Earmarked taxes


              Mongolian herders brand and earmark their livestock so that they can distinguish their own livestock from herds that belong to others. Our government could learn a thing or two from this clever practice of herding. Today many types of taxes with varying names are collected from individuals and businesses by the government. However, one cannot really know for sure whether these collected taxes are spent appropriately or not. If certain taxes are earmarked by usage of their revenue and spending is regulated by law, we will be one step closer to resolving many pressing issues facing our society today.

 Benefits of taxes paid should be seen

                Revenue collected from property tax could be spent on protecting property from fire and flood hazards, creating good working and living conditions, and furnishing grounds with a garden. It will allow the value of the location of the property to go up and produce more benefits for taxpayers. Some countries use revenues from property taxes to fund police, fire departments and high schools.

A fire broke out at Narantuul market a few days ago. If the revenue from the property tax collected from Narantuul had been spent on frequent fire safety inspections and emergency compensation for losses combined with insurance fees, the incident could have been prevented, or the total damages would have been much less. A portion of the total fee paid to insure a property from potential hazards could be used for prevention measures implemented in cooperation with local administration. Reports on the expenditures of such a fund should be made available to the public.

Taxes collected from vehicles and fuel could be earmarked for spending on road safety, building road signs, as well as parking lots and sightseeing destinations in rural areas, improving roadside lighting and fences, and delivering better services to those who use the roads.

Insurance companies can offer products aimed to prevent auto accidents and use the revenue to repair potholes and conduct inspections to make sure that sewers are working, and that maintenance is being done on time. This way, our city will look much nicer and labor productivity will increase.

Furthermore, drivers who blast their car horns and alarms at nighttime can be charged tremendously high penalty fees. The revenue accumulated could be dedicated for the above-mentioned road improvement projects. Although it might seem like a small change, it would actually bring about big differences.

Special taxes are imposed on alcohol, tobacco, gambling, and sources of air pollution. The United States spends the revenue collected from these special taxes on improving stadiums, while Sweden uses the money to treat people addicted to gambling and alcohol.

Customs duties are levied on imported food products. Revenue received from customs duties should be spent on ensuring food safety and having independent agencies carry out required inspections.

Earmarked taxes that clearly define the expenditure of taxes will allow taxpayers to see where their money is going and not feel like they have just been robbed. In the longer term, people would understand the concept behind taxes imposed by a democratic government and be encouraged to pay their taxes.

 When government neglects its duties

                One of the primary responsibilities of a democratic government is to protect public and private property. In order to fulfill this duty, governments collect many kinds of taxes. However, instead of spending the collected taxes wisely, our government today just keeps expanding. This is the main reason why Mongolians avoid paying taxes.

A 2012 audit of the General Department of Taxation of Mongolia, released by the Mongolian National Audit Office, says that there were about 80,000 economic entities registered in our country in 2012 and 20 percent of them did not submit their tax returns; 45 percent of those who provided their reports did not conduct any operations (in other words, they filled out X-marked tax returns); and 16 percent of them were operating in deficit. The statistics show that approximately 50,000 companies, 60 percent of the total economic entities included in the report, did not pay any taxes. It shows that there is an immediate need to take certain measures, such as lowering the number of taxes, reducing tax rates, increasing tax thresholds, and earmarking taxes.

Value added tax (VAT) should have a higher tax threshold and it needs to be raised as soon as possible. Otherwise, Mongolia will follow the unfortunate path of many countries where an invisible economy expanded due to enormous tax pressure being applied to small businesses. At this rate, every business in Mongolia is likely move to Narantuul market. Currently, in sole trading, commodities are priced at expensive rates in order to meet tax demands, and they almost have a greater value than the traders themselves.

Our government is not even capable of managing the companies they own. The huge amounts of deficit run by those state-owned companies is being made up by the taxes paid by private companies. Those companies in the private sector did nothing wrong, yet they are taking the blame and paying for the state’s deficits. This is absolutely unfair and can be seen as a crime of robbery. The State Property Committee recently released its first-ever report on the operations of state-owned companies. The report says that 34 of the biggest state-owned companies ran deficits and 14 of them had a deficit larger than one billion MNT. MIAT Mongolian Airlines had the largest deficit, followed by power plants and coal mines.

This economic decline could last for a while, and might even bring about a crisis, unless Mongolian citizens pay their taxes properly and our government spends the revenue wisely.

Short URL: http://ubpost.mongolnews.mn/?p=5694

Posted by on Sep 2 2013. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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