Production shoring up state coffers

June 24, 2021 | 08:00
Although the state budget revenue was dented in May due to the resurgence of COVID-19 affecting businesses’ performances, the first five months of the year have seen a big surplus in the state coffers, showing a gradual recovery of domestic production and business activities.
Production shoring up state coffers
This year the government has extended tax payments while reducing some fees to help businesses. Photo: Le Toan

The Department of Tax (DoT) of the northern city of Haiphong last week reported that in the first five months of 2021, the city’s total budget revenue collected by the department hit $585.2 million, up 35.8 per cent on-year.

It is expected that the figure for the whole year will be $1.46 billion, up 2.9 per cent on-year.

“The biggest contributor to this is VinFast, an arm of Vietnam’s biggest private firm Vingroup, whose contribution to the provincial coffers in 2021 is expected to be $239.1 million, up by $65.2 million as compared to 2020,” said Ha Van Truong, director of the DoT.

Since 2017, VinFast has been implementing a $1.5-billion project to manufacture automobiles in Haiphong’s Dinh Vu Industrial Zone.

“In the first five months of 2021, revenue from special consumption tax from VinFast was $93.87 million. Because the pandemic is expected to continue affecting the firm’s operations, it is expected that the revenue from VinFast in the remaining seven months will be about $145.26 million,” Truong said.

Minister of Planning and Investment Nguyen Chi Dung last week told the National Assembly Standing Committee that since late April, the resurgence of COVID-19 has badly affected performance of many enterprises and localities.

“Moreover, the government’s deployment of policies on deferral in tax payment and land rental has also dented the state coffers revenue,” Minister Dung said. “However, the accumulative revenue for the first five months of 2021 was relatively positive.”

He cited figures from the Ministry of Finance (MoF) showing that in the first five months, state budget expenditures in the period reached $25.29 billion.

There has been a surplus in the state budget of $3.76 billion thanks to a rise in revenues created largely by a rise in domestic production.

Specifically, total state budget revenue was over $29 billion, up 15.2 per cent on-year. In which domestic revenue reached $24 billion, increasing 14.2 per cent, revenue from crude oil exports hit $693.9 million, down 18.4 per cent, and revenue from export-import activities was nearly $4.28 billion, up 30.1 per cent.

In a specific case, state-run Vietnam Oil and Gas Group (PetroVietnam) reported that in the first five months, its total revenue was $9.88 billion, up 16 per cent on-year, with the group contributing $1.4 billion to the state budget, up 20 per cent on-year.

PetroVietnam’s total gross output is estimated to stand at $6.19 billion, an on-year 17-per-cent rise. In which, exploitation of crude oil and gas expanded 28 per cent, production of refined oil products ascended 17 per cent, production of chemical products climbed 15 per cent, and production and distribution of electricity and gas rose 6 per cent.

Elsewhere, state-owned Vietnam National Coal-Mineral Industries Holding Corporation Ltd. also reported that its five-month revenue reached $2.2 billion, and its contribution to the state coffers was $339.1 million.

Meanwhile, state-run Electricity of Vietnam last week reported that in the first five months, its total industrial gross output reached more than $6.39 billion, up 8.06 per cent on-year. Electricity produced and purchased was estimated to be more than 99.9 billion kilowatt hours, up 7.11 per cent on-year.

According to the General Statistics Office, in the first five months of this year, the economy’s production and distribution of electricity increased 8.3 per cent as compared to that of only 2.1 per cent on-year in the same period of last year.

In Vietnam, petrol and electricity are vital inputs for production activities, especially manufacturing and processing activities. Thus, a climb in these two items would mean ascension in local production, especially industrial activities which consumed a huge volume of electricity and petrol.

The economy’s index for industrial production in the first five months climbed 9.9 per cent as compared to that of only 1 per cent in the same period last year.

The manufacturing and processing sector, which creates 80 per cent of the nation’s industrial growth, ascended 12.6 per cent in comparison with merely 2.2 per cent in the corresponding period of 2020.

In the first five months, the government has extended tax payment and land rental payment worth $913 million in total, while reducing and exempting taxes and fees valued at $106.9 million. This has helped many businesses and people lessen their difficulties and maintain their business and production activities.

The MoF forecast that the economy’s total state budget revenue in June will be about $3.34 billion, raising the total figure in the first six months of 2021 to more than $32.4 billion.

Last November, the National Assembly adopted a resolution on budget estimation for 2021. In which, total state budget revenue for 2021 will be over $58.4 billion, and total state budget spending will be $73.34 billion.

Total state budget deficit will be $14.94 billion, accounting for 4 per cent GDP. In which, for 2021, the central state budget overspending will be $13.86 billion, tantamount to 3.7 per cent of GDP. The local state budget deficit will be $1.08 billion, equal to 0.3 per cent of GDP.

If the economy grows 6 per cent in 2021 as set by the legislative body, total GDP is estimated to be $290.34 billion – based on the current calculation. If a new calculation method is applied for 2021, the GDP size is expected to be 25 per cent higher than the existing figure.

Also in 2021, the total loans for the state budget are estimated to be nearly $26.46 billion.

Programme on public debt management for 2021-2023

The prime minister has approved a public debt management programme for the 2021-2023 period.

Under the programme, the total borrowing over the next three years will be $75.65 billion, of which $69.56 billion will go to the central budget.

The local budget spending deficit is limited at 0.2 per cent of GDP, as stipulated in the 2015 Law on State Budget, and the debt repayment obligation of local governments is approximately $800 million.

With regards to foreign commercial loans by enterprises and credit institutions, the growth rate for short-term credit is capped at 18-20 per cent per year, and the net maximum medium- and long-term loans are around $6.35-7 billion per year.

For 2021, the government is expected to borrow more than $27.14 billion, including $22.93 billion from domestic sources and $4.21 billion from foreign lenders.

Of this figure, over $25.2 billion will be used to balance the central budget while the remaining $1.93 billion will be spent on lending to other borrowers.

The government is expected to repay debts of more than $17.15 billion in 2021.

By Nguyen Thanh

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