Today (January 13, 2024), Deputy Speaker of Parliament B. Purevdorj, along with MPs Ch. Lodoisambuu, A. Undraa, and G. Uyankhishig, announced their initiative to introduce a bill to lower the Value-Added Tax (VAT) to 5%.
This bill was initially submitted in 2019 but was not deliberated upon and was subsequently returned under the new parliamentary procedures. However, the new members of parliament have collaborated to reintroduce it.
There are 180,000 registered businesses in Mongolia, of which 81,000 are VAT payers. Additionally, 250,000 individual entrepreneurs are registered, with 50,000 of them paying VAT. The low number of VAT payers is attributed to the high tax rate. Reducing VAT is expected to make goods and services more affordable for citizens and stimulate economic activity. This spring, Prime Minister L. Oyun-Erdene is planning measures to reduce the burden of social insurance contributions and taxes. In this context, the initiative to reduce VAT to 5% has been proposed. If implemented, the new law would ease the tax burden on taxpayers.
Globally, over 80% of the 200+ countries have VAT rates below 10%. In countries with rates exceeding 20%, refund systems are well-established. However, Mongolia's refund system is insufficient. For example, stores in rural areas often do not pay adequate VAT or issue receipts, making refunds ineffective for rural citizens. Even if refund rates are increased, they may not benefit rural areas without structural improvements. The Finance Minister has opposed reducing taxes.
Currently, citizens pay 10% VAT and receive a 2% refund. If the proposed law is enacted, they would pay 5% VAT and receive the same 2% refund, reducing the net tax burden to 3%.
Today (January 13, 2024), Deputy Speaker of Parliament B. Purevdorj, along with MPs Ch. Lodoisambuu, A. Undraa, and G. Uyankhishig, announced their initiative to introduce a bill to lower the Value-Added Tax (VAT) to 5%.
This bill was initially submitted in 2019 but was not deliberated upon and was subsequently returned under the new parliamentary procedures. However, the new members of parliament have collaborated to reintroduce it.
There are 180,000 registered businesses in Mongolia, of which 81,000 are VAT payers. Additionally, 250,000 individual entrepreneurs are registered, with 50,000 of them paying VAT. The low number of VAT payers is attributed to the high tax rate. Reducing VAT is expected to make goods and services more affordable for citizens and stimulate economic activity. This spring, Prime Minister L. Oyun-Erdene is planning measures to reduce the burden of social insurance contributions and taxes. In this context, the initiative to reduce VAT to 5% has been proposed. If implemented, the new law would ease the tax burden on taxpayers.
Globally, over 80% of the 200+ countries have VAT rates below 10%. In countries with rates exceeding 20%, refund systems are well-established. However, Mongolia's refund system is insufficient. For example, stores in rural areas often do not pay adequate VAT or issue receipts, making refunds ineffective for rural citizens. Even if refund rates are increased, they may not benefit rural areas without structural improvements. The Finance Minister has opposed reducing taxes.
Currently, citizens pay 10% VAT and receive a 2% refund. If the proposed law is enacted, they would pay 5% VAT and receive the same 2% refund, reducing the net tax burden to 3%.