Collecting fees and charges: Ministry of Finance requires full payment into the budget, many units want to keep

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A notary office worker performs the notarisation fee and non-taxable, the notary office gets the service price and is taxable. Source: Internet.

There should be no difference

Implementing the Law on Fees and Charges, the Government issued Decree No. 120/2016/ND-CP dated August 23, 2016 detailing and guiding implementation of a number of articles of the law. After more than two years of implementation, these regulations have caused some inadequacies in management and use of collected fees, especially the mechanism of leaving fees to the fee-collecting units.

In the past, a number of agencies with large revenues asked the Government and the Prime Minister to apply a specific financial mechanism, including use of retained funds; a number of State agencies (Frequency Department, Telecommunications Department, Broadcasting Department - Ministry of Information and Communications) have asked the Prime Minister for the application of specific financial mechanisms such as non-business and revenue units to refunds of fees collected for investment.

However, the law on public investment has changed. Specifically, in Clause 21, Article 4 of the Law on Public Investment 2014: Public investment capital includes capital from revenue retained for investment but has not been included in the State budget balance. According to Government Decree No. 77/2015/ND-CP of September 10, 2015 on the medium-term and annual public investment plan, the charge is left to State agencies under public investment. On September 13, 2018, the Government issued Decree No. 120/2018/ND-CP to amend and supplement articles of Decree No. 77/2015/ND-CP. In particular, abolishing the regulation on fees left for State agencies belonging to public investment capital. Thus, from September 13, 2018, the fees left to State agencies (fee collection) are not included in capital for public investment.

On the other hand, according to the Ministry of Finance, the financial mechanism associated with unit characteristics creates income disparities between equivalent job positions among units in the same ministry or branch (between the beneficiary mechanism and units not entitled to the mechanism); between agencies and units performing the same function of State administration. In fact, many important job positions in State management agencies, especially units (department level), which do policy work but have no revenue, cannot apply finance mechanisms associated with unit characteristics and should not have additional income; while officials in the agencies that apply financial mechanisms associated with the unit characteristics are entitled to higher income and wages, although the nature of the job may not be as complex and important as the position at the policy-making unit. Even within the same unit, the allowances for additional salaries and incomes are generally applied to all equitised officials and public servants, reducing the impact of encouraging workers to improve their performance.

With these grounds, the Ministry of Finance decided to propose amending regulations related to the management and use of fees in Decree 120/2016/ND-CP and publish the first draft in September 2019. So far, the agency has collected comments from 46/85 ministries, branches and localities. The comments are generally in agreement with the draft with some additional contributions.

Pay or not to pay?

Regarding the regulation to leave the charge back to the State agencies for collection, in the draft, the Ministry of Finance proposed amending into the State agencies to collect the fees to pay all collected fees into the State budget, except Vietnamese foreign representative agencies are left apart. This view received disagreement from some ministries such as Police, Information and Communications, Planning and Investment, Culture - Sports and Tourism, Science and Technology, Justice, and Health as well as some provinces and cities like Binh Dinh, Khanh Hoa, Hanoi and Da Nang. They suggested keeping the current regulations, in accordance with Article 12 of the Law on Fees and Charges, avoiding major disturbance, affecting sustainability of many units that are stably operating and provide many public services.

Explaining this, the Ministry of Finance said in a report to the Government Standing Committee of the National Assembly not long ago raised the issue: State management agencies providing public non-business services at a fee. According to the Law on Fees and Charges, all collected fees and the State budget shall be paid, balanced by the State Budget, ensuring operational funding. In case State management agencies provide both public non-business services and perform the functions and tasks of the State administrative apparatus which need to be reviewed to determine clearly the agency's operation model with financial mechanisms. It is necessary to ensure if fees are collected, the whole fees shall be remitted into the State budget and the State budget shall be balanced and ensure the operation fund.

As such, the Ministry of Finance's proposed amendment is in line with the content the Government has previously reported to the National Assembly Standing Committee, so the drafting agency reserves its proposal and will include this content and the section on issues still has different opinions for consulting Government members.

With respect to the taxation of the part of fees left to enterprises to collect fees, Decree 120 stipulates that the fee amount left for organisations assigned by State agencies to collect charges (enterprises) is the turnover of enterprises but not yet provided specify this revenue is taxable. Therefore, the Ministry of Finance has proposed calculating this part of revenue as other ordinary revenues and enterprises must declare and pay taxes in accordance with law.

With this content, the Ministry of Education and Training proposes to finalise the regulations on the type of non-business units to be applied the financial mechanism like enterprises, because the ministry is wondering whether or not non-business units pay taxes on the fee collected.

Explaining, the Ministry of Finance said the Law on Fees and Charges stipulating public services provided by the State (State agencies, public non-business units, organisations assigned by agencies) currently collecting fees (fees belonging to the State budget are not taxable). For the same services, provided by enterprises, they shall collect according to the price mechanism (non-State budget fee) and enterprises shall declare and pay taxes.

In the case of a non-business unit transformed into an enterprise (not belonging to the service provided by the State), the enterprise will collect the fee for providing this service according to the price mechanism. For example, notarisation services: Notary offices that perform notarisation charge fees and are not taxable, and the notary offices that perform notarisation collect charges for services and are taxable.

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Also related to this issue, Hanoi has the opinion that some current documents that stipulate collection and payment for State agencies are not required to declare and calculate VAT. If the content of VAT declaration and payment with the money left to the fee and fee collecting organisation is required, it is necessary to review and amend other regulations. Regarding this, the Ministry of Finance said that: If an enterprise is assigned a fee by a competent State agency, the fee amount left to the organisation shall apply similarly to the case of ordering and assigning the task of providing services. The Government is currently regulated in Decree 32/2019/ND-CP dated April 10, 2019 of the Government, not a collection payment, as stated in Hanoi.