Mongolian Embassy’s delegation visits Hoa Binh province www.baohoabinh.com.vn

(HBO) – A delegation from the Mongolian Embassy in Vietnam and the Vietnam-Mongolia Friendship Parliamentarians’ Group led by Ambassador Dash Bilegdorj paid a working visit to Hoa Binh province on December 15. The delegation had a working session with Tran Dang Ninh, Permanent Vice Secretary of the provincial Party Committee and Chairman of the provincial People’s Council; and Bui Van Khanh, Vice Chairman of the provincial People’s Committee.

Increases in personal income taxes reveal underlying systematic issues with fair taxation in Mongolia www.theubpost.mn

Beginning on January 1, 2018 Mongolia will introduce a new tax bracket system for the personal income tax. The new tax bracket system intends to replace an old system which imposed 10 percent to all citizens regardless of their income. Most would agree that tax reform in Mongolia has been long overdue but Cabinet’s proposed amendment has been met with fierce opposition. Many unions, including the Oyu Tolgoi mine workers’ union and other businesses have publically opposed the decision and have staged protests.

The Ministry of Finance has justified the move, clarifying that the increases in the personal income tax would only affect eight percent of the population. Of Mongolia’s 900,000 registered taxpayers that pay a personal income tax, 92 percent will be unaffected by the increases and will pay the 10 percent they are accustomed to. Tax breaks for the lowest earners will increase also as part of the new tax bracket system. These are all within the terms that were agreed upon with the International Monetary Fund when Mongolia requested to be enrolled into an extended fund facility.

Delving deeper beyond the surface into the tax increases shows us that the measure is not baseless and is in line with IMF’s core values of mitigating the impact of some reform measures on the most vulnerable in society. Tax breaks for the lowest earners will be increased on a step-by-step basis. In 2018, the lowest tax bracket will enjoy a 120,000 MNT tax break. The tax discount will be gradually increased each year, ultimately reaching 240,000 MNT in 2021.

Collecting taxes, especially the personal income tax, based on income brackets is not a new idea and is employed by countless countries around the world. Some might ask then if only eight percent of workers will be affected and if a similar system is employed around the world, why are people still opposed to the increase?

Logically, people who will be most affected by the tax increases will be the most opposed. It is quite rare for any government anywhere to increase taxes and for it to be unopposed.

The Mongolian Association of Woman Business Owners has publically criticized the decision as an impediment to the people’s opportunity for growth and prosperity in addition to being detached from reality.

For some, their opposition stems from the fact that their albeit high-income is the only source of income for a family. For miners, the long working hours and time spent away from the families justifies their relatively high-income salaries and they have been the most vocal opponents of the tax bracket system.

In 2017, revenue from the personal income tax is estimated to be 43 billion MNT. With the introduction of tax bracket system, revenue will jump to 88 billion MNT in 2018 and 84 billion MNT in 2019. Accordingly, the new tax bracket will only supplement an additional 40 billion MNT to the state budget, hardly enough to put a dent in the 737 billion MNT state budget deficit.

However, the issue is not only just that certain high-income individuals will pay higher taxes.

Increasingly, discussion around the issue has transformed into a debate about equal and fair taxation. In theory, a tax bracket system is a fair system of taxation but only if it is imposed fairly and evenly amongst the population. One large segment of Mongolia’s population has been consistently and systematically omitted and unofficially exempt from taxes and more specifically the personal income tax. Taxation of informal sectors has been a common issue for many developing countries and Mongolia is no exception.

There is a bigger systematic reason for the blatant tax exemption that herders enjoy. While the number of herders has been decreasing consistently as rural to urban migration increases, they still remain a major voter base. While the interests of herders might not be at the forefront in Ulaanbaatar, Mongolia still has 20 other provinces. In the majority of those provinces, livestock production is the main source of income and therefore voters tend to vote for politicians that promise to not impose taxes on herders.

The ruling Mongolian People’s Party won a 65 majority seat in Parliament mainly thanks to its platform that it would not create any additional taxes, it was obvious that appeasing to herders was a major reason for its landslide victory.

Herders, along with traders in the city’s markets account for a large unregulated untaxed sector in the economy. In theory, traders and herders alike should all have to pay taxes. Herders and their children all enjoy public services such as education, health insurance, and welfare that is funded by taxpayers without contributing their share.

Deliberately exempting herders from taxes for political gain has created a bad precedent and ultimately concentrated the majority of the tax burden on the 900,000 workers paying a personal income tax.

Admittedly, herding is a tough business in which the herder is solely responsible for any liabilities. It is a sector which can be devastated by weather or natural disease. However, since the transition into a market economy, Mongolia has seen development of whole economic sectors dependent on livestock products from herding as herders are not only subsisting on livestock but profiting.

While this may not be true for all herders, many wealthy herders benefit from not having to pay taxes. In many ways, Mongolia’s reluctance to impose taxes on herders can be likened to the United States’ reluctance to tax churches and religious organizations. A sense of traditional values and morals have become an impediment to fair taxation. In a world where herders are tugrug billionaires and churches are multi-billion dollar businesses, it is irrational to exempt a huge segment of the economy.

Many politicians have tried to skew the argument into something cultural, arguing that imposing taxes on herders would threaten the Mongolian way of living. However, as argued by economics professor G.Khashchuluun at the National University of Mongolia, at the very least, we need to tax herders that have thousands of livestock.

Another argument is that the Constitution states that pasture in Mongolia belongs to the state, classifying it as a natural resource as same as coal or petroleum. Therefore, mining companies and herders both use resources owned by the government for profit but only the mining companies pay taxes.

However, taxing herders is not the be-all and end-all solution to Mongolia’s taxation system. As a whole, the system in which taxes are determined and collected need to be more comprehensive.

Tesla to make pickup truck after Model Y crossover www.reuters.com

(Reuters) - Tesla Inc will build a pickup truck soon after producing electric crossover vehicle Model Y, Chief Executive Elon Musk said on Tuesday.

Mongolian Consulate Opens in Busan www.hapskorea.com

Busan City announced that a Mongolian consulate has opened in Busan for active exchanges between Busan and Mongolia.

Turkey, Azerbaijan, Kyrgyzstan, Mongolia to form joint military www.irannewsdaily.com

The al-Kawthr network reported that Turkey, Azerbaijan, Kyrgyzstan and Mongolia will have joint military forces under the title of ‘the Joint Army of the Turkic World, the Eurasian Military Force.’

Mongolia borrows $1 billion from India to set up oil refinery www.newsbharati.com

Ulaanbaatar, December 26: To decrease the dependency on China, Mongolia had approached India for funding it for establishing an oil refinery that could boost the nation’s gross domestic product by 10%. In response Mongolians got a smile on face as India has decided to give $1 billion as a loan to Mongolia.

The Mogolian government intends to use $700 million of the loan for an oil refinery and $264 million for oil pipelines, according to a statement on its website last week. Mongolian PM Erdenebat Jargaltulga has instructed relevant ministries to negotiate with the Export-Import Bank of India, according to the statement.
Mongolia is looking to India and other investment partners as its economy contracts and its debt burden grows. Last month, China backed off from talks with Ulaanbaatar over a loan package to help the economy after a dispute over the visit to Mongolia by the Dalai Lama.
The refinery will have a capacity to process 1.5 million metric tonnes of oil per year. It will produce 560,000 tonnes of gasoline, 670,000 tonnes of diesel fuel and 107,000 tonnes of liquefied gas annually. The refinery could boost Mongolia’s GDP by 10%, according to the statement.
The 20-year loan will have an interest rate of 1.75% and principle payments will be waived during the five years.

MSE revises price limit for block trades www.mse.mn

According to the provision number 8.10.11 of 'Mongolian Stock Exchange' JSC Charter of Incorporation and the provision number 33.1 of the Mongolian Stock Exchange Trading Rules and the CEO Order number A218 dated 25 December 2017, the lower price limit for block trade is set to be 15% from the previous day close, removing the upper price limit. The changes are made based on the suggestions from the market participants and are reflected in the revised 'Trading Rules' approved by the MSE Board of Directors on 13 December 2017 that is pending approval by the FRC.

China wants Afghanistan's ancient trade routes to be part of new 'Silk Road' www.rt.com

China and Pakistan are looking to include Afghanistan in their $57 billion economic corridor, as part of Beijing's Belt and Road initiative, said Chinese Foreign Minister Wang Yi, as quoted by Reuters.
The economic corridor is expected to benefit the whole region and act as an impulse for further development, according to the minister. Under the broader Belt and Road project Beijing is planning to build a new “Silk Road” connecting China to Southeast and Central Asia by land and the Middle East and Europe by sea.

Special Envoy Ambassador appointed for Mongolia's removal from EU tax haven blacklist www.gogo.mn

Minister of Foreign Affairs D. Tsogtbaatar appointed B.Mandakhbileg as a Special Envoy Ambassador to work with the European Union (EU) for Mongolia's removal from the EU's tax haven blacklist.

Workers oppose income tax increase www.montsame.mn

Ulaanbaatar /MONTSAME/Mongolian Trade Union of Energy, Geology and Mining Workers (MTUEGMW) protests against increased tax rate on individual income that is set to be effective starting January.