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Mongolia's Copper and Gold Mining Windfall Tax Background |
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Monday, 15 May 2006 |
The Mongol Messenger, had an article earlier this week on the windfall tax:
Two bills aiming to tax windfall
profits from the rise in world copper
prices have been submitted to parliament,
and the May 5 plenary session
called for a debate on the bills.
Seventeen MPs proposed a levy of
80 percent on all income above $3,000
a tonne for copper, while a government
bill called for an increased use licence
fee to five percent. However it proposed
the increase be held to 2.5 percent
for mining coal reserves.
Some MPs claimed that an 80 percent
levy would cause international
concern and that Mongolia should negotiate
with Russia because Erdenet is
a joint venture.
MP N. Batbayar said, “We should
not lose the chance for a huge income
which comes about not from the work
of the miners. Under the 2003 agreement,
the enterprise was to pay Mongolian
taxes, so there will be no conflict.
Our bill will earn triple what will
come from the government bill.”
MPs claimed that the levy was effective
in other countries, and that if it
were approved, Erdenet would not suffer,
but the 2005 dividend worth $150
million could be spent on building a
pure copper refinery.
MP Ts. Damiran said that he believed
that copper prices would reach
$9,000 a tonne by 2010 because copper
supplies are becoming scarcer
while demand is rising.
Erdenet has made profits for all of
its 30 years except 1998, when the copper price fell to $1,600.
Deputy Prime Minister M.
Enkhsaikhan claimed that, as owners
of the land, Mongolia could raise the
mining fee, but a sudden increase in
tax could give negative signals to foreign
investors.
Finance Minister N. Bayartsaikhan
said, “We are making a strategic decision
that will have an effect for many
years, not just one year.”
“For a small country like Mongolia,
we need to raise the fee because
international big corporations are coming
in. It is difficult to estimate their
real income, so it is difficult to assess
the income for tax.”
He said that, while the working
group is drawing up amendments, it
may take a long time before it is ready
to be debated in parliament, so the government
has submitted a separate bill
on raising the mining licence fee.
The two bills united in calling for
a special fund for income from the
windfall profits.
 Comments (2) | |
1. To Finance Minister N. Bayartsaikhan:
Written by Guest, on 2006-05-15 10:04:35, IP: 67.172.185.185
You said: “For a small country like Mongolia, we need to raise the fee because international big corporations are coming in. It is difficult to estimate their real income, so it is difficult to assess the income for tax.”
If 'estimating their real income' is truly the problem, you can hire a top-of-the-line accounting company. Don't attempt to audit the financial statements yourself.
Always remember: you get what you pay for! If you want top notch accountants, you'll have to pay the price. If you want top-notch mining companies, you'll have to allow the incentive of turning a decent profit for the extremely financially risky work that is undertaken.
If you want to be embraced by the international community (both economic and political) as a law-abiding country, don't change laws that originally enticed mineral explorers to come to your land. When you change laws, change the laws for those who understand the rules that they will have to observe before they expend huge amounts of cash and effort. Those who thought that your country was acting in good faith when you passed the 1997 Mineral Laws should not be penalized because now the country suddenly decides it wants to change the rules. |
2. "a strategic decision that will have an
Written by Guest, on 2006-05-16 05:32:41, IP: 203.58.10.234
The minister is quite correct - this will have an effect for many years - but of actually driving away foreign investors, until the country once again makes a policy u-turn and lowers taxes to re-attract foreigners in another attempt to establish a mining industry... |
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Mongolia Websites
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Akira
KAMIMURA, lecturer, faculty of Mongolian studies, Tokyo University of
Foreign Studies launched an innovative website on old Mongolian
manuscripts maps in cooperation with the state archive of Mongolia. It contains 16 precious maps which are stored at the state archive for
academic use. The oldest map was estimated being made in 1803-1805.
A remarkable
feature of this web site is that you can find manuscripts written on
those maps by an advanced search function. All content of the maps has been indexed and easily accessible with the advanced search function.
For
instance, if you type, "erdeni"(transcription of Mongol bichig as
"erdene"), you get 24 search results and it says "erdeni" is written on
4 different maps. Then, it indicates where the search words are found
on the specific places of the maps. Also, you can add search conditions
among 20 items.
KAMIMURA
hopes this web site helps progress on study of Mongolian history and
many other related disciplines. Not only for the academic use, it is
also beautiful and interesting to appreciate.
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