Keeping budget deficit under control

Deputy Prime Minister Vu Van Ninh
 

Could you brief budget collections in the first half of 2013?

Usually, budget collections in the first half of a year often reach 45-48 per cent of full-year budget estimates, this year it was around 40 per cent only. Exactly, by June 15 state budget collections covered 39.8 per cent of the year’s estimates.

Compared to the estimates, collections from import-export amounted to 32.7 per cent, from state-owned enterprises 36.9 per cent, from foreign invested enterprises (not including crude oil) 45.7 per cent and from non-state trade and services sector 39.3 per cent.

To reach the set goals, we need to raise an average VND68 trillion ($3.2 billion) each month, in fact, only VND58.9 trillion ($2.8 billion) was collected each month in the first six months, around VND9 trillion ($428 million) less. It signals a host of difficulties would exist in fulfilling full-year budget collection target of VND816 trillion ($38.8 billion).

Why have we underperformed budget collections?

There are two main reasons generally.

First, production and business hardships have slowed down economic growth.

Second, inventories, particularly unsold properties, stood at alarming levels.

Amid high inventories, total retail sales and service revenue in the first half of 2013 hiked nearly 12 per cent on-year only. If the price hike factor was excluded, the growth was a mere 4.9 per cent, far below 6.7 per cent growth in the same period of 2012.

Besides, lower collections came as we have applied diverse measures to help firms weather hardships and support market.

Accordingly, from early 2013 tax management bodies have curtailed 50 per cent of land rental for businesses and extend payment of value added tax (VAT) and corporate income tax (CIT).

Besides, from July 1, 2013 the application of amended VAT and CIT laws will see CIT rate levied on small and medium size enterprises go down to 20 per cent from current 25 per and VAT rate on social housing business slash by a half in the year’s second half. This will diminish budget collections in the rest of the year.

Does this mean that keeping budget deficit not more than 4.8 per cent of the GDP this year would be a tough task?

Budget deficit was set at VND101.190 trillion or $4.8 billion (4.8 per cent of the GDP) per maximum this year in the context the GDP expanded 5.5 per cent. If the GDP growth fared poorer, we must inevitably cut down expenses, in the meantime strive to increase collections from some potential areas like from land and mining areas and better cope with tax frauds.

How should we cut down expenses until the year’s end?

The prime minister has urged state bodies sourcing state budget to apply measures to reduce costs, particularly non-salary expenses. Ministers, leaders of ministerial-level organizations and centrally-controlled provinces and municipalities were required to review their budget plans until the year’s end, striving to save 10 per cent of recurrent expenses (except wage payment) and saving at least 30 per cent of expenses put in receptions, meetings, business trips, surveys and the like.