Prime Minister Nguyen Xuan Phuc has asked ministries and agencies to initiate drastic and effective measures to ensure a balance in the State budget amid decreasing revenues and rising expenditure.— Photo baohaiquan.vn

HA NOI (Biz Hub) — Prime Minister Nguyen Xuan Phuc has asked ministries and agencies to initiate drastic and effective measures to ensure a balance in the State budget amid decreasing revenues and rising expenditure.

Under Directive No22/CT-TTg aimed to enhance the implementation of the State budget and finance tasks in 2016, the PM has required the Ministry of Finance (MoF), other relevant agencies, and municipal and provincial authorities to implement tax laws effectively and strive to exceed the State budget collection estimate set by the National Assembly (NA) for 2016.

The NA in January this year passed a resolution to target a collection of VND1,015 trillion (US$45.1 billion) to the State budget in 2016 while allowing expenditure from the State budget to reach VND1,273 trillion.

Under the new directive, MoF has been ordered not to adjust the State budget collection downwards. It must keep a close eye on the economic situation, especially changes in crude oil price and their impact, and take effective measures aimed at ensuring a balanced budget in light of rising expenditures and falling revenues due to natural disasters and climate change.

The ministry must also assess the impact of free trade agreements on government revenues and propose ways to relieve adverse effects.

According to director of the Viet Nam Institute for Economics and Policy Research Nguyen Duc Thanh, taxes and tariffs will be reduced considerably as the many free trade agreements Viet Nam has signed will come into effect shortly. Lower tax revenues from import-export duties will have a significant impact on budget revenue collection.

The ministry was told to direct its tax and customs officials to strengthen efforts to collect taxes and tax arrears, prevent smuggling, trade fraud and tax evasion. The customs officials were also asked to check the certificates of origin for imported goods which enjoy low duties under the free trade agreements.

The PM also directed the Ministry of Finance to propose measures to enhance the management of public capital and public assets and seek ways to use them effectively for the country's development.

The ministry should accelerate administrative reforms, especially in the fields of taxation and customs, so that Viet Nam can meet tax-related criteria in ASEAN-4.

To bolster State budget revenue, the PM has instructed the Ministry of Industry and Trade to boost sustained exports while requiring the Ministry of Planning and Investment to improve the business climate and support domestic small- and medium-sized enterprises, besides creating a favourable business environment to attract foreign investment.

Under the directive, the PM has also asked provincial and municipal governments nationwide to try and increase the collection value to the State budget this year in their respective locations by at least 14 per cent to 16 per cent against last year.

For companies that the government has full ownership of, the PM has asked them to contribute all their remaining profit to the State budget, after allocating a part of it to their legal funds. They are not allowed to retain the profit to add to their charter capital this year.

Besides the budget collection, PM Phuc has also called for measures to intensify the supervision and transparency of budget spending in a move to keep the deficit under control.

According to experts, the government must take drastic measures to better control the budget as it is reported that the budget deficit hit VND70.1 trillion in the first five months this year. Statistics from the finance ministry showed that budget revenue from January to May was VND396.2 trillion, equal to only 39.1 per cent of the annual estimate, while budget spending reached VND466.3 trillion, equal to 36.6 per cent of the annual estimate.

In the first five months, the country spent VND64.55 trillion on foreign debt settlement, up 5.3 per cent year-on-year. It also disbursed VND68 trillion for development projects and VND332 trillion for national defence and administrative governance.

Tumbling crude oil prices cut budget revenue considerably in the period, with revenue from oil in the first five months of 2016 falling sharply by 48.1 per cent to VND15.9 trillion, accounting for only 4 per cent of total budget revenue.

Under the directive, PM Phuc has also asked the State Bank of Viet Nam to pursue a flexible policy to curb inflation, stabilise the economy and boost growth to be able to achieve the economic growth target of 6.7 per cent this year, contributing to stable government income. — VNS