The Business Council of Mongolia expresses concerns about proposed tax increases to fund the IMF program. They argue that the social insurance increase is regressive and burdens small businesses. Some individuals would see their taxes double unfairly. Increasing tax rates could narrow the tax base by incentivizing avoidance. Alternative options to increase revenue or decrease spending include analyzing tax amnesty results, privatizing some state assets, and decreasing government spending and subsidies. The Council invites cooperation to choose economic measures that benefit citizens, businesses, and the government.

1. POSITION STATEMENT ON TAX INCREASE
OF THE BUSINESS COUNCIL OF MONGOLIA
The Business Council of Mongolia (BCM) advocates for a fair, stable, and transparent business
environment.
First and foremost, we support the need to approve and implement the Extended Fund Facility (EFF)
program with the International Monetary Fund (IMF). International markets and credit agencies have
already priced in the likelihood of implementation of the IMF program, thus stabilizing Mongolia’s
economic and risk outlook. Not implementing the IMF program will be seen as a very negative indication
for political risk and risk for investing in Mongolia.
At the same time, we have concerns regarding the proposed increases in taxes:
1. The proposed social insurance increase is regressive in that the lowest paid workers are the ones
who will be most negatively affected. It is also a greater burden for SME’s.
2. There is an unfair allocation of the new tax burden on a limited number of persons, some of whom
will see their taxes double - there must be a more fair way to spread the burden among more people
IF increasing taxes is a decision that must be taken.
3. In general, taking this money out of the economy (from persons and companies) will have a
negative effect on the growth of the economy.
4. It would be better to increase the tax base instead of increasing tax rates, to ensure that
everyone is paying their fair share of taxes. Increasing rates of existing taxes will have the opposite
effect as there will be more incentive to avoid tax and a potential narrowing of the tax base.
Additionally, we would like to point out that there are other ways to increase state budget revenue or to
decrease state budget expenditures. Below are a few such examples:
1. Conduct thorough analysis of Tax Amnesty results, register income sources, assets that were cleared
and disclosed as a result of tax amnesty.
2. Bring back off-shore capital through means of economic attraction.
3. Partial privatization of the Pension Fund and to increase private sector’s participation. As a result,
the fund losses can be decreased and pension can be increased for tax payers.
4. Eliminate subsidies and exemptions as they limit fair competition.
5. Privatize state owned enterprises that set “price ceiling” for the market and operate with loss.
6. Decrease state budget expenditure on government officials in terms of positions and numbers.
Of note, we will not support any campaigns that encourage citizens and businesses to refuse to pay
taxes. We encourage our members and everyone from the business community to follow the law, and it
is the confirmed position of our organization and our members that the proper method for airing their
concerns is through continued dialogue with members of Parliament and the Government of Mongolia.

2. Finally, we would like to invite representatives of the Parliament and Government of Mongolia to
work with us and the private sector to research, to develop, and to choose measures that will boost the
economy, thus creating win-win-win for the private sector, citizens of Mongolia, as well as the Government
of Mongolia.
THE BUSINESS COUNCIL OF MONGOLIA
10 APRIL 2017
ULAANBAATAR