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Experts advise against Tax on Transfer of Exploration Licenses

ZGM DAILY
2018-03-13 13:39 GMT+8

30 percent tax on transfer of 1745 registered exploration licenses started taking effect this year in order to stop license transaction and increase budget revenue. The experts say that the regulation is driving out investors, which are bringing in foreign currencies worth 6-7 percent of GDP, and affecting the transparency of the mining sector.

Mining companies form 79 percent of FDI according to MRPAM

Tsogtbayar Tamjid, Economic and Financial Advisor to the Minister of Mining and Heavy Industry, remarked “This is fully against the investors. It will certainly stop FDI flow into Mongolia. Because exploration is a risk itself. Deducting 30 percent from companies bearing this risk is threatening.”

Bilguun Ankhbayar, CEO of Mongolian Investment Banking Group, highlighted that it can be perceived as a tax on investment, rather than trades. He added, “If the current tax rates and conditions stay as it is for a longer period of time, no exploration companies in Mongolia will survive and the operational environment of companies listed at the Mongolian Stock Exchange will reduce.”

During his participation in the Prospectors and Developers Association of Canada 2018, the Minister of Mining and Heavy Industry Sumiyabazar Dolgorsuren gave an interview to Bloomberg TV Mongolia, in which he asserted that the stock market development is crucial for the transparency of mining sector.

FDI totalled USD 702 million in 2017, of which 79 percent, or USD 554.5 million, were made in the mining sector. Around 10 percent of mining sector investments were formed by 4 or 5 foreign invested mining companies, while the exploration expenditure of the state was only MNT 12.25 billion (USD 5.1 million), according to a study of Minerals Resources and Petroleum Authority of Mongolia (MRPAM). In other words, the capital expenditures of foreign companies are eight times higher than the state in the exploration field.

According to MRPAM statistics, a total of 19 companies listed in international stock markets operate in Mongolia. The positive external and internal environments create opportunities for mining companies to invest in Mongolia. “There is no need for an extra tax, because the shareholders pay taxes directly from the sale of their shares. It is possible to add other types of fees to increase budget revenue. On the other hand, the development that follows a mine and its benefits are crucial for Mongolia,” explained Tsogtbayar Tamjid. 

 Tselmeg.Z, Tugsbilig.B

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