties due to reducing revenue in the Central Budget. The Ministry of Finance has calculated the loss could reach from 8,000 up to 12,000 billion VND in 2016.

Mr. Võ Thành Hưng - Director of the State Budget Department, Ministry of Finance, analysed the situation: “Firstly, the revenue collection of crude oil and Exports which is 100% of the regulatory revenues in the Central Budget tends to fall very fast as the oil prices fall, oil mining production reduces and export & import tax also decreases due to the implementation of integration commitments. In particular, the revenue collection from crude oil in the first 10 months of 2016 was 32.46 trillion VND, equal to 59.6% of the estimate, declined 42.4% over the same period in 2015 while oil production from the payment in early of 2016 until now reached 90.3% of annual plan. Furthermore, the average price payment of the first 10 months of 2016 is $US 42.7/barrel, decreased $US 17.3/barrel compared to the estimate. The export turnover within October 2016 also increased 4.1% over the previous month; in that, the import turnover of some major items which contributed large amount of revenue to the State Budget, such as gasoline, oil tanks increased by 13.2%; textile materials, garments, leather, shoes rose by 10.5%; chemical products increased by 7.7%, ... Adding together the first 10 months, after the refund of VAT under the regime of the total revenues collection from export activities, it reached 122.26 trillion VND, equal to 71.1% of the estimate, decrease by 4.3% compared to the same period in 2015. If the total of 2 revenues accounted for 40% of the State budget revenues in the period 2006-2010, then the total fell under 25%. It is expected by the end of 2020, the figure will be maintained at 14%.

Another reason that caused difficulty in revenue collection for the Central Budget is regulated revenue of the key localities. This amount of revenue increased along with the growth rate of domestic revenue collection in general. In the period 2006-2010, there are 11 regulatory localities generating revenue of the central government. In the period of 2011-2016, there were 13 localities, including 3-4 local regulatory ratios above 50%. For the rest, basically, there are 50 localities still receiving subsidies from the Government. "In these conditions we cannot raise the rate of overspending, the ceiling of public debt has been stipulated by the National Assembly at 65% of GDP, the optimal solution is structured to increase domestic revenue collection, fill the revenue reduction from imports & exports and crude oil "- Mr. Hung said.

Collecting domestic revenue is positive

Although the increase in domestic revenue collection is a big challenge, in recent time, the Ministry of Finance has also implemented this direction quite well. The domestic revenue collected in the first 10 months of 2016 was 663 trillion VND, equal to 84.5% of the estimate, up 13.3% over the same period of 2015. There were 11 of 16 revenues and taxes achieved good results including: non-State owned industry and commerce was 89.9%; foreign direct investment enterprises 84.9%; Personal income tax was 87.9%; Environmental protection tax 91.1%; registration fee 96%. All the collections that related to property also got a high result, such as land use fee income was 127.8%; ground rent was 141.5%; house sales was 308.8%; agricultural land tax 165.6%; non-agricultural land tax was 91.8%, etc.

In particular, in 63 provinces, there was mostly growth in revenue collection. Only 4 provinces achieved low results in collection as planned. There are 39 localities that ensured the implementation of scheduled estimates (the revenues collection reached over 83.3%), in that 21 localities have the progress of collection which achieved over 90% such as Quang Nam, Thai Nguyen, Thai Binh, Hau Giang, Ninh Binh, Bac Lieu, Ha Nam, Kien Giang, Da Nang, Hai Phong, Vinh Phuc, Tien Giang, Khanh Hoa Province, Lai Chau, Phu Tho, Hoa Binh, Soc Trang, Bac Ninh, Thanh Hoa, An Giang, Dong Thap.

In order to compensate the loss of revenues from crude oil and exports from the rest of the year, the tax service also had specific plans to continue to increase the revenues collection. In particular, focusing on preventing loss of revenue activities such as reinforcing the inspection activities; closely monitoring the situation of debt management, tax debts enforcement and tax debt recovery progress in each Tax Department; enforcing tax debt for enterprises owed large tax debt that was announced by the General Department of Taxation.

Looking beyond to the next period, according to Mr. Vo Thanh Hung, the Ministry of Finance has set three major directions to increase domestic revenue collection. The first solution is to focus on improving the investment environment for enterprises development. Secondly, revising for appropriate adjustment of receivables outstanding, including direct and indirect revenues by expanding the collection object to the tax liability on each enterprise on each item, but the object to the taxpayer will be expanded. Finally, improving management efficiency to reduce losses and increase additional revenue sources.

Saving expense cost

For State budget expenditure, in the last 10 months, total expenditures reached 980.5 trillion VND, equal to 77% of the budget and an increase of 6.9% over the same period in 2015. The expenses are: Investment development was 163.2 trillion VND, equal to 64% of the estimate; payment of debt and aid was 130.84 trillion VND, equal to 84.4% of the estimate which ensures full payment of debt promptly under the commitments, not let the adverse impact on the macroeconomic situation; development of economic - social services, defense, security, administration were 679.9 trillion VND, equal to 82.5% of the estimate. Overspending in the State budget in the 10 months of 2016 was 159.5 trillion VND, approximately by 62.8% of the overspending that was approved by the National Assembly in the early of 2016.

In the conditions that collecting revenues was facing difficultly while the demand for expenditure was raised. In the near future, the Ministry of Finance set the requirement for strict savings as a priority task, as stated by Prime Minister Nguyen Xuân Phúc in the 2nd meeting of the National Assembly: "we need to change the culture in practicing thrift of individual officers and the entire society. Also, we need to manage tightly State budget expenses, procurement and use of public property, public cars, organizing conferences and workshop, business trips in the country and abroad ". Additionally, one of the immediate requirements is that the Ministries and Central agencies have to arrange for salary adjustments since July 1^st 2017 in the assigned estimate without addition. To implement the task, the units will be forced to save other expenses in order to ensure the increase in salary.

Besides that, the restructuring of the State budget expenditure will be made following the direction of increasing the proportion of investment development, gradually bring this proportion in 2017 up to 25.7% of total budget expenditure. For the business sector, the Government has a mechanism and is asking these units to enhance their autonomy on the basis of allowing prices adjustment and public service charges under the schedule. The Ministry of Finance has calculated to reduce the expenditure on the units of Ministries, central agencies and businesses in the next year nearly 1,000 billion VND, including health care, education and training. However, the withdraw cost of this phase is used for restructuring which instead of direct support for the unit, is used for supporting the policy beneficiaries and turn back to invest to these fields.

With the effort to increase revenue collection efficiently and the above solutions, the Ministry of Finance is expected to accomplish the missions of the financial budget in 2016 successfully as well as ensuring the balance of the State budget in the next period.