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‘Elevated tax criteria may intensify financial strain on businesses’ www.ubpost.mn
On November 8, the Mongolian National Chamber of Commerce and Industry’s Board of Directors held a press conference to highlight significant concerns over the 2025 state budget proposal, expressing that the increased tax and spending burdens could heavily impact the private sector. Business leaders voiced concerns that escalating expenses, as outlined in the draft budget, risk overwhelming Mongolian enterprises and citizens alike with higher taxes and social security contributions.
The press conference raised issues of unfulfilled commitments by major political parties, including the Mongolian People’s Party (MPP), Democratic Party (DP), and HUN Party, who had initially promised economic relief and support for businesses. These parties, which hold a substantial share of parliamentary seats, pledged to reduce budget expenditures and prioritize the growth of the private sector. However, the 2025 budget shows a different approach, with substantial increases in both budget revenue and expenditures.
The draft budget sets total revenue at 36.8 trillion MNT, with a balanced income of 33.9 trillion MNT and expenditures at 35.8 trillion MNT. Compared to 2023, budget revenue has surged by 15 trillion MNT (68.8 percent), and budget expenditure by 13.4 trillion MNT (60 percent), with current expenses climbing by 9.1 trillion MNT (53.9 percent). Critics argue that the budget’s focus on high projected income and excessive current expenses could inflate government involvement in the economy, thereby limiting space for private sector growth.
According to the board, the tax structure embedded in the budget proposal allocates 87 percent of revenue from taxes, translating to 31.9 trillion MNT, an increase of 49 percent over 2023. This elevated tax requirement, along with social security premiums, may intensify the financial strain on businesses, potentially limiting their ability to sustain growth and job creation.
The private sector representatives in attendance emphasized that the fiscal overexpansion could shrink private sector activity by redirecting resources toward government initiatives. “This budget’s tax structure will make it exceptionally difficult for businesses to shoulder the financial load in 2025,” the board members noted, adding that the increased tax and insurance burdens, combined with rising interest rates, could further strain the country’s economic stability.
The business leaders called for significant reforms in fiscal policy, emphasizing a shift away from current overexpansion tendencies. They proposed scaling back current expenses during periods of high economic growth, supporting impactful investment projects, and adjusting the social welfare policy from a welfare-centric model toward a labor-focused approach.
The board members highlighted that such reforms could alleviate the tax burden on businesses and individuals while enhancing private sector participation in Mongolia’s economy. They also urged relevant officials to uphold the Budget Stability Law’s accountability provisions, ensuring that fiscal policy remains sustainable and growth-oriented. Moreover, the companies collectively pledged to monitor the government’s budget discussions and ensure that the 2025 budget incorporates balanced policies that support rather than inhibit Mongolia’s economic development.
Published Date:2024-11-10
