Assignment topic analyze the situation of budget system in vietnam since 2010

Strong economic growth in 2010 with GDP growth reaching 6.8% contributed to increased revenue for the state budget.. Overall, positive economic growth in Vietnam in 2010 may positively i

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

ASSIGNMENT

Topic: Analyze the situation of budget system in Vietnam since 2010

Lecturer: Ph.D Nguyen Viet Hung

Subject: Macroeconomics

Class: EBBA 15.2

Members: An Tri Ding

Nguyén Quang Minh Dang Duy Phuc

Nguyén Hoai Thu Nguyén Thi Vui

Ha Noi, 2024

TABLE OF CONTENTS

1 Introducfion - - - «cm n nh n ni ni n ni n ni n Km ni ni ni 1

2 State budget and state budget revenue and expendi(ure ‹ ‹s«.- 1 2.1 State Dudỹe€f co non nu n ng HH mì Hi in in 1n g0 V0 vn 0 09 9958 1 2.2 State budget reyenue and expendi(uF€ -«ccs «s2 23c 15155555 2 2.2.1 State 0h 8 eeeẮe 2

2.2.2 State budgef expendituF€ - co cm n n1 ni in vn mm 1 9p 5 2.2.3 State budget balance and đefiCi( - «co so c1 S0 1 1n 1 n5 4

3 The situation of the state budget from 2010 to nñOW, co con 1S s1 6

3.1 Overview of Vietnam's economic deveÌlopmen[ ‹ s-‹« «s « 6 3.2 State budget reyenue si(UafÏO' «co co cm n1 mm in mm pm 6 3.3 State budget spending sifuation «co c c0 cm S1 9n 1 vn 19 m5 8

4, Recommendations to increase the efficiency of state budget revenue and expenditure in the upComing Y€AFS co nu n9 cm 1n n1 n1 vn 11v 9

5 CoTCÏUSIOT o- con nh ni nh ni ni ni ni n ni ni nh ni ng ni im 9 REFERENCES - co n0 BI II BI i9 090.019 619619 0888 10

1 Introduction:

Our country's economy in 2010 took place in a context of more difficulties than advantages Abroad, the world economy is recovering slowly after the crisis and many potential adverse factors are still affecting our country In the country, natural disasters and epidemics continuously occur However, the economic development seems relatively stable Vietnam's economy in 2010 had important implications for Vietnam's state budget system Strong economic growth in 2010 with GDP growth reaching 6.8% contributed to increased revenue for the state budget In addition, increased tax revenue has provided the government with more financial resources to regulate services and infrastructure projects, thereby affecting budget allocation

Overall, positive economic growth in Vietnam in 2010 may positively impact Vietnam's state budget system, leading to increased revenue and higher government spending Reality shows that the state budget system is always innovated and improved to develop the economy However, there are still some inadequacies in revenue and expenditure in the state budget system Therefore, the article will focus

on analyzing the current situation of Vietnam's state budget system since 2010, thereby providing some conclusions and solutions for the coming years

2, State budget and state budget revenue and expenditure:

2.1 State budget:

2.1.1 Definition:

State budget is all state revenues and expenditures estimated and implemented within

a certain period of time decided by competent state agencies to ensure the

implementation of the functions and tasks of the State government

2.1.2 Characteristic:

e The state budget is the largest financial plan that needs to be approved by the National Assembly before implementation

e The state budget is not a mere financial plan but also a law

e The state budget is the financial plan of the entire country, given to the government to organize and implement but must be under the supervision of the National Assembly

The state budget is established and implemented entirely to pursue common benefits for the entire country, regardless of who enjoys those benefits, and what economic sector or class they belong to in social

2.2 State budget revenue and expenditure:

2.2.1 State budget revenue:

a)

b `—

Definition

State budget revenue refers to the total income or funds that a state government receives during a specific period, typically a fiscal year This revenue is generated from various sources, including taxes (such as income tax, value-added tax and property tax), fees, fines, grants, and other forms of income

Governments use this revenue to fund public services and programs, such as education, healthcare, infrastructure development, public safety, and social welfare initiatives Monitoring state budget revenue is crucial for assessing the financial health of the government and providing essential services to its citizens

Classification:

Source of formation:

— State budget revenue is divided into domestic revenue and foreign revenue Domestic revenue accounts for a significant proportion of the total state budget revenue

Foreign revenue is also important, although it is not substantial and does not determine the overall revenue

Occurrence and economic content:

— State budget revenue includes:

Revenue arises regularly over time and in quantity, including taxes, fees, and charges:

- Taxes from organizations and individuals are compulsory to the state according to legally prescribed limits, to meet the state's expenditure needs

- Fee is the payment that organizations or individuals must make when receiving services from other firms

- Charges are payments that organizations or individuals must submit when served by state agencies or authorized organizations in state management tasks

+ Revenue earned from irregular and unstable sources in terms of occurrence time and amount received, including:

- Revenue from state economic activities

- Revenue from enterprise activities

- Revenue from the sale or lease of state-owned assets

- Revenue from foreign aid, domestic and foreign loans, and other revenues

e Capital mobilization:

— Balanced state budget revenue includes:

- Taxes, fees, charges

- Revenue from state economic activities, including: income from state capital contribution to economic entities, money recovered from state capital at economic entities, recovery of state loans (both interest and principal)

- Revenue from enterprise activities

- Revenue from the sale or lease of state-owned assets;

- Other revenues as prescribed by law

— Revenue to offset deficits:

- When state budget revenue does not meet expenditure needs, the government has to borrow from the domestic organization and even other countries

2.2.2 State budget expenditure:

a) Definition:

e The process of distribution and use of State budget funds, by some principles to carry out state functions, is called fiscal expenditure

e Expenditure of the State budget shall be divided into Central and Local Governments’ expenditures The central budget is decentralized with specific revenue sources and spending tasks at each local level To meet budgetary expenditure tasks, local authorities with lower state revenue will be

supplemented from the central budget

b) Classification:

e Based on the nature of expenditure:

+ Recurrent Expenditure:

These are expenditures that occur regularly and are consistently associated with the routine tasks of the state in managing the economy and society Recurrent expenditures are stable, mostly related to consumption, and linked to mandatory organizational structures

+ Development capital Expenditure:

These expenditures aim to create technical infrastructure, contributing to economic growth and development Typically, they are substantial expenditures, not stable, accumulative in nature, and linked to goals, directions, and capital scale depending on sources

+ Debt and Assistance Expenditure:

This includes expenditures for the state to repay domestic and foreign loans when due

+ State budget contingency provisions

e Based on function and duty:

+ Accumulative Expenditure:

These are expenditures that increase the material and potential of economic growth, including developmental investments and other accumulative expenditures

+ Consumption Expenditure:

These are expenditures that do not create tangible products for future consumption, including expenditures for career activities, administrative management, national defense, security, etc

2.2.3 State budget balance and deficit:

The state budget balance shows if a government has extra money (surplus), not enough money (deficit), or just enough (balanced)

- Surplus happens when the government gets more money from taxes and fees than it spends on programs and debts This extra money can be used to pay off debts, improve infrastructure, or save for later use

- Deficits occur when expenses exceed revenues

In Vietnam, the governments want a balanced budget, but it's hard during uncertain times or when there's pressure to fund important things like schools or roads Balancing the budget needs careful money management, like making more revenue and choosing where to spend wisely The state budget balance is important for judging how well a government handles money and if it can meet people's needs during tough times

Definition of Budget Deficit:

- A budget deficit occurs when expenses exceed income (tax and other borrowed revenue), usually measured over a single financial year The term tends to be reserved for governments, although it’s also possible for organizations, businesses, and individuals to run budget deficits Each year, the deficit adds to the national debt (the total amount owed by the government accumulated over the years) Consequently, the national debt is a significantly higher figure

814K

695K 677K 458K

340K

Value Chg Chg%

Line chart of government spending in Vietnam from 2010 to 2023

- Government Spending in Vietnam increased to 877000 VND Billion in 2023 from

855000 VND Billion in 2022 Government Spending in Vietnam increased

significantly in 13 years, reaching an all-time high of 877000 VND Billion in 2023 and a record low of 284000 VND Billion in 2010

- Government Spending refers to public expenditure on goods and services and is a major component of the GDP Government spending policies like setting up budget targets, adjusting taxation, increasing public expenditure and public works are very effective tools in influencing economic growth

3 The situation of the state budget from 2010 to now:

3.1 Overview of Vietnam’s economic development:

VIETNAM GDP GROWTH RATE

ZZ

5.42

5.25 =#/

Table of Vietnam's GDP Growth rate from 2010 to 2020

- Vietnam’s economy in the 10 years from 2010 to 2020 has made impressive development, with per capita income increasing 2.3 times, from $1160 in 2020 to about $2700 in 2019 In 2020, although heavily influenced by the COVID-19 pandemic, Vietnam’s economy is still predicted by the IMF and World Bank to have the highest growth rate in the world

3.2 State budget revenue situation:

40.00

20.00

10.00

0.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total state budget_ Total state budget revenue/ GDP expenditure/ GDP

Vietnam's state budget revenue has undergone a remarkable journey from 2010 to the present.

3.2.1 A Decade of Growth (2010-2015):

129 974.900)

68 449.60(68 912.406)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ll State Budget: HCMC: TR: Domestic (DO)

Vietnam saw growth during the early 2010s leading to a significant increase in state budget revenue as reported by the Ministry of Finance The state budget revenue averaged around 26% of the Gross Domestic Product (GDP) during this period This growth was attributed to factors;

Booming Manufacturing Sector: The influx of investment boosted Vietnam's manufacturing industry resulting in higher corporate income tax contributions

Rise in Domestic Consumption: The expanding middle class drove an increase in consumption thereby boosting VAT and excise duty collections

Diversification Efforts: To reduce reliance on state-owned enterprises for revenue the government introduced tax reforms focusing on income tax and expanding VAT and excise duties

The International Monetary Fund (IMF) data clearly illustrates this trend In 2010 state budget revenue was recorded at VND 245.9 trillion which rose significantly to VND 1,343.5 trillion by 2015 [source; imf.org]

3.2.2 Shifting Priorities and Fiscal Consolidation (2015-Present):

The end of the decade witnessed a change in the state budget revenue situation Although revenue kept increasing in actual numbers, its rate of growth relative to GDP started to decrease The World Bank states that the percentage decreased from an average of 26.4% during 2006-2010 to 23.4% in 2011-2015

[documents1.worldbank.org] There are multiple reasons for this deceleration

Economic growth in Vietnam decreased after a quick expansion, affecting the overall collection of taxes

Free Trade Agreements (FTAs): The reduction of tariffs from FTAs signed by Vietnam resulted in a drop in customs revenue

Fiscal Discipline: Due to increasing public debt, the government focused on fiscal consolidation Efficient spending could have had an indirect influence on efforts to collect revenue

Nevertheless, a glimmer of hope appeared in 2023 Thanks to the economic recovery and high oil prices, state budget revenue surpassed expectations, totaling around VND 1.7525 trillion, surpassing the 2022 forecast [vietnam.vn]

The state budget revenue status in Vietnam mirrors the vitality of its developing economy The first half of the 2010s saw significant revenue increases driven by economic growth and efforts to diversify Nevertheless, the need for ongoing reforms 1s highlighted by a decrease in growth during the latter part of the decade In the future, it will be essential to focus on narrowing the tax base, enhancing tax

administration, and promoting sustainable economic growth to ensure a strong state budget

3.3 State budget expenditure situation:

Vietnam's state budget spending has played a significant role in the country's development over the past decade (2010-2024)

3.3.1 Prioritizing Infrastructure and Development (2010-2015):

80k

70 954.000

70k

64 667.900

50 60k

40k

29 606.60020 932220

23 274.100

20 954.200 »

400

30k

20k 17.94

k

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

@ State Budget: HCMC: Balance of Budget Expenditure