Mongolia faces needs to boost budget revenue
Experts see possibilities to increase tax income
2 долоо хоног, 5 өдөр өмнө
Budget revenue of Mongolia is at risk due to tax deficit, deduction, and discounts for mining investors. Furthermore, the Extended Fund Facility program will expire in the coming year, threatening the budget decrease. As a result of the need, officials propose the possibility to increase budget revenue by setting up the right tax policy.
One out of every MNT 10 of Mongolia’s tax revenue goes to discounts and exemptions. In the last four years, tax deduction and exemptions to citizens and entities of Mongolia equal to nearly four trillion tugriks. The volume has increased, and exceeded one trillion tugriks this year. This number is expected to reach MNT 1.2 trillion next year, according to the 2019 budget. Currently, there are over 40 discounts and 180 exemptions nationwide.
As of 2018, there are 1.2 million working population in Mongolia
Taxes are the main source of Mongolia’s budget revenue, which accounts for 80 percent of it. However, the country can not fully obtain its tax. The tax deficit equals MNT 800 billion. As of 2018, there are 1.2 million people, who are working in Mongolia of which 650,000 are paying social insurance. The rest of the working people are receiving social and civil services without paying social insurance. This may lead the country to inequality of social allocation.
More specifically, government revenues are mainly generated from taxation and royalties from the mining industry, but the country provides benefits to direct mining investors by showing VAT and profit discounts. International organizations have also warned the need to organize such tax breaks. According to the World Bank, the detailed study of these preferences, goals, and economic feasibility is required.
In 2017, Mongolia received an extensive bailout package from the International Monetary Fund (IMF) under its Extended Fund Facility (EFF). Since taking the IMF loan, Mongolia has had a good economic situation. When the three-year financial program expires in 2020, the revenue sources will decrease gradually and spell risk to the budget.
In order to expand budget revenue, Mongolia needs the policy which enables the government to identify unregistered and potential taxpayers and enhance accountability in tax administration. The experts also underscored the importance of simplifying tax payments, using electronic invoices, improving taxation and information strategies.