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 the collected tax is spent appropriately or not. If certain taxes are earmarked by usage of their revenue and it is regulated by law, we will be one step closer to resolving many pressing issues our society faces today.
Benefits of taxes paid should be seen
Revenue collected from property tax could be spent on protecting the property from fire and flood hazards, creating good working and living conditions, and furnishing the environment with a garden. It will allow the value of the property of the location to go up and produce more benefits for taxpayers.Some countries use the revenue from property tax to fund police and firefighting forces and high schools.
A fire broke out at Narantuul market a few days ago. If the revenue from 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 from or the total damage would have been much less.A proportion of the total fee paid to insure a property from potential hazards could be used for prevention measures implemented in cooperation with local administration. Any report on expenditure of such fund should be made available for public.
Taxes collected from automotive vehicles and fuel could be earmarked to spend the revenue on ensuring road safety, building road signs as well as parking lots and sightseeing facilities in rural areas, improving road lighting and fences, and delivering better service for passengers.
Insurance companies can offer products aimed at preventing from road accidents and use the revenue to repair potholes and conductrelevant inspections in order to make sure that sewers are working and operational 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 fees. Revenue accumulated from the fee could be dedicated for the above-mentioned purposes. Although it might seem like a small change, it will actually bring about big differences.
Special taxes are imposed on alcohol, tobacco, gambling and mobile source 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 the customs duties had better 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 are going and not feel like they have just been robbed. In the longer term, people will understand the concept behind taxes imposed by a democratic government and be encouraged to pay their taxes.
Government that neglected its duty
One of the primary duties 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 tax wisely, our government today just keeps expanding. This is the main reason why Mongolians avoid paying taxes.
The 2012 audit report on General Department of Taxation of Mongolia released by 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 the reports did not conduct any operations (in other words, they filled out X-marked tax returns) and 16 percent of them were in deficit. The statistics shows that approximately 50,000 companies, 60 percent of the total economic entities, 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 the rates, increasing tax thresholds and earmarking taxes.
Value added tax (VAT) should have higher tax threshold and it needs to be done as soon as possible. Otherwise, Mongolia will follow the unfortunate path of many countries where invisible economy expanded due to enormous tax pressure on small businesses. At this rate, every business in Mongolia is likely to go into Narantuul market. Currently in sole trading, commodities are priced at expensive rates in order to meet the tax demands and almost have higher value than the traders themselves.
Our government is not even capable of managing the companies they own. Huge amounts of deficit run by those state-owned companies are 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 deficits.This is absolutely unfair and can be seen as a crime of robbery.The State Property Committee recently released the first ever report on 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 tugrugs. MIAT Mongolian airlines had the hugest deficit, followed by power plants and coal mines.
The economic decline this time 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.