Business Council of Mongolia releases statement on tax increase


2017-04-10 14:51 GMT+8

The State Great Khural of Mongolia to finalize and approve bill on 2017 budget amendments. To implement the IMF program, the Mongolian government has agreed to make three arrangements, including the budget adjustment to increase some tax rates. In regards, Business Council of Mongolia issued the following statement, advocating for a fair, stable, and transparent business environment.

First and foremost, we support the need to approve and implement the Extended Fund Facility (EFF) program with the International Monetary Fund (IMF). International markets and credit agencies have already priced in the likelihood of implementation of the IMF program, thus stabilizing Mongolia’s economic and risk outlook. Not implementing the IMF program will be seen as a very negative indication for political risk and risk for investing in Mongolia.

At the same time, we have concerns regarding the proposed increases in taxes:

  1. The proposed social insurance increase is regressive in that the lowest paid workers are the ones who will be most negatively affected. It is also a greater burden for SME’s.
  2. There is an unfair allocation of the new tax burden on a limited number of persons, some of whom will see their taxes double - there must be a more fair way to spread the burden among more people IF increasing taxes is a decision that must be taken.
  3. In general, taking this money out of the economy (from persons and companies) will have a negative effect on the growth of the economy.
  4. It would be better to increase the tax base instead of increasing tax rates, to ensure that everyone is paying their fair share of taxes. Increasing rates of existing taxes will have the opposite effect as there will be more incentive to avoid tax and a potential narrowing of the tax base.

Additionally, we would like to point out that there are other ways to increase state budget revenue or to decrease state budget expenditures. Below are a few such examples:

  1. Conduct thorough analysis of Tax Amnesty results, register income sources, assets that were cleared and disclosed as a result of tax amnesty.
  2. Bring back off-shore capital through means of economic attraction.
  3. Partial privatization of the Pension Fund and to increase private sector’s participation. As a result, the fund losses can be decreased and pension can be increased for tax payers.
  4. Eliminate subsidies and exemptions as they limit fair competition.
  5. Privatize state owned enterprises that set “price ceiling” for the market and operate with loss.
  6. Decrease state budget expenditure on government officials in terms of positions and numbers.

Of note, we will not support any campaigns that encourage citizens and businesses to refuse to pay taxes. We encourage our members and everyone from the business community to follow the law, and it is the confirmed position of our organization and our members that the proper method for airing their concerns is through continued dialogue with members of Parliament and the Government of Mongolia.

Finally, we would like to invite representatives of the Parliament and Government of Mongolia to work with us and the private sector to research, to develop, and to choose measures that will boost the economy, thus creating win-win-win for the private sector, citizens of Mongolia, as well as the Government of Mongolia.

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