LAW OF THE AZERBAIJAN REPUBLIC ON THE STATE BUDGET
The present law establishes legal, economic and organizational framework for the preparation, adoption, execution and control over execution of the state budget on each fiscal year.
Article 1. Key provisions
Definitions used in the present Law express the following meanings:
State budget – a form of collecting and spending means necessary to ensure the implementation of functions belonging to the state through relevant executive bodies in an order established by law;
Budgetary classification – grouping of state budget income and revenues based on functional, economic and other principles;
Fiscal year – period between January 1 and December 31;
State budget deficit – amount of state budget expenses not covered with revenues;
Cash execution of state budget – a mechanism of state budget execution enabling collection of revenues to the state budget and their use in accordance with budgetary classification;
State budget revenues – amount of taxes, duties, other payments and revenues entering the state budget in an order established by the legislation;
State budget arrears (loans) – means transferred from the state budget to the budget of the Nakhchivan Autonomous Republic and other local budgets for an indefinite period on the condition of return;
State budget expenses – means allocated from the state budget in accordance with the state budget classification;
Grant - means donated from the state budget to the budget of the Nakhchivan Autonomous Republic and other local budgets for regulating their expenses and revenues;
Subvention - means transferred from the state budget to the budget of the Nakhchivan Autonomous Republic and other local budgets for financing certain activities and returned if they have not been timely and purposefully used;
State subsidy – monetary means donated from the state budget to other budgets and organizations;
Earmarked budgetary funds – monetary means formed within the state budget and being used for implementation of specific activities;
Sequester – proportional reduction of expenses on remaining months of the fiscal year, except protected articles in case of non-execution of state budget expenses.
Article 2. Legislation of the Azerbaijan Republic on the state budget
The legislation of the Azerbaijan Republic on the state budget consists of the Constitution of the Azerbaijan Republic, the present Law adopted in conformity with the present Law on each fiscal year, the Law on the state budget, and other legislative acts.
Article 3. Budgetary system
The budgetary system of the Azerbaijan Republic consists of the state budget of the Azerbaijan Republic, the budget of the Nakhchivan Autonomous Republic, and local budgets.
Article 4. Budget classification
1. The budgetary system of the Azerbaijan Republic uses a common budgetary classification, which ensures comparison of budgetary information on all levels.
2. Structure and composition of the budgetary classification are determined in accordance with the legislation of the Azerbaijan Republic.
3. Incomes and revenues of the state budget are calculated in accordance with a relevant budget classification.
Article 5. State budget revenues
1. State budget revenues are formed at the expense of taxes, duties, payments and revenues established by the legislation of the Azerbaijan Republic.
2. Distribution of revenues on payments envisioned by the legislation among the state budget and other budgets is governed on the territory of the Azerbaijan Republic by the Law on the state budget adopted for each fiscal year considering the country’s regional development programs.
Article 6. State budget expenses
1. State budget expenses are directed, according to a relevant budget classification, to finance current expenses, investments and other expenses.
2. The amount of means allocated from the state budget to executive power bodies is established in accordance with expense articles ratified by a relevant executive power body.
3. Loans allocated for financing the activity of legislative bodies and judiciary power bodies are ratified by expense articles of the state budget in a separate line.
Article 7. Earmarked budgetary funds
1. Purposeful budgetary funds may be set up as part of the state budget. In such cases, revenues on such funds are indicated within the revenues article of the state budget separately and are used exclusively within the fund’s purpose. To spend the means of purposeful budgetary funds in any other direction is prohibited and the remainder in the balance by the end of the year cannot be written off in favor of the budget.
2. In case purposeful budgetary funds have no free source of income and are formed at the expense of deductions from common funds of the state budget, the volume of such funds is indicated within the expense article of the state budget.
Article 8. Reserve fund
1. For expenses not envisioned in the state budget of the Azerbaijan Republic and extraordinary situations, a reserve fund is set up, the amount of which is to be established each fiscal year.
2. Regulations for using the reserve fund means are governed by ruled ratified by a relevant executive power body.
Article 9. Relationship between the state budget with the budget of the Nakhchivan Autonomous Republic and local budgets
Relationship between the state budget with the budget of the Nakhchivan Autonomous Republic and local budgets is implemented through distribution of income sources. In case of insufficiency of domestic sources of income, allocation of grants, subvention, state subsidies and budget arrears (loans) from the state budget to the budget of the Nakhchivan Autonomous Republic and other local budgets may be envisioned for the solution of exigent socio-economic problems of certain territories.
Article 10. Process of preparation of the state budget draft
1. The process of preparation of the state budget draft commences 11 months ahead of the next fiscal year and covers a period till the day of presentation of the draft state budget to the Milli Mejlis of the Azerbaijan Republic.
2. The draft state budget on a regular fiscal year is prepared in accordance with macro-economic forecast of the socio-economic development of the cou8ntry, purposeful programs, results on the current and next year, financial and economic performance of economic sectors, administrative regions, all enterprises regardless of form of ownership.
3. Substantiated documents on preparation of economic and social programs and forecast necessary for the preparation of the draft state budget on a regular fiscal year are submitted to a relevant executive power body within envisioned terms and order.
4. In case of need, a relevant executive power body may demand from central and local executive power bodies, organizations financed from the state budget, to provide substantiating materials and calculations necessary for the preparation of the state budget.
5. Names of institutions and organizations attracted to the preparation of economic and social forecast, programs and other calculations necessary for the preparation of the draft state budget on a regular fiscal year are determined by a relevant executive power body.
Article 11. Documents prepared and submitted together with the draft state budget
In connection with the state budget on a regular fiscal year, the following documents are prepared and forwarded to the Milli Mejlis of the Azerbaijan Republic:
- Report on the performance of the state budget for the current year;
- Draft Law on the state budget of the Azerbaijan Republic on a regular fiscal year;
- Concept of economic and social development of the Azerbaijan Republic and forecast indices on a regular fiscal year;
- Purposeful programs, the funding of which is envisioned at the expense of the state budget;
- Main directions in the budgetary and tax policy;
- Combined financial balance on the territory of the Azerbaijan Republic;
- Draft laws on budgets of purposeful state funds not included into the state budget;
- Amount of revenues and expenses of the state budget according to the budgetary classification on a regular fiscal year;
- Other documents established by a relevant executive power body.
Article 12. Forwarding to the Milli Mejlis of the Azerbaijan Republic of the draft law on the state budget on a regular fiscal year
The draft law on the state budget on a regular fiscal year together with other documents established by the present law should no later than October 15 of the current year be forwarded for discussion and adoption of the Milli Mejlis of the Azerbaijan Republic in accordance with item 2 of the Article 109 of the Constitution of the Azerbaijan Republic.
Article 13. Discussion and adoption of the draft law on the state budget on a regular fiscal year
1. Discussion and adoption of the draft law on the state budget on a regular fiscal year is implemented in accordance with the internal by-laws of the Milli Mejlis of the Azerbaijan Republic.
2. On the instruction of a relevant executive power body, its authorized representative addresses a Milli Mejlis session of the Azerbaijan Republic with a report on the state budget on a regular fiscal year.
3. The draft law on the state budget on a regular fiscal year is adopted in the Milli Meslis of the Azerbaijan Republic no later than December 20 of the current year.
4. If the draft law on the state budget on a regular fiscal year is not adopted within the established term, a relevant executive power body shall establish temporary rules for financing from the state budget until the state budget is adopted.
Article 14. Principle indicators set forth by the law on the state budget on a regular fiscal year
The law on the state budget on a regular fiscal year establishes the following principle indicators:
· total amount of revenues;
· amount of revenues on sources of income;
· norms for deductions from certain tax to the state budget;
· total amount of expenses;
· amount of expenses in accordance with the functional budgetary classification, including grants, subventions provided to the budget of the Nakhchivan Autonomous Republic and other budgets, international liabilities, payments on domestic and external arrears, and the reserve fund amount;
· upper limit of state budget deficit;
· upper limit of domestic and external arrears.
Article 15. Forwarding of indicators to institutions and organizations in connection with the adoption of the state budget on a regular fiscal year
1. After adoption of the state budget on a regular fiscal year, a relevant executive power body shall conduct and ratify in accordance with budgetary classification the distribution of expenses among organizations.
2. A relevant executive power body shall establish in accordance with adopted indicators of the state budget on a regular fiscal year the quarterly distribution of its revenues (by sources) and expenses (in accordance with budgetary classification).
3. indicators, quarterly distribution of revenues and expenses of the adopted state budget shall be reported to institutions and organizations by relevant executive power bodies within a month.
4. leaders of relevant executive power bodies shall be held accountable in an order established by the legislation of the Azerbaijan Republic for failure to timely deliver the deductions to the institutions and organizations in question as envisioned in the distribution of state budget expenses among organizations.
Article 16. State budget execution
1. The cash execution of the state budget on a regular fiscal year is implemented through the state treasury. According to relevant accounting standards, the state treasury keeps an account of all operations registered through the treasury of all institutions and organizations financed from the state budget.
2. Acquisition by state budget organizations of goods (operations and services) at the expense of the state budget is governed by a relevant legislation of the Azerbaijan Republic.
3. Operations on liabilities assumed in the process of state budget execution shall be completed within a month after the fiscal year. Means that have not been used within this period are refunded to the state budget.
Article 17. Execution of balance between state budget revenues and expenses
1. Execution of balance between state budget revenues and expenses is an important condition for its preparation and execution.
2. The amount accumulating by the end of the year as a result of additional expenses during state budget execution, as well as over-fulfillment of revenues or economizing on expenses, are directed, after the state budget is fully covered, to the non-reserve fund envisioned by the draft state budget for a regular year in accordance with the legislation.
3. If during the state budget execution its revenues are executed are 20% below the established amount and this causes the exceeding of the upper limit of the state budget deficit, a mechanism of proportional reduction of all expenses is applied in the subsequent months (sequester), except protected articles of the state budget.
4. The composition of protected articles of the state budget is set forth by the law on the state budget on a regular fiscal year.
5. In case of need, relevant executive power bodies can, in the process of state budget execution, introduce changes to the limits of established expense articles in accordance with budgetary classification.
Article 18. Report on state budget execution
1. A monthly report is prepared and forwarded to relevant executive power bodies on state budget execution. State budget execution is reflected by a monthly report based on the functional classification and classification by organizations.
2. A quarterly report on state budget execution, according to the functional budgetary classification, is forwarded before the end of the first month of a regular quarter by a relevant executive power body to a relevant Milli Mejlis commission of the Azerbaijan Republic.
3. The annual report on state budget execution of the Azerbaijan Republic and a corresponding draft law shall no later than on May 15 of a regular year forwarded by a relevant executive power body to the Milli Mejlis of the Azerbaijan Republic for ratification.
4. The Milli Mejlis of the Azerbaijan Republic discusses the documents forwarded to it and ratifies the Law on state budget execution on a regular fiscal year.
Article 19. Control over state budget execution
1. Control over state budget execution is implemented by the Milli Mejlis of the Azerbaijan Republic.
2. If factual revenues on state budget income turn out to be 20% below the adopted plan in quarterly reports on state budget execution, these reports shall be discussed by corresponding commissions of the Milli Mejlis of the Azerbaijan Republic.