Parliamentary hearing on annulling the windfall profits tax to continue next week

Today was first day of full parliament-Khural's hearing on annulment of Windfall Profits tax and amendment of Corporate tax laws needed for conclusion of the Oyu Tolgoi investment agreement. Government of Mongolia proposed four draft laws needed for conclusion of the Oyu Tolgoi investment agreement with Ivanhoe Mines Mongolia Inc, a joint venture between Ivanhoe Mines Ltd and Rio Tinto Group. The miners wanted to circumvent the windfall profits tax which imposes 68 percent tax on profits from sale of mineral concentrates when the price of copper concentrate reaches $ 2,600 a ton or when gold reaches $ 850 an ounce. This windfall profits tax is major barrier for conclusion of the Oyu Tolgoi Investment Agreement between Mongolian Government and the international miners.

As result of 3 week re-negotiation authorized by the Parliament since July 23, 2009, the miners agreed to pay all taxes of Mongolia including the windfall profits tax provided that Mongolia annulled the windfall tax effective Jan 1, 2011. It means the miners will avoid paying the controversial tax.Lawmaker Batbayar Nyamjav (Democratic Party) initiator of the windfall profits tax law said " intention of the tax was to reduce export of raw materials and create condition for building copper smelter in Mongolia. Mongolia before and still is a country that exports only raw materials and commodity. We have turned into a raw materials supplier for our two neighbors.A country which never adds value to its raw materials and commodities, can not develop. Therefore, I can not agree with annulment of this tax." Batbayar was only lawmaker which voted nay to the draft law on annulment of the tax during the parliamentary minority group meeting.
Lawmaker Byambatsogt Sandag (MPRP) was critical of the miners over intention of their letter to the Mongolian lawmakers.He said " I would like to ask foreign investors to respect and uphold Mongolian laws and statehood. When Ivanhoe Mines and Rio Tinto sent letter saying " Mongolia is at a crossroad", they acted as if they are pressuring Mongolian lawmakers. This cast much doubt about the miners. I tell them, "follow Mongolian laws when you are in Mongolia". Before white people landed in America, Mongolia was an empire. No one can tell us what to do and determine our way for us."
Some lawmakers were suspicious at the working group of Government of Mongolia which done the re-negotiation with the miners. Bayartsogt Sangajav, the Finance Minister who headed the working group stated " I'm announcing that we did not receive a single cent from China or Rio Tinto and Ivanhoe Mines as bribe or anything like that."
According to the Parliament procedure, voting on whether to discuss the windfall profits tax took place in end of the hearing and decided to transfer the draft law to the Parliamentary standing committee on budget by vote of 54-10. Total of 64 lawmakers were present during the voting. At the same time, Mongolian civic groups held a conference and appealed to "patriotic lawmakers" not to give in to demands of the international miners. Next week, the hearing on the legal revisions is scheduled to continue.

Reporting by Ganbat, reporter of MonInfo, news and information services in Mongolia



  1. Do you know who is on the budget committee taking up the WPT?

    Are they in favor of removing it?

  2. Eric,
    The standing committee of the Khural on budgetary issue is headed by Mr.Khurelbaatar Chimed, former Minister of Fuel and Energy and State Secretary of the Ministry of Finance and Economy who headed first working group to negotiate with Ivanhoe back in 2007. The committee members include Batbayar Nyamjav, initiator of the windfall tax which opposed the annulment of the tax and Enkhbold Zandaakhuu and Davaasuren Tserenpil which interviews we have translated in our site.Please check out their interviews on our site. All lawmakers have different opinions about removal of the WPT.Some supports it and some are not.My hunch is unless Government of Mongolia come up with a tax to substitute the WPT, Khural may reject complete annulment of the tax. This is my opinion only. The committee consists of 20 lawmakers from MPRP and the Democratic party. 10 may vote yes and 10 may vote nay. No one can tell until the committee reviews the annulment of the WPT.

    Ganbat, reporter of MonInfo, news and information services company

  3. Eric,
    We at MonInfo, will report on budgetary committee review of the WPT annulment proposal next week. Stay tuned. Thank you for visiting our site.

  4. So now that the drafts and the WPT in particular have been sent back to the standing committees, what can we expect?

    In other words, how many votes does it take for the WPT to get out of the standing committee and back on to the floor of SGK for a vote?

  5. I don't understand the procedure in this instance.
    If I remember, the WPT was adopted on a Friday evening, with less than quorum, without hardly any pre-notice and didn't seem to have been discussed prior to its adoption by any committee.
    Why is repealing the same law so much more complex than its adoption?

  6. Eric,
    Now the draft law heading back to the full parliament session.... we'll see what happens.

    To anonymous:
    Yes, WPT was passed on a friday late afternoon of 2006. All laws go through respective standing committees before going to full parliament hearings. WPT was discussed at the budgetary committee prior its passing.No exception.
    Sometime laws are passed very quickly and sometimes it takes longer. It all depends on specifics of circumstances and importance of draft laws. Oyu Tolgoi is important resource for Mongolia and Mongolian proverb "measure seven times and cut once" is applied here.

    Ganbat of MonInfo News Service


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