Financial sector’s strategic measures propel state budget amid global economic challenges

Minister of Finance Hồ Đức Phớc. VNA/VNS Photo

Minister of Finance Hồ Đức Phớc talks to Vietnam News Agency about the strategies for accomplishing the financial sector’s tasks in 2024. 

In light of the economic challenges in 2023 impacting state budget collection, what measures does the financial sector have in place to ensure a balance between state budget revenues and expenditures?

In 2023, the global political, economic, and social complexities are forecast to persist, significantly influencing the country’s economic recovery and growth. Despite these challenges, the financial sector has effectively and decisively executed assigned tasks.

Throughout the year, the Ministry of Finance presented the amended Price Law and five resolutions to the National Assembly for approval and passage, submitted tax law developments to the National Assembly Standing Committee, and proposed 33 decrees to the Government. Six decisions were submitted to the Prime Minister for issuance, and 63 circulars were issued by the Ministry.

The Ministry operates a comprehensive, flexible, and targeted fiscal policy regarding state budget management. This approach is particularly vital in an economic landscape still grappling with post-pandemic challenges, where the resilience of businesses is limited. Always standing alongside businesses and the public, the Ministry proactively recommended and submitted numerous solutions for tax exemptions, reductions, and deferrals, as well as the postponement of fees, charges, and other state budget revenues. These measures, estimated at VNĐ200 trillion, aim to mitigate economic challenges, enhance cash flow for businesses, support socio-economic recovery and development, and contribute to nurturing revenue sources for the state budget.

This represents a pivotal milestone, vividly illustrating fiscal policy’s positive and impactful role in stabilising the macroeconomy and propelling economic recovery and growth.

Moreover, the Ministry of Finance has proactively presented a resolution to the Government and the National Assembly for approval, addressing additional corporate income tax regulations to counter global tax base erosion. This measure, set to be implemented in Việt Nam in 2024, underscores the nation’s proactive engagement on the international stage. It reaffirms our country’s right to collect taxes on production and business activities within our territory, aligning with international regulations and domestic laws.

Simultaneously, the Ministry of Finance has steered tax and customs authorities towards enhanced revenue management. Leveraging information technology systems and big data applications, these efforts aim to meticulously oversee revenue, manage risks, and thwart fraudulent activities, particularly invoice usage and value-added tax refunding. As a result, the estimated state budget revenue for 2023 surpasses projections by approximately 5 per cent. When factoring in tax exemptions and reductions, this year’s budget revenue exceeds the National Assembly’s assigned estimate by an impressive 9-10 per cent.

Amidst the lingering economic challenges post-pandemic and the constrained resilience of businesses, coupled with the persistent implementation of various tax and fee exemption and reduction policies to alleviate hardships and support businesses and citizens, the overall outcomes in state budget revenue for the entire year are exceptionally positive. These achievements stand as a significant milestone in effectively managing the state budget for the year 2023.

Shifting focus to state budget expenditures, the Ministry of Finance has collaborated closely with ministries, sectors, and localities to ensure stringent, thorough, economical, and effective management of state budget allocations.

Accordingly, in 2023, we strived to achieve balance and ensure resources for a significant increase in the base salary, elevating it from VNĐ1.49 million per month to VNĐ1.8 million per month, constituting a notable 21 per cent increment starting from July 1. This adjustment holds immense significance, particularly considering the challenges of the past three years, during which the impacts of the COVID-19 pandemic necessitated a focus on epidemic prevention, leaving salary reform unaddressed and contributing to difficulties faced by a segment of civil servants. It also sets a crucial foundation for the ongoing implementation of comprehensive salary policy reform in 2024, in accordance with the Party’s Resolution 27-NQ/TW.

A noteworthy success in fiscal policy management is the effective control of overspending and public debt management. This achievement has been recognised by credit rating agencies and international organisations, characterising it as sustainable and indicative of the capability to implement expansionary fiscal policies. The estimated 2023 budget deficit is anticipated to be below 4 per cent, a figure lower than the 4.42 per cent limit sanctioned by the National Assembly. By the close of 2023, public debt is projected to be approximately 37 per cent of GDP, significantly lower than the National Assembly’s established ceiling of 60 per cent. Government debt stands at around 34 per cent of GDP, also considerably below the ceiling of 50 per cent. An increasing domestic debt balance and a gradual decrease in foreign debt mark this positive debt structure.

With the current low debt level relative to the established ceiling and a favourable debt structure, the Ministry of Finance has advocated for the government to restructure public debt. Việt Nam, therefore, possesses ample flexibility in deploying loans for substantial projects that can serve as key drivers of the economy, fostering the fastest and most sustainable economic efficiency. The financial markets persist in consolidating and addressing challenges promptly to facilitate healthier, more open, and transparent development.

In 2024, how does the financial sector plan to continue implementing tax policies to support businesses and the public?

In 2023, to promptly and proactively realise socio-economic and financial-budget development goals, the Ministry of Finance meticulously researched and proposed solutions on taxes, fees, charges, and land rent applicable to the year, amounting to a total support value of about VNĐ200 trillion. Recent times have witnessed the practical implementation of numerous support solutions with substantial value and widespread impact.

Given the significant impact on state budget revenue, balancing regular activities, allocating capital for development investment, addressing social security needs, and maintaining fiscal equilibrium poses a substantial challenge. The introduction of the aforementioned support policies underscores the Ministry of Finance’s unwavering commitment to standing alongside and supporting businesses and individuals.

In the future, in conjunction with the effective implementation of assigned tasks and support solutions, the Ministry will closely monitor the evolving situation to research and propose solutions for 2024.

In the immediate time, the Ministry is expeditiously organising the effective implementation of the policy to reduce the value-added tax rate by 2 per cent, as approved by the National Assembly in the 6th session, for certain groups of goods and services currently taxed at the 10 per cent rate. Urgent submission to the Government for the issuance of a Decree detailing this policy is underway to swiftly enact it, reaching those facing difficulties and in need of support. This measure is projected to reduce tax revenues by approximately VNĐ25 trillion.

Simultaneously, the Ministry has submitted to the National Assembly Standing Committee a decision to continue reducing environmental protection tax rates on gasoline, oil, and lubricants, with an expected reduction in state budget revenue collection by about VNĐ42.5 trillion.

Furthermore, a circular has been issued by the Ministry regulating fees and encouraging the use of online public services. This policy involves reducing fees ranging from 10 to 50 per cent, with an expected annual support of about VNĐ100 billion for individuals and businesses.

In tandem, the Ministry remains committed to comprehensive reform, including institutional refinement, enhancement of apparatus effectiveness and efficiency, and streamlining administrative procedures. There is a continued emphasis on the modernisation of financial industry areas, particularly in tax and customs, as these directly impact businesses and the public.

The Ministry is actively working with relevant agencies to review export and import tax rates, fostering support for domestic production and businesses.

In 2024, what key areas will the Ministry of Finance prioritise to stimulate economic recovery?

Looking ahead to 2024, amidst a socio-economic landscape presenting both opportunities and challenges, the anticipated difficulties in executing financial and state budget tasks are expected to outweigh the advantages. The financial sector faces a substantial undertaking with an estimated state budget revenue of VNĐ1.7 quadrillion and projected state budget expenditure of VNĐ2.1 quadrillion. The state budget deficit is foreseen to be VNĐ399 trillion, approximately 3.6 per cent of GDP.

The challenge for 2024 lies in judiciously employing fiscal policy to simultaneously propel economic growth, ensure macroeconomic stability, control inflation, and safeguard national financial security. Hence, the degree of relaxation in fiscal policy needs careful calculation and consideration to attain these multifaceted goals, particularly on macroeconomic stability and inflation control.

In this context, the paramount objective of the financial industry is to formulate and implement proactive, flexible, targeted, and pivotal fiscal policies. Concurrently, the focus is securing resources to execute socio-economic development tasks and bolstering security, defence, and social safety nets. This involves a concentrated effort on swiftly advancing critical infrastructure investment projects, fostering regional and inter-regional connectivity, and implementing wage and social insurance reform policies integral to organisational restructuring and streamlining.

There is a continuous commitment to refining institutions and policies on state budget revenue, bolstering revenue management, and striving to surpass assigned revenue estimates to ensure resources for socioeconomic development goals.

Additionally, stringent control over state budget expenditures, increased spending savings, improved efficiency in the management, allocation, and utilisation of the state budget, reinforced financial discipline, ongoing public investment spending restructuring, and a targeted increase in public investment disbursement are emphasised. Measures are being implemented to strictly control state budget overspending, public debt, and contingent debt obligations to adhere to safety limits. Furthermore, solutions to restructure the public debt portfolio in a safe and sustainable direction continue to be pursued.

The Ministry continues to ensure the stable and secure operation of financial markets and financial services, taking strict measures against violations and fostering fair competition among economic sectors.

In the immediate future, the Ministry will manage financial and state budget tasks during the 2024 Lunar New Year time to ensure normal production and business activities before, during, and after the Tết holidays. A rigorous deployment of state budget revenue and expenditure tasks in 2024 right from the year’s onset is prioritised to achieve the established goals. VNS