General Taxation Department head elaborates on VAT refunds and future plans


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.