For many years, Mongolia has benefited from technical assistance provided by international organizations such as the World Bank Group, the International Monetary Fund (IMF) and the Japan International Cooperation Agency (JICA). Some of Mongolia’s most important partners in recent years have been the Organisation for Economic Co-operation and Development (OECD), the Intergovernmental Forum on Mining, Minerals, Metals, and Sustainable Development (IGF), and the OECD/UNDP Tax Inspectors Without Borders (TIWB) program.
Since 2019, the OECD and IGF have been working with the Mongolian Tax Administration to strengthen revenue collection from the extractives sector, which contributed more than 80% of Mongolia’s exports and 24% of fiscal revenues in 2019.
As a result of the mining tax audit capacity building initiatives, the Mongolian Tax Administration issued its first transfer pricing tax assessment in late 2020 for approximately USD 228 million and a denial of USD 1.5 billion in carried forward losses. The Tax Act (“tax assessment”) was reported by the taxpayer’s parent entity on December 23, 2020 and although the matter currently remains under dispute, this represents a significant milestone and step forward for the Mongolian Tax Administration in executing its strategy to combat tax Base Erosion and Profit Shifting (BEPS) in the mining sector.
The recent tax assessment builds upon focussed efforts by the Mongolian Tax Administration and the Ministry of Finance to align the country’s tax rules and practices with international best practices. Having joined the OECD’s BEPS Project and the Global Forum on Tax Transparency and Exchange of Information for Tax Purposes, Mongolia is successfully implementing the BEPS measures by introducing a number of international taxation provisions.
Launched in 2015 at the Third Financing for Development Conference in Addis Ababa, TIWB is a joint initiative of the OECD and the UNDP, designed to support developing countries in building tax audit capacity. TIWB is a ‘learning by doing’ project, providing hands on support to officials working on international taxation. Experts from around the world work side by side with local officials on pre-audit risk assessment and case selection, investigatory techniques, transfer pricing audits, and sector-specific issues. In spite of the COVID-19 crisis, TIWB experts continue to provide real-time virtual advice and guidance to countries in Eastern Europe, Africa, Asia and Latin America.
The BEPS in Mining Program is a joint initiative of the IGF and OECD. The program provides technical assistance and capacity building to resource-rich developing countries. The programme helps address the causes of BEPS in the mining sector, so that developing countries are able to capture a fair share of the financial benefits from their natural resources.