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Solutions to the state budget deficit

08:39 | 21/07/2016

VCN- Why does the state budget (NSTU) tend to decrease while the local budgets exceed estimates? That is the long-lasting question when the revenue structure has changed.

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The drop of oil price has a significant influence on the state budget (Photo: H.Van).

The local budgets increase but still receive the subsidy

"The state budget successfully achieves the target", said Deputy Prime Minister Vuong Dinh Hue at the preliminary meeting of the finance sector for the last 6 months. According to Deputy Prime Minister, the state budget revenue always exceeds the estimates, the amount of state budget for expenditure is still safe. However, it is said that, the structure of state budget and local budgets have changed significantly recently, the state budget tends to decrease while local budgets are in surplus. Nevertheless, local budgets still get some great supplements from the state budget. Why is this problem still happening and what is the solution to overcome these shortcomings?

At the 10th session, the National Assembly XIII, the Government reported to the National Assembly about the results of the state budget in 2015, specifically: It reached 16.4 trillion vnd, of which about 31.3 trillion vnd deficit in the state budget and an increase of 47, 7 trillion vnd in local revenues. Additional evaluation results showed that the total state budget in 2015 exceeded 85.77 trillion vnd over the estimates, up 69.37 trillion vnd compared to the number reported to the National Assembly. The state budget just decreased about 2.26 trillion vnd, lower than the level reported to National Assembly in October 2015 and this revenue growth is mainly due to contributions from local budgets on housing revenues. However, there are still 5 provinces with 1.4 trillion vnd deficit in local revenues and they have to use saving resources and reserve of 2015 to implement general balance.

Results of the state budget in the first 6 months of 2016 also showed similar things. As reported by the Ministry of Finance, local budgets in the first 6 months are about 55% of the estimates, specifically 45 provinces with local revenues reaching 50% or more; 57 provinces with local revenues higher than the same period in 2015. Meanwhile, the state budget was at low, only reached 42% compared to the estimates and lower than that in the same period last year (reached 46.3%), mainly due to the drop of crude oil price and the implementation of tariff reduction commitments when joining the free trade agreements (FTAs). In order to achieve the estimates, the state budget needed to reach at least 50% of the first estimate of the first 6 months.

What is the reason?

So what is the main cause of deficit in the state budget and increased local budgets? The basic, objective and main cause is the decrease of revenues from export of crude oil and tax of imports, which derives from the impact of oil prices and tariff reduction when Vietnam is joining international economic integration. Under the provisions of the Law on State Budget, budget revenues of crude oil, import and export tax revenues are 100% of the state budget. In recent years, revenues from crude oil and import-export activities account for a large share of total state budget but they have been decreasing.

The impact of sharply low oil price and tariff reduction under bilateral and multilateral FTAs ​​have had a great influence on the collection of state budget recently. For local budgets under the Law on State Budget , local budget revenues are mainly from the land (excluding some areas which are directly influenced by oil price fall as Quang Ngai, Ba Ria-Vung Tau).

The second reason may be due to the rigid rules of the Law on State Budget. As the Law defines, besides 100% revenues that state budget and local budgets enjoy, there are 6 provisions to split revenues between the state budget and local budget, including: VAT (excluding VAT of imported goods); CIT; the income tax for high income earners; tax on transfer of profits abroad (excluding tax on transfer of profits abroad in the field of oil and gasoline); SCT revenues from goods and services in Vietnam; and the cost of gasoline and oil.

Another reason for a drop in state budget is the remaining part of the collection of tax debts of the economy from the inspection, testing and auditing.

Support state budget to overcome difficulties

There is a need to find solutions in the immediate and long-term to support the collection of the state budget to overcome difficulties and reach the assigned estimates.

There are many solutions of the Ministry of Finance in boosting revenues of the state budget in the near future. In particular, the Ministry of Finance will strengthen the institutional improvement, promote the reform of administrative procedures, especially in the field of taxation and customs through supporting electronic tax payment, electronic tax refund, customs procedures connected with the banking system, national Single Window; improve the investment and business environment, enhance national competitiveness, thereby promoting economic growth and increasing revenues. It may be necessary to modify the rules and regulations for the state budget and local budgets to be more effective.

solutions to the state budget deficit Deputy PM wants balanced State budget

On Saturday Deputy Prime Minister Vương Đình Huệ asked the finance sector to adopt drastic measures to ...

Along with that, the Minstry of Finance will deploy management solutions synchronously on the state budget revenue, proactively handle the impact of crude oil price fluctuations; strengthen the inspection and examination of tax collection, customs, combat commercial fraud, etc in order to reduce losses of the state budget. Full and timely implementing the collection of the state budget about the taxable profits and dividends after the provision of funds as provided by law; not retaining to replenish the capital.

By Vu Van Chung/ Hoang Anh