Renewing the management of revenues from reorganization and equitization of state enterprises

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The fund's debt of local businesses as of December 31, 2018 was VND575,461 million. Photo: Internet

Change management model

The Ministry of Finance has proposed to change the current revenue management model of the Enterprise Arrangement and Development Fund to directly collect State budget and decentralize revenue between the central budget and the local budget in accordance with the state budget Law.

With this provision, revenues from arrangement and equitization (including public non-business units under the Government's regulations on equitization of public non-business units), divestment of state capital in enterprises due to Ministries, ministerial-level agencies and agencies attached to the Government acting as representative owners must pay to the central budget.Revenues from arrangement, equitization (including public non-business units), and divestment of state capital in enterprises must be remitted by the People's Committees of provinces and centrally run cities as representatives of owners submitting the local budget. At this time, all amounts currently collected and remitted to the Enterprise Arrangement and Development Support Fund will be collected and remitted to the State budget.

This policy aims to guide the management and use of revenues from arrangement, equitization and divestment of state capital strictly according to the provisions of the Constitution and the State Budget Law. At the same time, revenues from arrangement, equitization and divestment of state capital must be fully and promptly remitted and must be included in annual state budget estimates, financial plans and medium-term public investment plans.Priority is given to spending estimates for development investment, creating long-term resources. In case of excessive and unexpected revenues, it is required to report to the National Assembly and the National Assembly Standing Committee for consideration and decision on the management and use of this revenue source according to the law provisions.

Another aspect that the Ministry of Finance proposes to change is specifying the content of revenues from the arrangement and equitization of SOEs and public non-business units and divesting the invested state capital in enterprises and remitting the State budget.

The Ministry of Finance proposes that revenues from reorganization, equitization and divestment of state capital shall be remitted to the State budget, including: income from equitization of enterprises with 100% state-owned capital and limited liability companies one member with 100% of charter capital owned by SOEs; revenues from other forms of arrangement and conversion for SOEs according to the provisions of law on other forms of arrangement and conversion; revenues from the equitization of public non-business units; and revenue from divestment of state capital in enterprises; proceeds from divestment from enterprises and transferred to the State Capital Investment Corporation (SCIC). The above revenue does not include enterprises owned by political organizations or socio-political organizations (including Party's enterprises) because these enterprises operate mainly for non-profit purposes and are not the direct objectsapplied inthe law on equitization and management, use of state capital and assets in enterprises.

Separate priority spending groups

In addition to revenue, expenditure management of revenues from reorganization and equitization of enterprises should also be considered. The Ministry of Finance raised the issue of stipulating the contents of priority spending from the state budget for the purpose of supporting the process of restructuring and equitizing SOEs and public non-business units from the arranged revenuesto equitize SOEs and public non-business units and divest state capital at enterprises.

The current spending contents are divided into two groups to organize the estimation and spending that are suitable for the nature of expenditures. The first group is recurrent expenditures to compensate and support the equitization and divestment of state capital, including: redundant labor, payroll streamlining; expenses related to equitization and other forms of ownership arrangement and conversion; expenses related to state divestments. The second group is development investment expenditures, including: development investment expenditures; capital investment to establish SOEs, supplement state capital to enterprises; spending on partial or complete acquisition of enterprises in accordance with the law on management and use of state capital in enterprises; other expenditures according to the Resolution of the National Assembly, the National Assembly Standing Committee for the central budget and the resolutions of the provincial-level People's Councils for local budgets.

Such clear separation provisions will ensure the correct, adequate and timely payment, support for the process of reorganization, equitization and restructuring of SOEs and public non-business units, and at the same timeit is possible to reasonably adjust the investment of state capital in enterprises.

Another policy proposed by the Ministry of Finance is to return to the localities revenues from the arrangement, equitization of SOEs and public non-business units, and divestment of state capital at local enterprises already remitted to the Fund from January 1, 2017.

In fact, in the period of 2017-2019, the total amount paid to the Fund was VND6,863 billion, accounting for 3.7% of the total revenue of the Fund in this period (VND182,940 billion). Most of the localities that are remitted to the Fund are mountainous and difficult localities with limited budget revenues such as Dak Lak, Gia Lai, AnGiang and Tay Ninh.

According to the review of the Ministry of Finance, if the above-mentioned implementation is implemented, the estimated amount to be refunded to localities in the 2017-2019 periods is about VND4,592 billion.

For the late payment interest from the equitization revenues of the SOEs and from the divestment of state capital in the enterprises, the Ministry of Finance proposes a number of measures. Specifically, it is necessary to review and identify the objective reasons due to the equitization and divestment mechanisms and policies that change from time to time, by the organization of equitization settlement and state divestment of State management agencies are slow, which results in late payment interest. Some of the late payment interest arising due to the Fund management has changed, leading to irregular monitoring and insufficient sanctions to urge. At the same time, supplementing the provisions on handling deleted eligible delayed interest payment.

The Ministry of Finance also proposed that businesses to be considered for exemption of late payment interest include enterprises with losses of business results and accumulated losses up to the time of consideration of exemption from late payment interest; enterprises that have used the after-tax profit source and the compensation of collectives and individuals related to late payment (if any) but not enough to offset the interest on late payment. The determination of the amount of late payment interest to be exempted for enterprises shall be based on the business results of the enterprise and the amount of late payment interest arising each year on the principle that the late payment interest amount shall be cleared up to the maximum amount of additional losses annually.