...We must en­sure that all cus­tomers re­ceive re­ceipts no mat­ter where they pur­chase goods from – even if they make a pur­chase at a shop or mar­ket. This way, ev­ery­one can ex­er­cise equal rights and main­tain fair­ness...

Head of the Gen­eral Tax­a­tion De­part­ment L.Zorig an­nounced that VAT re­funds amount­ing to nearly 35 bil­lion MNT will be dis­trib­uted to tax­pay­ers start­ing Fe­bru­ary 1, at a con­fer­ence on the im­pact of the new VAT Law on the econ­omy, which took place at the Press In­sti­tute on Jan­uary 19.

He shared at the con­fer­ence that the Gen­eral Tax­a­tion De­part­ment brought in over 1.5 tril­lion MNT to the state bud­get in 2016, 35 per­cent of which came from VAT rev­enue. This is re­port­edly 70 bil­lion MNT more than the amount of rev­enue the Gen­eral Tax­a­tion De­part­ment gen­er­ated for the state bud­get in 2015.

“See­ing th­ese re­sults, I be­lieve that the new VAT Law is ef­fec­tive,” he con­cluded.

L.Zorig added that there are 38,000 busi­nesses us­ing re­ceipt print­ers and that out of some 900,000 con­sumers who re­ceived re­ceipts, only around 620,000 of them have scanned and reg­is­tered re­ceipts on web­site. The Gen­eral Tax­a­tion De­part­ment plans to fin­ish dis­tri­bu­tion of VAT re­funds to those reg­is­tered within the first quar­ter of 2017.

L.Zorig gave a brief in­ter­view to pro­vide de­tails about the VAT re­fund and lot­tery for this year.

The re­vised VAT Law has been ef­fec­tive for over a year. Can you share some of the changes the law brought?

The Gen­eral Tax­a­tion De­part­ment ex­ceeded its pro­jected rev­enue in ev­ery sec­tion last year. In other words, we earned more than we es­ti­mated. We orig­i­nally planned to gen­er­ate 1.39 tril­lion MNT into the state bud­get, but gen­er­ated 175 bil­lon MNT more.

Sta­tis­tics in­clude rev­enue from all sources, not just tax. For ex­am­ple, there are so­cial in­sur­ance con­tri­bu­tions, cus­toms tax, and other fees. We saw a slight de­cline in terms of to­tal tax rev­enue com­pared to 2014. It could be said that 35 per­cent of to­tal funds cen­tral­ized to the state bud­get by the Gen­eral Tax­a­tion De­part­ment, specif­i­cally 555 bil­lion MNT of 1.56 bil­lion MNT, was from VAT rev­enue.

It was very chal­leng­ing to meet the VAT rev­enue pro­jec­tion in the past. In gen­eral, we used to col­lect only 90 per­cent of the rev­enue pro­jec­tion. How­ever, we were able to ex­ceed the pro­jec­tion by over 70 bil­lion MNT last year. This is the re­sult of the new VAT Law. More­over, many new or­ga­ni­za­tions reg­is­tered as VAT pay­ers last year - 2,708 new busi­nesses to be ex­act. This is the out­come of a new sys­tem.

On the other hand, we’re re­ward­ing the pub­lic. Tax­pay­ers get the chance to par­tic­i­pate in a lot­tery and be­come a lucky win­ner if they reg­is­ter their re­ceipt to the VAT sys­tem. In ad­di­tion to that, they can get re­funds of up to 20 per­cent of their tax con­tri­bu­tions in the pre­vi­ous year, which is two per­cent of their VAT con­tri­bu­tion. Around 620,000 peo­ple have been reg­u­larly reg­is­ter­ing re­ceipts of their pur­chase. Re­funds for th­ese peo­ple am­mount to 34 bil­lion MNT. Tax­pay­ers will re­ceive re­funds depend­ing on how earnestly they reg­is­tered their re­ceipts to the sys­tem. Some might get back 100,000 MNT and oth­ers might even get 500,000 MNT. Like so, there are many ben­e­fi­cial re­sults from the new VAT Law.

It’s good that the num­ber of reg­is­tered tax­pay­ing com­pa­nies in­creased. How­ever, most of the pub­lic pur­chase goods from mar­kets, yet mer­chants and deal­ers there don’t give out re­ceipts. What will the Gen­eral Tax­a­tion De­part­ment do to ad­dress this is­sue?

We have to en­cour­age more peo­ple to reg­is­ter re­ceipts and pro­mote peo­ple’s con­tri­bu­tion to the tax rev­enue. Mostly peo­ple liv­ing in Ulaan­baatar where the in­ter­net en­vi­ron­ment is good are able to dili­gently reg­is­ter their re­ceipts. Peo­ple liv­ing in ru­ral and pro­vin­cial set­tle­ments aren’t able to do so. I guess we still have some tech­ni­cal prob­lems, but we’re search­ing for ways to re­solve this prob­lem for res­i­dents in soums and prov­inces. Most peo­ple pur­chase the things they need from large mar­kets like Naran­tuul and Kharkhorin al­though they don’t re­ceive re­ceipts.

First of all, pri­vate mer­chants at mar­kets don’t have re­ceipt print­ers. Se­condly, they don’t have the de­sire to re­port on their in­come. Hence, we will first co­op­er­ate with the Ulaan­baatar Mayor and con­duct a re­search at Naran­tuul, 100 Ail, Kharkhorin, Bars and other large mar­kets so that we can in­tro­duce a sys­tem to print re­ceipts for cus­tomers. We have the re­spon­si­bil­ity to en­force the law. The fact that this law is not be­ing im­ple­mented means that the rights of the pub­lic are be­ing vi­o­lated. We must en­sure that all cus­tomers re­ceive re­ceipts no mat­ter where they pur­chase goods – even if they make a pur­chase at shops or mar­ket places. This way, ev­ery­one can ex­er­cise equal rights and main­tain fair­ness.

Is it true that the su­per draw of the VAT lot­tery will be re­duced? Does that mean peo­ple will be able to win 20,000 MNT in­stead of 100 mil­lion MNT, 200 mil­lion MNT and 300 mil­lion MNT lot­tery draws?

Small prize draws for 20,000 MNT, 100,000 MNT and 500,000 MNT will re­main the same. As for the 100 mil­lion MNT and 200 mil­lion MNT draws, we plan to split them into smaller prizes of five mil­lion MNT, 10 mil­lion MNT and 20 mil­lion MNT. There will no longer be su­per lot­tery draws. I’m sure the Min­istry of Fi­nance will sup­port this idea. This is a pol­icy to al­low more peo­ple to win. This way, a lot more peo­ple will be­come in­ter­ested in reg­is­ter­ing re­ceipts and par­tic­i­pat­ing in the lot­tery. We must do some­thing like this since the ac­ces­si­bil­ity of the VAT re­fund and lot­tery is quite low right now. For ex­am­ple, even I reg­is­tered quite a few re­ceipts but haven’t been able to win any­thing yet.

Some op­pos­ing opin­ions are be­ing raised, say­ing that tax re­duc­tion and ex­emp­tion should be ended. What’s your opin­ion on this?

That is cor­rect and right. Peo­ple are able to get a bunch of tax re­duc­tions and ex­emp­tion just for pur­chas­ing goods from small and medium sized en­ter­prises (SMEs). SMEs are ex­empt from im­port du­ties and VAT if they im­port any kind of equip­ment. The gov­ern­ment sup­ports agri­cul­ture and farming by ex­empt­ing do­mes­ti­cally pro­duced veg­eta­bles and chicken from tax. Ev­ery law Par­lia­ment is ap­prov­ing is try­ing to ex­empt some­one or some­thing from taxes. Now, there are tons of tax re­duc­tion and ex­emp­tion pos­si­bil­i­ties be­cause of this.

It’s nec­es­sary to re­duce and avoid ap­prov­ing ad­di­tional tax re­duc­tion and ex­emp­tion con­di­tions in leg­is­la­tions in up­com­ing years. Of course, there are es­sen­tial ex­emp­tions and re­duc­tion, but there are some we don’t need at all. We must study and find th­ese ex­emp­tions that aren’t ben­e­fi­cial and hardly af­fect the econ­omy and end them. Ac­cord­ing to an Amer­i­can lawyer spe­cial­ized in taxes, the USA ap­proved loop­holes in their Tax Law.The loop­holes were be­lieved to be so small as to only mos­qui­toes could pass through, but a few years later, the tiny holes be­came large, al­low­ing even ele­phants to pass through. The lawyer said that the coun­try ended up with a very huge gap in the fis­cal bud­get be­cause ev­ery or­ga­ni­za­tion tried to take ad­van­tage of those loop­holes. Our coun­try will end up the same way at this rate.

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