1 GLOBAL AI CHIP MARKET TO GROW TENFOLD IN NEXT FIVE YEARS: WHITE PAPER WWW.CHINADAILY.COM.CN PUBLISHED:2019/06/17      2 CHINA TO ROLL OUT NEW RARE EARTHS POLICY ‘AS SOON AS POSSIBLE’ WWW.RT.COM PUBLISHED:2019/06/17      3 JAPAN ASKS MONGOLIA TO HELP WITH ABDUCTION ISSUE WWW.NHK.OR.JP PUBLISHED:2019/06/17      4 PRESIDENT KH. BATTULGA DELIVERS SPEECH AT THE OPENING OF KHAAN QUEST-2019 WWW.MONTSAME.MN PUBLISHED:2019/06/17      5 PM U.KHURELSUKH RECEIVES FOREIGN MINISTER OF JAPAN TARO KONO WWW.MONTSAME.MN PUBLISHED:2019/06/17      6 CHINA, RUSSIA, MONGOLIA VOW TO STRENGTHEN TRILATERAL COOPERATION WWW.BELTROAD.NEWS PUBLISHED:2019/06/16      7 COUNTRY REPRESENTATIVE IN MONGOLIA (VACANCY NOTICE)- AMERICAN COUNCILS FOR INTERNATIONAL EDUCATION WWW.MONGOLIANBUSINESSDATABASE.COM PUBLISHED:2019/06/16      8 "DOING BUSINESS WITH UK" SEMINAR WAS HELD IN ULAANBAATAR WWW.MONGOLIANBUSINESSDATABASE.COM PUBLISHED:2019/06/16      9 MONGOLIA'S FOREIGN TRADE UP 10.2 PCT IN JAN.-MAY WWW.XINHUANET.COM PUBLISHED:2019/06/13      10 TRADE TURNOVER REACHES USD 5.6 BILLION AS OF MAY WWW.ZGM.MN PUBLISHED:2019/06/13      ТӨСЛИЙН II ДАХЬ ҮЕ ШАТЫГ 19.5 САЯ ЕВРОГООР САНХҮҮЖҮҮЛЭХЭЭР ТОХИРОЛЦЖЭЭ WWW.EAGLE.MN  НИЙТЭЛСЭН:2019/06/17     НИЙГМИЙН ХАЛАМЖИЙН ТЭТГЭВЭР, ТЭТГЭМЖ АВАГЧИЙН ТОО 203.5 МЯНГААР НЭМЭГДЖЭЭ WWW.EAGLE.MN НИЙТЭЛСЭН:2019/06/17     ИМПОРТЫН ӨСӨЛТ СААРЧ V САРЫН БАЙДЛААР 6 ХУВЬД ХҮРЭВ WWW.BLOOMBERGTV.MN  НИЙТЭЛСЭН:2019/06/17     СЗХ: “МИК АКТИВ 9” ХХК-Д ХӨРӨНГӨӨР БАТАЛГААЖСАН ҮНЭТ ЦААС ГАРГАХ ЗӨВШӨӨРӨЛ ОЛГОЛОО WWW.BLOOMBERGTV.MN НИЙТЭЛСЭН:2019/06/17     МОНГОЛЫН КОМПАНИУДАД БИЗНЕСИЙН ЁС ЗҮЙ НЭВТРҮҮЛНЭ WWW.ZGM.MN  НИЙТЭЛСЭН:2019/06/17     ЭКСПОРТ 7 ТЭРБУМ ДОЛЛАРТ ХҮРЧЭЭ WWW.EAGLE.MN НИЙТЭЛСЭН:2019/06/17     МОНГОЛ УЛСЫН ГАДААД ӨР 1.6 ТЭРБУМ АМ.ДОЛЛАРООР ӨСӨВ WWW.EAGLE.MN НИЙТЭЛСЭН:2019/06/17     "БРИТАНИ-ТАЙ БИЗНЕС ЭРХЛЭХ НЬ" СЕМИНАР ЗОХИОН БАЙГУУЛАГДЛАА WWW.MONGOLIANBUSINESSDATABASE.COM НИЙТЭЛСЭН:2019/06/16     БНКУ, МОНГОЛ УЛСЫН ХУДАЛДАА СҮҮЛИЙН ЖИЛҮҮДЭД БУУРЧЭЭ WWW.BLOOMBERGTV.MN  НИЙТЭЛСЭН:2019/06/13     ТАВАНТОЛГОЙ-ЗҮҮНБАЯНГИЙН ТӨМӨР ЗАМЫН АЖЛЫН ЗӨВШӨӨРЛИЙГ “МОНГОЛЫН ТӨМӨР ЗАМ” ТӨХК-Д ОЛГОЛОО WWW.EAGLE.MN  НИЙТЭЛСЭН:2019/06/13    

Higher gold royalty poses threat to FX reserves www.zgm.mn

Due to consecutive failure to form the quorum, the Parliament has delayed its plenary sessions for two months. One of the key items on the order list was a bill on extending 2.5 percent gold royalty for another three years, which was supposed to be ratified before the turn of the year. Thus, gold tax will now be set at pre-revision level at 5-10 percent, depending on the global price of gold.

According to a study conducted by the Bank of Mongolia (BoM), higher royalties lead to lower gold purchase, which ultimately affects foreign exchange (FX) reserves. For instance, gold tax was at an unbearably high level of 68 percent with the sudden income tax in 2006-2013. As a result, gold purchase fell from 15.5 tons to 2.1 tons by 2010. In other words, the BoM’s treasury fund was almost drained empty.

Officials explain that the sudden income tax, which raised gold tax from 5 percent to 68 percent, was due to boom in copper price; however, the decision had more adverse effects than its benefits as the number of artisanal miners drastically increased as a result.

The 2.5 percent gold royalty was approved in 2014. The result was almost immediate as gold purchase consistently increased in an annual amount, reaching a record high of 22 tons last year, which is 10 percent higher than the previous record in 2017, expanding FX reserves by USD 800 million to a 15-year record.

Therefore, the increased gold royalty is raising concern over a potential tax avoidance of gold producers, reduced gold purchase and increased illegal transportation of gold. A spokesperson of the BoM previously stated, “This law was ratified to boost the economy that was collapsing in 2014. The 9 percent royalties will increase budget revenue by only MNT 50 billion. BoM views the 2.5 percent royalties should be extended by at least 3 years.” BoM estimates to increase foreign exchange (FX) reserves by USD 750 million this year. The 2019 Monetary Policy Guidelines ratified by the Parliament stated to increase FX reserves to USD 6.5 billion in the middle-term.

As for other countries, gold royalty stands at 3 percent in the U.S, 5 percent in Brazil, 4 percent in Indonesia and 2.5 percent in India. This shows that the current 5-10 percent tax is higher than average.

Miners and investors seek favorable tax environment. China, for instance, deduct only CNY1.2-7 per ton of gold depending on the capacity of the mine, technical conditions and locations, as well as 2 percent royalty on import golds.



Published Date:2019-01-11