Investment Is Forbidden or Pay 68 Percent Tax
Some parliamentarians boasted, “It is not so high tax rate. It should have been 80 percent and it is rather low. Miners should not have to worry about.”
Starting from the previous year, Mongolia began to implement Windfall tax law. Thanks to taxations, state budget tends to exceed 2 trillion MNT. As assumed by politicians, copper price in the world market will be USD 6800, generating MNT 309.5 billion to state budget from Erdenet enterprise. Gold price is increased up to USD 590 and 20 tonne gold is to be mined of which gold to be obtained by Boroo gold company is excluded. MNT 53.8 billion is to be generated from windfall tax to be imposed on remaining 13 tonne gold to the state budget.
Scaring Investors off and Build Creativities Up
As the state budget increases, life of citizens shows no improvement at all and no major investments yet. Instead poverty takes place and unemployment spreads over the country. If things go along what the politicians assume, our country must have become the one similar to China in terms of development. Thus, there is an error here.
There has been an experience taking 70 percent windfall tax from mining companies in the world. For instance, America imposed 70 percent windfall tax on oil import companies in 1974. Other foreign countries had no way other than stopping this measure, knowing it would not go far, even they reinforced their budgets. Investors suffered a lot from paying all for taxation and closing doors. But today, how is the condition in our country?
Representatives of foreign investment companies asked to free from windfall tax during Investors’ Forum “Discovery Mongolia 2007”. It is essential to renew equipment at least to be engaged in mining business. Therefore they complain that they have to rob Peter to pay Paul if they pay 68 percent windfall tax.
Gold amount, handed over to the Mongolbank has been dropped dramatically in recent few years. Investors began to get away because they have to pay tax as per the gold they obtained. In other words drastic fall is following the wind fall tax. While state officials want to have great investment and creativities by attracting foreign investors, windfall tax of 68 percent blocks these opportunities. And thus, some get away from tax already.
Gold and copper windfall tax is to be imposed in case price of 1 ton copper exceed USD 2600 and of 1 ounce gold exceed USD 500 in London exchange. As a result, MNT 250 billion is assumed to flow to the state budget. Some Parliamentarians, who have engaged in ratification of windfall tax in 2006, boasted, “It is not so high tax rate. It should have been 80 percent and it is rather low. Miners should not have to worry about.” While working in Mongolia, a task group of IMF submitted recommendations to the Government last year. Mr. Roger Kronenberg, Head of the Task group noted that 68 percent windfall tax may adversely affect on Mongolia’s investments. Recent events show that he was right. What kind of future is waiting for Mongolia, which has locked its doors in front of foreign investors by the lock 68 percent windfall tax?
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