Budget collections only met the 2013 target thanks to efforts in the final month of the year.
In his report on the State budget situation presented to the sixth session of the National Assembly (NA) last October, Minister of Finance Dinh Tien Dung estimated that budget collections for all of 2013 would stand at just VND752,370 billion ($35.8 billion), down VND63,630 billion ($3.03 billion) against initial estimates. For this reason he proposed, on behalf of the government, that the NA raise the budget overspending limit to 5.3 per cent of the GDP from 4.8 per cent and issue additional government bonds worth $8.1 billion. He also suggested that the government make use of other financial sources, including 75 per cent of profits from oil and gas and all dividends generated from State stakes in enterprises that have not been transferred to the State Capital Investment Corporation. Such financial sources were expected to help cover the shortfall in State budget revenue in 2013.
The deficit, Minister Dung explained, was caused in part because budget expectations for 2013 were greater than the actual ability of the economy. Vietnam expected to collect 20 per cent more in terms of land taxes and export and import taxes compared to 2012 - an impossible task given the existing economic climate. It also had to provide tax breaks to enterprises, which were a huge loss to the State budget. Last but not least, the country’s economic growth in 2013 was not as robust as hoped.
No need to worry
After the NA gave the green light to adjusting the budget collection target, the situation changed for the positive. The Ministry of Finance (MoF) proactively focused on the implementation of State budget collection, and the total collections last year, as a result, reached VND819,000 billion ($39 billion), accounting for 100.4 per cent of the target. A quick look at the budget situation in 2013 reveals that during the first eleven months of the year collections accounted for only 85.57 per cent of the annual target, or an average of 7.78 per cent per month.
Yet budget collections in December were around 14.8 per cent, or double the monthly average. In explaining such an anomaly, Minister Dung said that the NA had released certain resolutions asking State-owned enterprises (SOEs) to submit dividends from State holdings in joint stock companies. “The NA also decided to collect 75 per cent of the profit from the Vietsovpetro joint venture instead of 50 per cent as previously,” he said.
As a result, major concerns over a severe shortfall in State budget revenue were alleviated. But the achievement was only possible thanks to timely guidance from the NA and the government and strong coordination between the country’s 63 cities and provinces. Other factors were the quick introduction of NA resolutions allowing the government to use other financial sources, such as dividends from State stakes in SOEs and profits from oil and gas. The temporary measures helped send about VND28,000 billion ($1.3 billion) to the State budget over the final month of the year.
For its part, MoF has actively implemented a range of solutions in conducting its political mission. It carried out inspections at 54,000 enterprises and retrieved about VND13,400 billion ($638.1 million) for the State budget. It also imposed tax penalties of VND2,300 billion ($109 million) on 230 foreign-invested enterprises that it found had used transfer pricing tactics to evade their tax obligations.
Last year the situation in the country’s business community improved, as up to 34.6 per cent of enterprises reported profits, an increase of 4.6 per cent compared to 2012. This created the conditions for total corporate income tax collections in 2013 reaching VND91,000 billion ($4.3 billion), up by 18 per cent against 2012. “Our financial policy continued to play a pivotal role and was institutionalised in various legal documents, including the revised Law on Corporate Income Tax, the revised Law on Value Added Tax, and the government’s resolution on providing preferential treatment to enterprises,” said Minister Dung. “These policies were welcomed by the business community, as tax exemptions, reductions and deferments totalling $780.2 million were granted in 2013.”
Meanwhile, total expenditure in 2013 was estimated at VND986,000 billion ($46.9 billion), equal to 100.8 per cent of the annual estimate, of which spending on investment and development stood at VND201,600 billion ($9.6 billion), equal to 115.1 per cent of the annual estimate. Meanwhile, spending on economic and social development and national defence and security (including salary reform) was VND679,600 billion ($32.3 billion), or 100.8 per cent, while approximately VND105,000 billion ($5 billion) was set aside to pay debts and provide aid, equal to 100 per cent of the annual target.
In 2013 Vietnam mobilised capital by issuing $8.1 billion worth of government bonds, which played an important role in balancing the State budget. As a result the State budget deficit in 2013 stood at only VND167,200 billion ($7.9 billion), or 4.95 per cent of GDP. This figure was a little bit higher than the old ceiling of 4.8 per cent of the GDP set by the NA in the late 2012 and much lower than the new deficit ceiling of 5.3 per cent. It paved the way for the government to proactively implement fiscal policy in 2014 with the aim of boosting economic growth and bringing the economy out of the doldrums.
Looking to 2014
The economy wrapped up a fairly grim 2013 with stability. Many major economic indicators showed robust growth but stagnation remained a major concern for 2014 and subsequent years. This year State budget collections are estimated at nearly VND783,000 billion ($37.2 billion), including VND539,000 billion ($25.6 billion) from domestic sources. The budget deficit is targeted at VND224,000 billion ($10.6 billion), equivalent to 5.3 per cent of GDP. The best possible scenario for 2014 is that budget collections exceed the target by 5 per cent, and the budget deficit will then be only VND184,860 billion ($8.8 billion). If this is the case it will represent a major success for the MoF and the financial sector.
MoF has set itself four main tasks for this year. Firstly, it will persist with measures aimed at easing difficulties for enterprises, restoring the country’s growth rate and generating more revenue for the State budget. Secondly, it will carry out all measures relating to the State budget synchronously and effectively to fulfil the targets set by the NA in budget collection and spending. Thirdly, it will strive to ensure sound management of bad debts while bolstering the country’s commitments and taking steps to ensure the country’s financial security. Its final task will be to strengthen fiscal discipline and tighten relevant regulations.
In order to successfully implement these tasks, Minister Dung confirmed that a number of drastic measures would taken, with the top priorities being to balance State budget revenues and spending, intensify fiscal discipline and guarantee transparency in policy implementation. “MoF will introduce measures to handle tax revenue losses, assuring national financial security, innovating tax and fee policies, and enhancing price management over essential goods such as petrol, electricity and public services,” he said.
B&F in brief
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Citibank Vietnam last month announced the appointment of Mr Dennis Hussey as its Country Officer, replacing Mr Brett Krause, who finished his term late last year.
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