It has been long since we have started talking about economic transparency. Words like transparency, open and accessible have been circulating extensively in our vocabulary so that Economic Transparency law started to convey positive notion. This law has been in discussion for very long time.
Mongolian Business Summit June20, 2014. Ch.Saikhanbileg, Head of Cabinet Office, representing Government of Mongolia.
“We need to make the economy transparent. Our tax system is not perfect yet. There are many unresolved and unchanged issues in the past 20 years. This law will give the businesses one time chance. After that there will be no shadow economy. We have initiated this law in order to reveal the hidden cash.”
From the above it can be understood that with the law Mongolian tax system will be strengthened and put an end to the shadow economy.
December 10, 2014, B.Lkhagvajav, President of Mongolian National Chamber of Commerce and Industry.
“We are working to have the Economic Transparency law to be approved within next one month’s period. We will cooperate with Speaker Z.Enkhbold on this matter. Mongolia needs Financial Reforms in order to move from its current position. This law should have been discussed back in May, but was postponed. If it was approved then we could have started the financial reforms starting the July 1st. The law enables the individuals, businesses to increase their profits with right financial tools. Businesses and entities could have started their operations anew. With tax return system enforced entities, businesses and individuals will pay their taxes.“
From above statement it can be understood that Economic Transparency law will enable the individuals, businesses and entities to start from the same start line with financial reforms. But it lacks to explain why entities and businesses that have been having their operations for 25 years need to start anew at the same starting point.
January 30, 2014, Interview of T.Ganbold, CEO of Altan Dornod Mongol LLC to Udriin Sonin newspaper
“If we had approved this law earlier, we could have started having the benefits earlier as well. I have doubt that even the economic downturn could have had different turn. It has been 25 years since Mongolia transitioned to market economy. First five years has been like wild capitalism. No one had proper business skills and every one was avoiding taxes. Most of the politicians have come up this way. Companies and businesses have been having double reporting. ”
His conclusion was not to blame the individuals and businesses, but more sudden transition of the economy and the systematic anomaly.
January 12, 2015, O.Orkhon, President of Mongolian Bankers Association
“As of the Economic Pardon Law we tried this once before. I don’t think hidden cash that has already been transferred overseas will come back. There is no such thing. Entities and individuals at Narantuul market never expose their income, it is wired through private accounts, and most of them are avoiding taxes. Every one in Mongolia knows this. We cannot continue and we in desperate need of regulating this state. I support the idea. But on the other hand for those who were paying their taxes it is somehow unfair. Why the state should pardon so frequently? Many will think that if the state pardons from time to time it would have been beneficial to avoid taxes.
The law should clearly state the benefits and fines of paying and not paying the taxes. But the government is not giving solutions for this procedure. Taxes have been raised. But now they are talking about giving tax returns. Taxes should be imposed in similar manner and give the businesses same conditions.”
January 6, 2015, MP U.Enkhtuvshin at the Legal Standing Committee discussion
“Economic Transparency Law should be approved immediately. Politicians should be left from this process. Probably there will be some cases raised for some politicians who have put their hands on Chinggis Bond money. The law should regulate businesses only.” The same view was expressed by MP J.Batzandan as well.
January 7, 2014, B.Lkhagvajav, President of Mongolian National Chamber of Commerce and Industry.
“There are two reasons why the law wasn’t approved. Two provisions of the law have become the obstacles; first is the provision, which states that the individual under investigation does not fall under this law and the second provision, which states that any one who comes open with their income statements to fall under the law. Businesses now struggling to raise funds from the capital markets as their income statements have been having double standards. The law helps to improve the tax system as a whole and will assist in overcoming the economic downturn.”
Experts and officials have been discussing the Economic Transparency law from different angles. Other MPs who defend the Economic Transparency law are B.Garamgaibaatar, Head of Economic Standing Committee, R.Gonchigdorj, S.Bayartsogt, Kh.Temuujin and B.Narankhuu.
While the Cabinet Office have given the following information:
During 2007-2008 entities have been pardoned from some taxes and social welfare fees. This time on top of social welfare fees and taxes immovable property and legal registration, accounting and income statements are to be included. For instance:
- Social welfare fees and taxes
- Immovable property and legal registration
- Lack of income statement and devalued income statement
- One time pardon to entities and individuals with correct income statements
The duration of voluntary income statement reports will be 6 months starting from the date that law enforces.
Outcomes
Implementation of law will ensure the economic transparency and fairness and strengthen the tax structure. The most important outcome will be the correct reporting information, which will enable to determine the economy with realistic numbers.
The law provisions to pardon from the legal and criminal outcomes related with double booking, but also provisions the cases that won’t fall under this law.
Although this law seems very right to be approved and implemented immediately it still lacks the research in several fields:
- National Statistics Office (lack of studies on shadow economy and whether the shadow economy will come open with the implementation of the law)
- General Taxation Authority (how many entities, businesses and individuals to be pardoned?)
- Ministry of Finance (which entities have been pardoned during the 2007-2008 and what positive outcomes this had on economy?)
- Ministry of Justice (who or which experts participated in the drafting of the law, has the working group involved independent economy experts and professional associations?).
If the officials at government and drafter have come up with open information on the above-unanswered questions many would not have doubted this law.
As long as the state institutions haven’t done their homework on that civil institutions are criticizing the law as the Economic Pardoning Law emerged together with Economic transparency law, which provisions that information of the pardoned entities should be hold, leading to the conclusion that this law was pretty much drafted by REQUEST.
It has been long since we have started talking about economic transparency. Words like transparency, open and accessible have been circulating extensively in our vocabulary so that Economic Transparency law started to convey positive notion. This law has been in discussion for very long time.
Mongolian Business Summit June20, 2014. Ch.Saikhanbileg, Head of Cabinet Office, representing Government of Mongolia.
“We need to make the economy transparent. Our tax system is not perfect yet. There are many unresolved and unchanged issues in the past 20 years. This law will give the businesses one time chance. After that there will be no shadow economy. We have initiated this law in order to reveal the hidden cash.”
From the above it can be understood that with the law Mongolian tax system will be strengthened and put an end to the shadow economy.
December 10, 2014, B.Lkhagvajav, President of Mongolian National Chamber of Commerce and Industry.
“We are working to have the Economic Transparency law to be approved within next one month’s period. We will cooperate with Speaker Z.Enkhbold on this matter. Mongolia needs Financial Reforms in order to move from its current position. This law should have been discussed back in May, but was postponed. If it was approved then we could have started the financial reforms starting the July 1st. The law enables the individuals, businesses to increase their profits with right financial tools. Businesses and entities could have started their operations anew. With tax return system enforced entities, businesses and individuals will pay their taxes.“
From above statement it can be understood that Economic Transparency law will enable the individuals, businesses and entities to start from the same start line with financial reforms. But it lacks to explain why entities and businesses that have been having their operations for 25 years need to start anew at the same starting point.
January 30, 2014, Interview of T.Ganbold, CEO of Altan Dornod Mongol LLC to Udriin Sonin newspaper
“If we had approved this law earlier, we could have started having the benefits earlier as well. I have doubt that even the economic downturn could have had different turn. It has been 25 years since Mongolia transitioned to market economy. First five years has been like wild capitalism. No one had proper business skills and every one was avoiding taxes. Most of the politicians have come up this way. Companies and businesses have been having double reporting. ”
His conclusion was not to blame the individuals and businesses, but more sudden transition of the economy and the systematic anomaly.
January 12, 2015, O.Orkhon, President of Mongolian Bankers Association
“As of the Economic Pardon Law we tried this once before. I don’t think hidden cash that has already been transferred overseas will come back. There is no such thing. Entities and individuals at Narantuul market never expose their income, it is wired through private accounts, and most of them are avoiding taxes. Every one in Mongolia knows this. We cannot continue and we in desperate need of regulating this state. I support the idea. But on the other hand for those who were paying their taxes it is somehow unfair. Why the state should pardon so frequently? Many will think that if the state pardons from time to time it would have been beneficial to avoid taxes.
The law should clearly state the benefits and fines of paying and not paying the taxes. But the government is not giving solutions for this procedure. Taxes have been raised. But now they are talking about giving tax returns. Taxes should be imposed in similar manner and give the businesses same conditions.”
January 6, 2015, MP U.Enkhtuvshin at the Legal Standing Committee discussion
“Economic Transparency Law should be approved immediately. Politicians should be left from this process. Probably there will be some cases raised for some politicians who have put their hands on Chinggis Bond money. The law should regulate businesses only.” The same view was expressed by MP J.Batzandan as well.
January 7, 2014, B.Lkhagvajav, President of Mongolian National Chamber of Commerce and Industry.
“There are two reasons why the law wasn’t approved. Two provisions of the law have become the obstacles; first is the provision, which states that the individual under investigation does not fall under this law and the second provision, which states that any one who comes open with their income statements to fall under the law. Businesses now struggling to raise funds from the capital markets as their income statements have been having double standards. The law helps to improve the tax system as a whole and will assist in overcoming the economic downturn.”
Experts and officials have been discussing the Economic Transparency law from different angles. Other MPs who defend the Economic Transparency law are B.Garamgaibaatar, Head of Economic Standing Committee, R.Gonchigdorj, S.Bayartsogt, Kh.Temuujin and B.Narankhuu.
While the Cabinet Office have given the following information:
During 2007-2008 entities have been pardoned from some taxes and social welfare fees. This time on top of social welfare fees and taxes immovable property and legal registration, accounting and income statements are to be included. For instance:
- Social welfare fees and taxes
- Immovable property and legal registration
- Lack of income statement and devalued income statement
- One time pardon to entities and individuals with correct income statements
The duration of voluntary income statement reports will be 6 months starting from the date that law enforces.
Outcomes
Implementation of law will ensure the economic transparency and fairness and strengthen the tax structure. The most important outcome will be the correct reporting information, which will enable to determine the economy with realistic numbers.
The law provisions to pardon from the legal and criminal outcomes related with double booking, but also provisions the cases that won’t fall under this law.
Although this law seems very right to be approved and implemented immediately it still lacks the research in several fields:
- National Statistics Office (lack of studies on shadow economy and whether the shadow economy will come open with the implementation of the law)
- General Taxation Authority (how many entities, businesses and individuals to be pardoned?)
- Ministry of Finance (which entities have been pardoned during the 2007-2008 and what positive outcomes this had on economy?)
- Ministry of Justice (who or which experts participated in the drafting of the law, has the working group involved independent economy experts and professional associations?).
If the officials at government and drafter have come up with open information on the above-unanswered questions many would not have doubted this law.
As long as the state institutions haven’t done their homework on that civil institutions are criticizing the law as the Economic Pardoning Law emerged together with Economic transparency law, which provisions that information of the pardoned entities should be hold, leading to the conclusion that this law was pretty much drafted by REQUEST.