Transcript The Public Sector of the Czech Republic

Union, principally financed by the EU
A joint initiative of the OECD and the European
STATE BUDGET IN THE CZECH
REPUBLIC IN ITS RELATIONS
TO THE EU
Seminar on Budget and EU Funds
Skopje, 14-15 May 2007
Bohdan Hejduk
Czech Ministry of Finance
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© OECD
 A. The Public Sector
 B. Preparation for the EU accession
 C. Relations of the Czech Republic to the
EU budget
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A. The Public Sector of the Czech Republic
 The Budget System
 Two Fiscal Statistical Systems
 The Public Finance Reform
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The Budget system -Legal Framework
 The budget process of the central government (the state
budget and extra-budgetary state funds) is set by the Act
on Budgetary Rules in addition to the special acts on extrabudgetary state funds.
 State Agricultural Intervention Fund, State Cultural Fund,
State Fund for the Support and Development of the Czech
Cinematography, State Fund of Transport Infrastructure,
State Environmental Fund, State Fund for Housing
Development, Estate Fund of the Czech Republic
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The Schedule of the Budget Process
 The schedule of the budget process starts in February
and finishes at the end of the year and is obligatory
according to the Act on Budgetary Rules.
 The state budget act and medium-term expenditure
frameworks for years n, n+1,n+2 as well as the limits of
expenditures and revenues for the chapters` (e.g.line
ministries ) budgets are approved annually.
 The draft state budget, medium- term expenditure
frameworks and limits of expenditures and revenues for
the chapters` budgets are drawn up by the Ministry of
Finance followed by the approval of the government and
the House of Deputies.
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Medium-term expenditure frameworks
 The medium-term expenditure frameworks for
years n, n+1, n+2 were included into the Act on
Budgetary Rules in connection with the decreasing
of the general government deficit and fulfilment of
the commitments towards the EU.
 The medium-term expenditure frameworks
involve :
state budget expenditures,
extra-budgetary state funds.
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The Budget Process
The budget process has four main phases:
 Formulation of the draft state budget and
medium- term expenditure frameworks for years
n, n+1, n+2 by the Ministry of Finance
 Government`s approval
 Parliamentary scrutiny
 Implementation
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Two Fiscal Statistical Systems
 There are two fiscal statistical systems
monitoring the general government/ public
budgets from the different points of view:
 The European System of National and
Regional Accounts ESA 95 (accrual-based)
 National Methodology –Fiscal Targeting (cashbased)
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Comparison I
 The Fiscal Targeting includes just so-called
public budgets involving the central, regional and
municipal governments as well as regional
councils of cohesion regions.
 The ESA 95 covers the entire Government sector,
in other words, public health insurance companies,
government agencies, subsidiaries, funds, state
universities and other set allowance organizations.
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Comparison II
 In accrual system (ESA 95), recognition occurs
with the exchange of liabilities and /or assets,
which is usually before the cash flow and closer to
actual economic impact of the transaction.
 In contrast, the cash basis (Fiscal Targeting ),
which is used in most traditional budget systems,
records outlays and receipts only when they
involve cash transactions.
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The Public Finance State – The General
Government Deficit
The public finance state remains steadily deficit
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•
-1
-2
% HDP
-3
-4
-5
-6
-7
Saldo vládního sektoru
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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The Proposed Public Finance Reform
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The Proposed Public Finance Reform follows the
government`s objectives in its programme declaration.
1.
to reverse the unfavourable development of public
finances, especially in the area of mandatory
expenditures (pensions, social benefits)
to reduce the general government deficit
to halt government debt growth
to reduce unemployment and the tax burden
to reduce the level of corruption and regulation
2.
3.
4.
5.
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Ratio of state budget, extra-budgetary state funds,
and public budget balances to GDP in %
indicator
2007
2008
2009
2010
3 442
3 718
4 019
4 340
-2,5
-3
-2,8
-2,3
Ratio of extrabudgetary state funds
balance to GDP in %
-1
-0,2
-0,1
0
Ratio of other units of
public budget balance
to GDP in %
-0,5
-0,7
-0,7
-0,7
-4
-3,9
-3,7
-3
-3
-2,6
-2,3
GDP in curr. pr. in
mld (bil) CZK
Ratio of state budget
balance to GDP in %
Ratio of public
budget balance to
GDP in %(without
reform)
Objective according
to the Government
Programme
Declaration
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B. Preparation for the EU accession
 Formulation of the National Programme for the
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Preparation of the Czech Republic for Membership of the
EU
National Development Plan
Creation of the Institutional, Administrative and Legal
Backgrounds
State Aid
European Communities` own resources
Act on Budgetary Rules
The Changes in Budget Classification of revenues and
expenditures
Usage of carryovers
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Formulation of the National Programme for the
Preparation of the Czech Republic for Membership of the
EU
 In order to strengthen the pre-accession strategy and allow
EU assistance to be channeled to meet the Czech
Republic`s specific needs, The EU prepared an Accession
Partnership document in 1998, which served as the basis
for the National Programme for the Preparation of the
Czech Republic for Membership of the EU, which was
updated each year.
 In 2002, the National Programme was replaced by a
Summary of the remaining tasks of the Czech Republic for
Accession to the European Union.
 The Ministry of Finance was responsible for the chapter
Financial Needs.
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The EC areas of interest
 Information systems for the monitoring of
the EU flows
 Levies into the ECs` own resources
 Possibilities of co-financing the EU projects
and programmes
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National Development Plan
 The CSF (Community Support Framework) for
the Czech Rep. is based on the National
Development Plan covering a strategy for
economic and social cohesion, including a
problem analysis for Prague.
 The State Budget Department of the Ministry of
Finance was involved in the preparation of the
NDP for 2004-2006, mainly in overall outline
concerning the financing of the operational
programmes for the period in question and setting
the limit for the additionality.
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Additionality
 Additionality means that the funds of the
European Community should not replace, but be
an addition to national economic and social
cohesion policy funds.
 With respect to the principle of Additionality, the
NDP included the level of public structural
expenditures that the Czech Republic was to
maintain during the programming period.
An ex-ante verification provided a frame of
reference for the whole programming period.
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Creation of the Institutional, Administrative and
Legal Backgrounds
The Czech Republic tried to create a wide and effective
association of all the relevant bodies, according to national
rules and practice :
 To make the drawing on support from the EU`s Structural
Funds as easy as possible.
 To be able to manage the EU appropriations from the state
budget`s and public budget`s points of view.
 To provide necessary national appropriations for the co-
financing and link them up with the EU appropriations
including cutting down the national programmes
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State Aid
 Producing an overview of state aid granted in the
Czech Republic was a necessary prerequisite for
ensuring transparency of state aid and its
compatibility with the EU rules.
 On the basis of the State Aid Act, the monitoring
institution`s competencies were transferred from
the Ministry of Finance to the Office for the
Protection of Economic Competition effective
1 May,2000 because of conflict of interest
concerning a double role of the Ministry of
Finance.
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European Communities` own
resources – where do they come from?
 Own resources currently come from
customs duties, agricultural levies,
sugar contributions, a fixed-rate portion
of value-added tax (VAT) receipts and a
fixed-rate levy on gross national income
(GNI).
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Own resources- institutional framework
 Czech Statistical Office- the harmonisation of the GNP in relation to
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compiling of national accounts according ESA 95.
General Directorate of Customs- the administration of collection and
remittance of customs duties and their tranfer to the EC account, and
their statements in accord with the EC regulations.
State Agricultural Intervention Fund - the collection of sugar
contributions.
Tax Department of the Ministry of Finance – the creating VAT
assessment base and submitting the statement concerning the tax base to
the EC.
National Fund Department- the whole system of own resources,
payments according to VAT and GNI, communication with the EC,
representative of the Czech Republic in ACOR meetings and work
groups of the Council for the own resources.
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Own resources- simulation
 On the basis of agreement with the EC, the
Ministry of Finance submitted a simulation
of own resources calculation for the Czech
Republic to the EC as well as the
government from 2001 until the accession
2004.
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Own resources-questionnaire
 The EC made a questionnaire which
provided the total list of administration
terms for the area of own resources. The
Ministry of Finace was supposed to fill in
the questionnaire. It included the detailed
description of the own resources system`s
administration.
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Own resources – Additional tasks
 Opening accounts of the EC on behalf of the ECs with the
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Czech National Bank in CZK and EUR for the transfers of
own resources.
Regular evaluation reports about a progress in preparation
for the levies to own resources for the EC.
Providing detailed written procedures concerning the
administration of own resources in Czech Rep.
Regular inspections of EC on spot in the area of traditional
own resources (customs duties, sugar contributions).
Inspections of the system of own resources and their
levies carried out by the MoF and SAO.
The system of collection of own resources will be
subjected to the internal audit of the Ministry of Finance.
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Act on Budgetary Rules
 In 2004 amendment to Act on Budgetary Rules enabled
harmonisation of Czech and European legal framework in
the area of the state budget:
 Financing of the programmes and projects co-financed
from the EU budget through the NF and accepting other
appropriations from the EU provided that they flow
through the state budget.
 Own resources after the accession of the Czech Republic
to the European Union.
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The amendment resulted from the
following preconditions:
 NF is responsible only for the appropriations for the
programmes and projects co-financed from the EU budget
(Structural funds and Cohesion fund).
 Originally the EU appropriations should flow through the
state budget in case the beneficiaries were either state`s
organizational units or state allowance organizations. Later,
this rule was changed.
 The contribution of the state budget on the EU programmes
is set as a binding indicator of a chapter in question.
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 Own resources are considered as expenditures of
the state budget.
 The chapters` administrators are in charge of
financing of the EU programmes for the whole
time of financing of the programmes.
 Technical and administrative procedures had to be
adjusted in relation to the implementation of the
ECs`regulations and in the area of own resources.
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 The customs duties were credited to the account
out of the state budget. The state budget gets only
the Customs Administration costs.
 A special account named EC was opened with the
Czech National Bank.
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The Changes in Budget Classification of
revenues and expenditures
1.Pre-accession stage
Items for:
 International institutions` appropriations
revenue,
 Transfers to supranational bodies
(non-capital tranfers, recovery of the
unjustifiably used the EU appropriations),
 Tranfers of the NF and from the NF.
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2.Accession to the EU (2004)
 The Czech Rep. share of selected customs duties
and sugar contributions (the total collection of
sugar contributions has been divided between the
EU and Czech Rep. since 2007).
 The EU appropriations revenue (capital, non-
capital subsidies, compensations).
 Tranfers to the EU ( levies to own resources
according to VAT and GNI).
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Usage of carryovers
 The state`s organizational units have been allowed to carry
over the saved appropriations in unlimited amounts into
reserve funds at the end of the year and use them in the
following years according to the stated purpose since 2004:
The appropriations for
1.Financing of projects or programmes co-funded from the
EU budget,
2.Financing domestic investment programmes,
3.EU funds outside investment programmes,
4.Social benefits,
5.Events insured against damage,
6. Other expenditures.
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Problems and solutions
Problems:
 Rapid increase of the amount of carryovers in
reserve funds since 2004.
Total amount in bil
CZK
Programmes and the
EU funds
in bil CZK
2003
2004
2005
7,1
32,2
58,0
7,0
21,2
2006
68,8
34,9
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 Instability of budgeting.
 Different results in comparison with the
ESA 95.
Solutions:
 Adjustment of Budgetary Rules – only
carryovers of claims for exceeding the
budgetary expenditures in the following
years, not part of cash expenditures.
 Government`s power to regulate carryovers.
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C. Relations of the Czech Republic to the
EU
 The Net Position in relation to the EU budget
in 2006
 The Development of the Net Position
in relation to the EU budget
within 2004-2006
 The Development of the EU appropriations share
of total revenues and expenditures of the state
budget within 2004-2006
 State Budget and financial flows in relation to the
EU budget
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2006
The net position in relation to the EU budget in 2006
Pre-accession aid
mil EUR
mil CZK
90,4
2 568,10
Agriculture
503,5
14 251,00
Structural actions
468,3
13 300,30
Internal actions
52,1
1 480,80
Compensations
201,1
5 710,20
1316,2
37 310,30
149
4 233
VAT resource
173,7
4 934
GNI resource
667,5
18 958
80,2
2 277
1 070,50
30 402,30
245,7
6 908,00
Total revenues from the EU budget
Payments to the EU budget
Traditional own resources
Reserves
Correction UK
Total payments
Net budgetary position in relation to the EU budget
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2004
The dev. of the net position
in relation to the EU bud.
2004-2006
Pre-accession aid
mil EUR
2005
mil CZK
mil EUR
2006
mil CZK
mil EUR
mil CZK
2004-2006
mil EUR
mil CZK
157,1
4 960,00
72,2
2 309,80
90,4
2 568,10
319,7
9 837,80
90,8
2 813,70
398,1
12 739,30
503,5
14 251,00
992,3
29 804,00
193,4
6 190,10
212,1
6 788,50
468,3
13 300,30
873,9
26 278,80
Internal actions
26,9
860,80
59,5
1 904,30
52,1
1 480,80
138,6
4 245,90
Compensations
332,3
10 466,50
300
8 940,00
201,1
5 710,20
834,2
25 116,70
Total revenues from the EU
budget
800,4
25 291,00
1 041,90
32 681,80
1 316,20
37 310,30
3 158,60
95 283,20
Traditional own resources
58,9
1 910,10
136,7
4 373,70
149
4 233,00
344,7
10 516,80
VAT resource
78,6
2 548,80
140,9
4 507,80
173,7
4 934,20
393,3
11 990,80
GNI resource
365,1
11 833,90
607,1
19 426,40
667,5
18 958,40
1639,8
50 218,60
1
31,40
1,2
37,00
2,1
68,40
Correction UK
50,6
1 639,00
73,7
2 359,00
80,2
2 276,80
204,5
6 274,80
Total payments
554,2
17 963,20
959,5
30 703,90
1 070,50
30 402,30
2 584,20
79 069,40
Net budgetary position in
relation to the EU budget
246,2
7 327,90
82,4
1 977,90
245,7
6 908,00
574,4
16 213,80
Agriculture
Structural actions
Payments to the EU budget
Reserves
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The Development of the EU funds share of total
revenues and expenditures of the state budget
within 2004-2007
mld CZK
2004
2005
State final account EU funds SFA
2006
EU funds SFA
2007
EU funds State budget EU funds
Total expenditures
862,9
x
871
x
967,1
x
Total revenues
769,2
25 ,3
813
32,7
862,7
37,3
1036,6
946,1
x
61,6
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State Budget and financial flows in relation to the
EU budget
 The ECs` own resources are funded from the state
budget (except for customs duties).
 The appropriations of the CAP are integrated into
the state budget.
 The SFs and CF appropriations originally flew
through the state budget only for the state`s
organizational units and state allowance
organizations. The rule has been applied for all of
the beneficiaries since 2007.
 Pre-accession instruments appropriations go only
through the NF.
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Thank you for your attention.
[email protected]
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