Finance Minister B.Javkhlan recently stated, “There is no such thing as a tax without burden. Tax burden is a relative concept.” This was his response to public concerns about the various taxes and fees imposed by the state, which many believe are excessive and place a heavy burden on citizens. The finance minister’s message suggests that the authorities are not prioritizing the well-being of citizens and plan to continue increasing taxes, further adding to the financial strain on the public.

In reality, every working Mongolian feels the weight of these taxes. For instance, a citizen pays 11.5 percent of their salary toward social insurance, while their employer contributes an additional 12.5 percent. On top of that, 10 percent of their salary is deducted as personal income tax. Additionally, a 10 percent value-added tax (VAT) is applied to the price of every good or product purchased.

For those living in the capital, every visit to a service organization comes with a two percent fee paid to the city office. Car owners face even more expenses, as they are required to pay three types of taxes and fees annually: road use tax, motor transport tax and air pollution tax. They must also purchase compulsory insurance. If a rural resident enters the city with a car, they are charged a daily fee of 5,000 MNT starting from the second day.

To make matters worse, the state also imposes a 10 percent tax on the interest earned from savings, further reducing the little money citizens have left after all these deductions. It’s clear that the financial burden on Mongolian citizens is significant and continues to grow.

Better to receive care than pay taxes

Citizens are not seeing the benefits of the numerous taxes they pay monthly and daily. Instead, their lives are becoming increasingly difficult and burdensome. A stark example of this growing frustration was the “Resign Government” demonstration organized by the Freedom Alliance Party on January 11 in the central square. Many people joined the protest, voicing their struggles with the heavy tax burden and criticizing the government’s policies and decisions as being detrimental to the well-being of citizens.

One citizen expressed their frustration online, writing, “How do you register for welfare? After working hard under immense stress, we end up paying taxes in the nine-figure range just to earn a modest income, and what’s left in our hand is barely enough to get by. The worst part is that we don’t get anything in return for the taxes we’ve paid. At this point, it’s better to stop paying taxes, register as poor, receive welfare and just give up.”

Another employer, referred to as Kh., shared his perspective on social media, stating, “After paying employees’ salaries, the remaining money goes straight to taxes. Don’t be fooled into thinking you’ll make a profit by starting a business. The state will take everything and push you toward bankruptcy.” These sentiments are not isolated; they reflect the harsh reality faced by the majority of Mongolians today.

Unfortunately, the authorities’ approach to taxation appears to be expanding rather than easing. Recently, Chairwoman of the Citizens’ Participation Union Party and representative of the Khan-Uul District City Council Ts.Oyungerel highlighted this issue in a public address. She revealed that the government is considering introducing a new tax called the “city center tax”, which would impose a daily fee of 27,500 MNT on individuals entering the city center. She warned, “The authorities are rushing to pass such a law. If the city center tax is implemented in Ulaanbaatar, everyone will effectively be fined. Very few people can afford this, meaning only the wealthy and powerful will be able to access the city center freely. We must fight to prevent the adoption of such a law.”

Ts.Oyungerel further criticized the government’s contradictory actions, stating, “When we see taxes being increased, it seems the government has no money. Yet, when we hear about large-scale projects, it appears they are spending lavishly. The reality is so far removed from their promises - it’s all lies.”

Budgets being spent on stoves or furniture

Of course, every country collects taxes. However, unlike Mongolia, in many nations, the taxes paid by citizens are used to improve their living conditions and make social services more accessible. Typically, taxes are increased only after citizens have achieved a certain level of income and a decent standard of living. In Mongolia, however, the taxes paid by citizens go into a large “pot” called the state budget and seem to “disappear” without trace. There are numerous examples of these funds being misused, not for the development of the country or its people, but rather to hinder progress.

Member of Parliament N.Nomtoibayar addressed this issue, saying, “Everything related to taxes, fines and fees has gone too far. It seems as though the government is pursuing a policy of stagnation rather than development. Businesses and organizations are shutting down, and young people are leaving the country in droves, often resorting to illegal work abroad. This path is unsustainable and will lead us nowhere.”

Indeed, it appears that taxpayer money is being used primarily to benefit those in power, such as funding lavish trips abroad for officials. A glaring example from this year’s state budget includes allocations of 111 billion MNT for foreign missions and 268 billion MNT for furniture and equipment. Meanwhile, only about 28 billion MNT of the taxes paid by citizens were allocated to distribute stoves to 32,000 households in the capital.

While the government claims to prioritize reducing emissions, its actions often contradict this goal. Instead of focusing on sustainable solutions, there seems to be a push for short-term measures that fail to address the root causes of environmental and economic challenges. This mismanagement of public funds and lack of coherent policy direction are exacerbating the struggles of ordinary citizens and hindering the nation’s development.

Are people ready to fund ‘bosses’?

This year, taxpayers will contribute a staggering 36.8 trillion MNT to the state budget. This means that citizens and businesses will essentially be “feeding” the authorities with this enormous sum. On top of that, an additional 3.8 trillion MNT will be required for the capital city’s budget, placing even greater pressure on individuals and organizations to work harder than ever before. The authorities have already approved historic increases in both the state and capital city budgets, setting a record high for this year. As a result, citizens, businesses and organizations will face unprecedented financial strain, leaving them with less money to support their families and meet their own needs.

There’s a well-known saying, “There is no such thing as state money - only taxpayers’ money.” In other words, it’s crucial to remember that the funds being spent by leaders do not belong to the state but to the taxpayers who earned them. Unfortunately, in Mongolia, the opposite seems to be true. Leaders are treating the money collected from citizens as if it were their own, spending it without accountability or regard for the public’s welfare. This mismanagement is a key reason why ordinary citizens are growing poorer, while taxes continue to rise and leaders with no real business acumen grow richer.

A clear example of this disparity can be seen in the labor market. According to the Mongolian Labor Market Supply and Demand Forecast for the Medium Term for 2024 through 2035, a study presented by the Ministry of Family, Labor and Social Protection last year, the average monthly salary of workers in Mongolia was projected to be 1.5 million MNT in 2022. However, the actual average salary was measured at just 731,100 MNT, which is less than half of the projected amount. The study also highlighted that real wages have not seen significant growth over the past decade, with little improvement since 2012. In simple terms, this means that the purchasing power of citizens has stagnated, leaving them unable to afford a better quality of life despite their hard work.

This troubling trend underscores a growing divide between the government’s priorities and the realities faced by ordinary citizens. While taxpayers are forced to shoulder an ever-increasing financial burden, the benefits of their contributions are not being reflected in improved public services, infrastructure, or living standards. Instead, the money seems to vanish into a system plagued by inefficiency, mismanagement, and a lack of transparency.

Unless there is a fundamental shift in how public funds are managed and allocated, the cycle of rising taxes, stagnant wages, and growing inequality will continue to erode the well-being of Mongolian citizens and hinder the nation’s progress. It is imperative for leaders to recognize that the money they spend belongs to the people and to prioritize policies that genuinely improve the lives of those who fund the state.

Lower incomes, better outcomes

In his New Year’s address on March 31, Prime Minister L.Oyun-Erdene highlighted positive economic projections for 2024, stating that the economy is expected to grow by five percent and foreign exchange reserves will reach 5.1 billion USD. He also mentioned that amendments to the tax and social insurance laws would be submitted to the spring session of Parliament, based on proposals from citizens and businesses. While these statements may sound promising, they appear to be more of a temporary attempt to placate citizens who are increasingly frustrated with the heavy tax burden rather than a genuine commitment to meaningful reform.

For instance, officials from the Ministry of Finance and other relevant agencies have been holding frequent meetings and discussions on reforming tax legislation. However, experts warn that these so-called reforms are merely superficial changes that fail to address the root causes of the problem. A.Munkhbold, president and researcher of the Mongolian Logistics Association, criticized the approach, saying, “It is true that the tax burden is high. To address this, a comprehensive socio-economic analysis must be conducted to determine the actual burden on citizens and businesses. Specifically, the impact on the middle class must be carefully considered. Our current tax system is a significant obstacle for citizens. Compared to countries with similar economies, our tax rates are excessively high. Honest taxpayers, or both citizens and businesses, have been suffering for a long time, while those who evade taxes and exploit loopholes thrive. It is unrealistic for the finance minister to claim that tax legislation can be updated within two months. From what he has said, it seems he is only proposing cosmetic changes. As the saying goes, ‘a dirty rabbit will have feces in its fur.’”

Indeed, the statements made by Finance Minister B.Javkhlan have done little to inspire confidence. One citizen aptly summarized the proposed solutions, noting, “They are trying to reduce the tax burden by making minor adjustments to VAT.” This observation seems particularly relevant, as the minister also mentioned plans to introduce VAT benefits for low-income groups. While this may sound like a step in the right direction, it raises a critical question, “Are Mongolian leaders effectively discouraging citizens from earning higher incomes by imposing greater financial pressure on those who do?”

This approach risks creating a system where citizens are penalized for striving to improve their livelihoods, while those who remain in low-income brackets receive limited relief. Such policies not only stifle economic ambition but also perpetuate inequality, as the middle class and honest taxpayers bear the brunt of the tax burden.

The government’s focus on superficial reforms and its failure to address the systemic issues within the tax system suggest a lack of genuine commitment to improving the lives of ordinary citizens. Without comprehensive, well-considered changes that prioritize fairness, transparency, and economic growth, the cycle of high taxes, stagnant wages, and public dissatisfaction will continue.

Ultimately, the government must recognize that its primary responsibility is to serve the people, not to burden them. Meaningful tax reform should aim to create a fair and equitable system that supports economic growth, rewards hard work and ensures that all citizens - not just a select few - can thrive. Until then, the promises of reform will remain little more than empty words, and the trust between the government and its citizens will continue to erode.