Taxpayers expect favorable environment from tax reform

ZGM DAILY

2018-03-08 10:00 GMT+8

“We will put an end to the scenario where entities' bank accounts close due to unpaid taxes, which puts their businesses to a standstill and force them to go bankrupt, further increasing unemployment,” resolutely noted Khurelsukh Ukhnaa, Prime Minister of Mongolia, in a discussion on the tax revision held at Mongolian Chamber of Commerce and Industry on Monday, March 5.

For 30 days starting from February 23, Ministry of Finance is conducting a public discussion on revising 24 tax-related laws, including General Taxation Law of Mongolia, Laws on Corporate Tax, Personal Income Tax and Value Added Tax, in order to hear voices of taxpayers and collect best proposals from the relevant parties. No fundamental changes and revisions were made to tax laws in the last decade.

“Due to economic difficulties and unfavourable business environment in recent years, thousands of companies have closed their businesses. As of third quarter of 2017, about 50 percent of entities had inactive operations, while 20 percent of them reported a loss. This shows that our entrepreneurs and taxpayers are still facing financial difficulties.

Since 2006, Mongolia’s economy grew six-fold. In last December, Mongolia was included on the first ever tax haven blacklist of European Union and immediately got delisted after giving promises to enable its tax environment to meet the EU standards.

In addition, 57.5 percent of all companies that took part in Mongolian Business Environment Survey evaluated the tax environment as “unfavourable” and 28 percent of the surveyors answered that the tax pressure reduction and clear tax policies are the foremost priority.

The draft revision is also simplifying the submission of financial statements of private entities. For instance, entities with less than MNT 50 million annual sales income will be required to submit only annual financial reports, and pay one percent of total revenue to tax, reducing frequency of financial report submission by four times and cutting tax 10 times.

In addition, entities with over MNT 3 billion revenue shall quarterly submit financial statements a year and entities with up to MNT 3 billion income shall submit halfyear reports.

The current Law on Corporate Tax requires all entities to prepare quarterly statements regardless of its scale, deduct 10 percent tax from their sales, and entities with over MNT 2.5 billion revenue to pay 25 percent tax. Furthermore, the draft revisions also dictate to cut 20 percent dividend distribution tax of foreign investors to 5 percent.

According to the information given by Khurelbaatar Chimed, Minister of Finance, no-risk bearing companies will not be a subject to financial inspections. Risk assessment will be done based on financial statements of companies and the inspection will be conducted afterwards. As he highlighted, another major change proposed by the laws is the protection of taxpayers’ interest. “If a taxpayer suffers as a result of errors made by a tax inspector, the inspector will be responsible for his action by not serving for 10 years in the public service,” noted Mr Khurelbaatar.

The Ministry of Finance considers that the revisions to tax laws will bring more favourable and healthy tax environment in the country.

In the beginning of this year, the International Monetary Fund’s staff team worked together for two weeks on formulating the draft of the Revision to the General Taxation Law. The Ministry of Finance believes that the bills will be presented to the Parliament by April and take effect starting from January 2019.

Oyunbayar.N

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