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The gains of higher taxes

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Parliament has submitted a draft amendment for the Excise Tax and Mineral Resources Law. The amendment states that any taxation in foreign currency must be made in Mongolian currency. An amendment was made according to the law of 2009 where it states that all tax and payments must be in Mongolian currency. However this law has not been followed in previous years. With the USD rate reaching 1771 MNT, why the sudden decision to implement the law at this time? The interesting fact about this draft is that the rate of USD against MNT to be used is the rate of January 2012 – 1450 MNT – which is lower by 300 MNT than the current rate. The excise tax is imposed on alcoholic drinks, tobacco, fuel, diesel and vehicles.
If Parliament passes the amendment as a draft, producers and importer will pay a lower tax than the current one. I have a suspicion that behind this there are Parliament members who will benefit from these kinds of tax cuts.

MPs in the business sector

For a while, H.Battulga, the Minister of Industry and Agriculture, initiated the idea to prohibit promoting candidates to Parliament who run alcohol businesses. Unfortunately, he has been overwhelmed by members who have a conflict of interest. There are many MPs who produce, import, run services and sell tobacco and vodka. For instance, everyone knows MP G.Batkhuu is the owner of APU and Ulaanbaatar Spirits. Moreover MP L.Enkh-Amgalan owns a specific share of the Spirit Bal Buram, subsidiary of MCS, and Tiger. Ts. Dashdorj, Member of the Mongolian People’s Party, has Mongol So Tobacco. D.Ganhuyag, the Minister of Mining, sells vodka and alcoholic drink through the chain stores of Everyday and his Sansar Bridge imports vodka from Japan. M.Sonompil, the Minister of Energy, runs Chinggis chain restaurants and beer business.
There are more than two ministers in Parliament that run such kinds of business. It is obvious that they made an amendment according to their own interests. There will be an even longer list if we add MPs who own bars, pubs, restaurants and commercial centers.

Working with the rate difference

When Parliament passed the state budget for this year, they considered USD rate at 1380 MNT. But in reality, it has increased to almost 1800 MNT. The deficit from the difference is uncertain. In addition, to transfer USD into MNT, they considered an optimistic budget. Draft makers said “When USD rate increases, the entities’ tax load increases too, conversely, when it declines it impacts negatively on the budget income.” Although, when they consider the tax amount, they estimated it very low. This will be a golden opportunity for businessmen who want to work on rate differences and enhance their businesses.
Last year, Parliament passed the Law on Tobacco Supervision, after which the number of small shops decreased and people smoked less in public places such as pubs and restaurants. In order to decrease the usage of vodka and tobacco, the excise tax must be higher. However the current situation is shameful because MPs are using economic levers and giving votes in favor of their own personal interests. Honestly, at this time, the opposing party mustn’t sit quietly. Maybe there are MPs who have such businesses among the opposing party as well, which is why they don’t speak out. Our only hope is that there will be many honest MPs who can stand up and reject this draft amendment.


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