Detailed Analysis of Changes in the State Budget Law

According to the Government e-Portal on June 26, 2025, at its 9th session, the 15th National Assembly officially approved the amended Law on State Budget with 426 out of 430 delegates voting in favor. The law will take effect from the 2026 budget year. Expected to create a breakthrough in the budget decentralization mechanism, this law focuses on empowering local authorities while strengthening financial discipline and transparency. As Vietnam enters a new phase of development, it needs to build a flexible, efficient public finance system suitable for the digital age—a requirement that the amended law aims to address.

Key Contents

1. Empowerment – Ending the “Ask-Give” Mechanism

• The law affirms the transfer of authority to local governments to decide on the use of increased revenues and unspent budget estimates, ending the prolonged “ask-give” situation (New State Budget Law: Empowering Localities, Ending the Ask-Give Mechanism).
• Notably, Hanoi will receive 100% of revenue from land use fees and land rents under the Capital Law, creating strong development momentum for the city (Hanoi to Receive 100% of Land Use and Land Rent Revenues).

2. Enhancing Local Budget Proactiveness and Autonomy

• The law clearly stipulates that after every 5 years of stable budget allocation ratios between levels, localities must have the capacity for financial self-sufficiency, reducing reliance on the central budget (Voice of Vietnam e-Portal).
• Additionally, for the first time, the law allows provincial financial reserve funds to temporarily advance up to 50% of the surplus from the previous year to accelerate important infrastructure programs, with a repayment period of 36 months.

3. Ensuring Principles of Fiscal Discipline and Transparency

It ensures rational resource allocation, balancing revenues and expenditures, and maintaining national financial security and safety. It strengthens financial discipline, publicizes and transparently manages revenue and expenditure activities, and enhances the efficient use of national financial resources (Amending the State Budget Law: Only Regulating Mature, Clear, and Proven Issues with High Consensus).

4. Simplifying Procedures – Enhancing Decentralization

• The law and guiding decrees have been revised to simplify expenditure control procedures from the State Treasury, reducing administrative time while still ensuring financial control.
• It enhances decentralization and delegation of power to the Government, the Prime Minister, and People’s Committees at all levels in deciding and adjusting annual state budget estimates, and deciding on the use of increased revenues compared to estimates and remaining expenditure estimates of the budget level (New State Budget Law: Empowering Localities, Ending the Ask-Give Mechanism).

5. Legalizing Good and Practical Practices

• The State Budget Law has abolished contents that are no longer relevant to reality, cutting and simplifying procedures in the stages of budget estimation, execution, and finalization, such as: removing regulations related to control numbers and the 3-year Financial-State Budget Plan; removing regulations on principles for decentralizing revenue sources, expenditure tasks, and relationships between budget levels during the budget stabilization period; removing the procedure for financial agencies to appraise the state budget finalization of direct lower-level local budgets to shorten the time for synthesizing the state budget finalization submitted to the National Assembly for approval; … 
• Regulations on the division of land use fees and land rent revenues will be implemented from the 2026 budget estimate. Some contents stipulated in this Law will be implemented, including the decentralization of expenditure tasks between provincial and communal budgets for science, technology, innovation, and digital transformation; the synthesis and preparation of state budget estimates, and the organization of state budget expenditures for science, technology, innovation, and digital transformation; and budget advances (New State Budget Law: Empowering Localities, Ending the Ask-Give Mechanism).

Conclusion

According to the Journal of Finance, the amended State Budget Law is a decisive step, shifting from an “ask-give” mechanism to one of empowering autonomy, while simultaneously demanding increased responsibility, transparency, and fiscal control. Adapting to the trend of digital transformation and enabling localities to be more proactive will open up significant opportunities for sustainable development. This is a strategic shift in the reform of financial institutions, aiming for modern, flexible public financial management without losing established discipline.

Harley Miller Law Firm

• Email: [email protected]/[email protected]
• Website: luatminhnguyen.com or hmlf.vn
• Hotline: + 84 9372 15585