Balanced budget the long-term goal: Minister

Finance Minister Dinh Tien Dung (Source: VNA)

Hanoi (VNS/VNA) – State budget revenues falling short of the half-way
mark in the first six months of the year is a normal feature of the domestic
economy and does not preclude meeting the annual target, Finance Minister Dinh Tien
Dung tells Vietnam News.

Q: In the first half this year, the total State budget collection met just 46.5
percent of the annual target.  How do you assess this result? Does this
make the target set by the National Assembly (NA) for 2017 difficult to reach?

A: This has to be put in perspective. Budget revenues for the first six

months present an increase of nearly 13 percent over the same period in 2016,
even though it fulfills only 46.5 percent of the annual target.

Domestic collection rose 12.4 percent year-on-year, or 45.5 percent of the
annual plan. If we take out land use taxes, income from lottery sales, revenues
from selling the State’s stake in enterprises, dividend revenues and profits
after tax, domestic revenues rose by more than 10.5 percent, which is basically
in line with the economic growth rate of 5.73 percent as well as the inflation
rate of 4.15 percent in the first six months.

A majority of the localities, 54 of 63, have done well in budget collection,
including Hanoi, HCM City, Quang Ninh, Hai Phong and Quang Ngai.

We should also keep in mind that budget revenues in the first six months of the
year usually falls short of 50 percent of the annual target as localities focus
on boosting production in the last months of the year, which is a distinctive
feature of our economy. Therefore, with the budget revenue results achieved in
H1, we believe that the finance sector will fulfill and even exceed budget
collection goals set by the National Assembly, which are expected to rise
year-on-year by five to eight percent.

However, it cannot be denied that the economy still faces many tricky
challenges, especially hardships in production and business. Therefore, from
now until the end of the year, the financial sector will have to work hard and
adopt drastic measures to ensure security and sustainability.

Q: It has been seen in recent years that local budget collection surpasses
targets while the central budget collection fails to meet them. Will this
situation be repeated this year?

A: At the second session of the National Assembly, we reported that central
budget revenue would fall short of the target by 8-12 trillion VND last year,
but in the end, the shortfall was just 321 billion VND.

Local budget revenue was expected to surpass the target by 36 trillion VND, but
it went up by 82 trillion VND, eventually.

In the first half of this year, while central budget revenue met 41.5 percent
of the annual plan, local revenues trumped it by four percent.

The financial sector will take this into account, make careful calculations and
take drastic measures to ensure a balanced State budget.

Q: Could you elaborate on some of the measures?

A: The sector has actively carried out several solutions in tandem to prevent
losses and avert a budget deficit, including increasing inspections,
strengthening supervision and auditing to prevent tax evasion, reduce tax
arrears and detect and prevent transfer pricing. In 2016, tax authorities
inspected over 84,500 enterprises, reducing State Budget losses by nearly 17.2
trillion VND and recovering 42.5 trillion VND in arrears, an increase of nearly
39 percent and 13.2 percent over 2015. This, in turn, reduced tax arrears at
the end of 2016 to 74.1 trillion VND, down 3 percent over 2015.

Q: Apart from strengthening inspections, auditing, etc., what are other
measures that the sector envisages as it tries to ensure a balanced State budget
in the long term?

Firstly, the finance sector will continue to perfect the financial and
budgetary system to progressively restructure the State budget and keep public
debt under control.

Specifically, in the second half of 2017 and early 2018, the Ministry of
Finance will submit to the Government and the National Assembly changes in the
environmental protection tax; amendments and supplements to some provisions of
the laws on corporate tax, individual tax, value-added tax, national-resource
tax and tax management. These changes are very important for restructuring the
State budget in the context of low global oil prices and deeper international
integration, which has resulted in reduced tariffs and lower revenues from
import-export activities.

Secondly, we will continue our fiscal tightening policy, exercise thrift and
review State budget expenditures to reduce overspending. We will also
accelerate reform of the nation’s financial system towards greater efficiency,
and allocate more funds for infrastructure development.

Thirdly, we will reform the financial management system in the areas of
taxation, customs, treasury, including the application of information technology.

Fourthly, we will continue to find solutions to reduce costs for businesses. In
particular, we will review documents relating to business tax contributions,
social insurance, health insurance, unemployment insurance and all other
expenses that they are responsible for. This will help reduce corporate
spending and create favourable conditions for businesses to develop, promote
production and business, which is a long-term strategy for ensuring stable,
sustainable revenue sources for the State budget.

Q: What are some of the specific objectives that the finance sector has set for
the future?

A: The sector will strive to successfully complete some specific objectives by
2020. Average state budget mobilisation for the 2016-2020 period is estimated
at about 20-21 percent of GDP, and total budget revenue for the period is
forecast at 1.65 times that of the 2011-2015 period.

Domestic collection is expected to account for 84-85 percent of State budget
income, with 14-16 percent coming from crude oil export and other import-export

Meanwhile, central budget revenues are set to reach 60-65 percent of total
budget collection. The sector will also reduce State budget overspending, not
exceeding 3.5 percent of GDP by 2020.

At the same time, public debt for the 2016-2020 period will be reined in at a
maximum of 65 percent of the GDP, while Government debt and national foreign
debt will not exceed 55 percent and 50 percent of GDP respectively.-VNA

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