ANALYSIS ON DRAFT LAW ON OPENNESS IN GOLD TRADE, MONGOLIA
UNDERPINNING RATIONALE OF THE
DRAFT LAW
After the Soviet era, Mongolian economy has experienced shock
therapy to sustain the import of critically important food supplies. Among other drastic measures the Government
of Mongolia has started “Gold Program” which in turn increased the gold mining
15 times within 9 years. This Program benefited not only the entrepreneurs but
also enabled higher international net reserve at the Central Bank.
Till year 2000, the Central Bank was the only legal purchaser
and exporter of gold. In 2000 there were gold trade liberalization policy
changes made to relevant laws authorizing the commercial banks a mandate to
purchase and export the gold.
As the gold mining blossomed in Mongolia the gold price soared progressively
at the international market the Parliament of Mongolia has enacted “68%
Windfall profit tax” asserting the need to impose additional rent on the
windfall revenues. Consequently, the gold mining and trade has started quietly
go underground avoiding all legal frameworks including taxes. In 2005 the
Central Bank had been purchasing 15.2 metric tons of gold and gradually it
reached 2.0 tons in 2010.
This dramatic slump was also affected by another law against
environmental damages named “Gold Mining Ban in river basins and neighboring forest
areas” enacted in 2009. In the underground gold market the trade goes smoothly
with only 8% charges where the total effective tax on gold is 22%.
Giving the current macroeconomic hurdles along with sharp
national currency depreciation, The Government prepared an amendment to lessen
the mining royalty on gold from current 5% down to 2.5% and to repeal the
progressive royalty, which is imposed subject to price level. (Currently given
current gold price the rate is 5%). As a result the Government envisaged the
gold miners should sell their gold to the Central Bank.
How Legislators might react on
the draft Law?
Legislators are quite critical to
this draft law due to lack of research and analysis on the gold illegal mining
and trade. .... This means that MPs might need some further analysis
and research on the gold mining itself rather than only its royalty rate
reduction.
Some MPs have been questioning the
ultimate goal of this draft law criticizing the only would be effect to
increase the International net reserve of the Central Bank as a short sighted
and blinded with fiction.
Genuinely, MPs would prefer to review
the gold mining sector related policy within the broader framework of overall
mining sector policy and the re-drafted mineral law.
One Response to “ANALYSIS ON DRAFT LAW ON OPENNESS IN GOLD TRADE, MONGOLIA”
Bullion Exchanges is a well known Bullion Retailer located in the heart of New York City's Diamond District.
They have a wide inventory of products including but not limited to, precious metals that range from the gold & silver to the prestigious platinum & palladium.
They are offering an enormous range of products appealing to 1st time shoppers and for established investors.
Post a Comment