Budget bumps remain amid rise in revenues

Budget bumps remain amid rise in revenues

Fresh figures from the government reported to the National Assembly Standing Committee last week showed that the exact figure of the budget deficit for last year was $12.46 billion, down by $2.48 billion as compared to the initial estimates and equal to 3.41 per cent of realised GDP worth $365.21 billion.

The National Assembly (NA) last year decided on a budget deficit of $14.94 billion or 4 per cent of GDP, including $13.86 billion for central budget overspending and $1.07 billion for local budget overspending.

As of December 31, 2021, the economy’s public debt was equivalent to 43.1 per cent of GDP; the government’s debt was 39.1 per cent of GDP, and the nation’s foreign debt was tantamount to about 38.4 per cent of GDP. These rates were all lower than the permissible limits set by the legislature.

According to the Ministry of Finance (MoF), the rough budget revenue reported to the NA last year was over $59.34 billion, higher than the initial estimate of $58.4 billion.

“However, the actual revenue figure was $68.17 billion, up 16.8 per cent as compared to the initial estimate and 14.86 per cent over the figure already reported to the NA,” said MoF Minister Ho Duc Phoc. “This is thanks to high revenue in Q1 and Q4 2021.”

Many pro-enterprise policies, both monetary and fiscal, have been applied in addition to a series of solutions on increasing investment and consumption since last autumn. “A number of sectors such as banking, securities, property, construction, and manufacturing of steel and automobile benefiting from these policies have resulted in big hikes in profits, helping expand the state budget revenue,” Phoc said.

It is estimated that last year, all fiscal solutions for supporting enterprises and people hit by the pandemic were valued at over $8 billion or 2.2 per cent of GDP. Moreover, some other measures were also applied in the form of reduction and exemption of fees for telecommunications services, schooling, electricity, and insurance, worth $3.63 billion.

Thus, all supporting policies are valued at over $11.63 billion or 3.2 per cent of GDP.

Expanded revenues

The NA in January adopted a first-of-its-type resolution on fiscal and monetary policy to support the country’s Programme on Socioeconomic Recovery and Development for 2022-2023, worth up to $15 billion. Under the resolution, VAT for applicable goods and services are reduced to 8 per cent in 2022 from 10 per cent, excluding goods and services in the sectors of telecommunications, IT, finance and banking, insurance, stock, real estate business, metal production and mining industries (except coal), coke production, petroleum, chemicals, and commodities and services that are subject to special consumption tax.

A maximum of $608.7 million will be earmarked for building new or upgrading local-level medical facilities and regional-level centres for disease control and boosting domestic production of COVID-19 vaccines and medicines.

About $2 billion from other legal financial sources will be for importing vaccines, therapeutic drugs and medical equipment and supplies for pandemic prevention and control. The Bank for Social Policies will be injected with $217.4 million to implement the preferential lending policy.

Investment in building, upgrading, and expanding establishments for social assistance, training, vocational training, and job creation could be valued at $137 million.

The MoF reported that all types of revenues increased last year. For example, domestic revenues reached $56.52 billion, up 15.1 per cent over the initial estimates and 15.1 per cent as compared to the figure reported to the NA.

For example, the revenue from land use was $8.06 billion, up 66.5 per cent from the initial estimates and up 32 per cent as compared to that reported to the legislature. Notably, revenue directly collected from production and business activities increased by $3.23 billion from the sum reported to the NA – including local private enterprises (nearly $2 billion), foreign-invested enterprises ($782.6 million), and state-owned enterprises or SOEs ($460.87 million) such as State Capital Investment Corporation ($130.43 million), Vietnam Engine and Agricultural Machinery Corporation ($23.6 million), and BIDV ($28.3 million).

Also, revenues from crude oil hit $1.94 billion, up 92.4 per cent against the initial estimate and 21 per cent over the figure reported to the NA. Revenues from Vietsovpetro were $37.6 million.

“Especially, we have increased the collection of tax from digital platforms of foreign providers who have no business establishments in Vietnam. For example, in 2018-2021 the total withholding tax collected via organisations in Vietnam was $195.6 million, including some big groups such as Facebook ($73.9 million), Google ($70.43 million), and Microsoft ($25 million),” the government report stated. “As for tax collected from individuals having big incomes from providing cross-border digital services such as online advertising and marketing, provision of digital information-based products and services, and online trading, the collected tax was about $24.26 million.”

In related news, from June 1, Facebook ads in Vietnam will be subject to an additional 5 per cent VAT, which will be applied to all advertising on the platform aimed at customers in Vietnam, regardless of corporate or individual advertisers.

Budget adjustments

The government also reaped big revenues from export-import activities, which brought $16.37 billion, up 19.6 per cent from initial estimates.

“Export-import activities before the peak pandemic wave and Q4 2021 strongly increased, leading to a total export-import turnover of $668.5 billion – up 22.6 per cent on-year, in which the export turnover hit $336.3 billion – up 19 per cent on-year, with a trade surplus of over $4 billion – higher than the estimated $2 billion earlier reported to the NA,” said the government’s report.

“Thanks to a rise in budget revenues, the total budget spending hit $80.65 billion, up 10 per cent or by $7.3 billion as compared to the initial estimates, and up by $6.33 billion from the sum reported to the NA,” said Finance Minister Phoc.

In the first four months of this year, the state budget revenue stood at $28.6 billion, up 15.4 per cent on-year.

“However, revenue from production and business activities increased only 5.4 per cent, meaning enterprises are still bogged down in difficulties. Revenue from land use and crude oil exports climbed 37.5 per cent on-year. The ratio of revenue from crude oil exports and land use accounts for 13.75 per cent of the economy’s total state budget revenue in the first four months of this year,” said Vu Hong Thanh, Chairman of the National Assembly Economic Committee last week.

“Revenue from equitisation of SOEs is small. In the first four months of this year, total money collected from the SOE equitisation and capital divestment hit only $85.65 million, only 6.5 per cent of the initial estimates,” Thanh said.

Last year, Vietnam saw the capital divestment of only 18 SOEs having a book value of $72.6 million, with a collected revenue of $191.3 million. Four SOEs had their equitisation plans approved, including three from Vietnam Northern Food Corporation and Vietnam Coal and Mineral Industries Group, with a total corporate value of $14.48 million.

The legislature in February adopted a scheme for raising the state budget deficit between 2022 and 2023 by an annual average rate of 1-1.2 per cent of GDP, with a maximum permitted sum of $10.43 billion. The rate will be 1.1 per cent of GDP this year, with a maximum amount of $4.47 billion. The government will formulate the state budget planning for 2023 which will be submitted to the NA for consideration and approval.