Over Forty-Thousand Companies Entitled to 10 percent of Erdenes Tavan Tolgoi Stocks

The following is an interview with S. Tuul, head of the Taxation Office of the General Department of Taxation (GDT).

-It was reported that the list of companies that would own Erdenes Tavan Tolgoi shares was released. Can you tell us more about this?

-In 2010, Government Resolution 39 was passed, which allows citizens and businesses to own Erdenes Tavan Tolgoi shares. Initially, the public would own 10% of the company free of charge, and companies, at a named price, would own another 10%. Later, another 10% of the company became available to the public for free.

Recently, Government Resolution 154 passed, which orders the GDT to create a list of companies that are currently active, pay taxes, were established before the 30th of June 2010, and are otherwise eligible to own some of the 10% of Erdenes Tavantolgoi shares.

We have received a list of some 55,000 economic entities registered at the General Authority of State Registration (GASR).

We combined and matched these companies with the information we have, and listed the companies that had less than 25% of foreign investment. Additionally, companies established after June 30th 2010, or ones that
have not paid taxes are not included in the list.

Of the list compiled, there were 41,390 companies that are eligible to own Erdenes Tavan Tolgoi shares.

-Why haven’t the names of the companies been released? Is this list finished?

-There are two reasons for this. First, the named price of stocks is not known yet. Although the Government is issuing one million MNT to the public for their 1,072 Erdenes Tavan Tolgoi stocks, the resolution on the actual price has not passed yet.

Secondly, even if the price of the stocks is set, in what account will they put them? This is also not resolved yet.

Once the above questions are answered, we will be ready to release the names of the companies eligible to own Erdenes Tavan Tolgoi shares.

-Is there a way that a tax paying company can learn whether they have this new right?

-Right now, it is not possible. As I said, once the above two mentioned problems are solved, we will place the names of these companies on our website and also distribute them to the media. Once that happens, the eligible companies or organizations may approach their respective taxation offices or visit the GDT website
for more information.

-Will the companies, regardless market size and coverage, divide the 10% equally?

-Yes, law has set that parameter. It means one economic entity is entitled to 26,360 stocks.

There are 22 taxation laws, and if a company was involved in paying taxes in any of these concerned laws, they are eligible to own these stocks.

-What if some companies does not want Erdenes Tavan Tolgoi shares? Will they be transferred to other companies?

-Well, the laws do not state anything about this, and we cannot rule out the possibility that some companies may not want their shares or if they would like some or half of their entitled shares. I believe that this will be resolved through a policy or regulation that will be passed in due time.

-Let us discuss a different topic now. How much funding was the GDT able to accumulate last year? With the fast growing mining industry, has the GDT reached its funding goals?

-In 2011, our goal was to generate 2.1 trillion MNT in taxes, and it was surpassed by 51 billion MNT. The income goal set by the State Great Khural is increasing year by year. They also set the GDP growth at 16.6%. We see that they may be setting tax funding goals higher by adding expenditures that do not have sufficient backing or reason.

As of the beginning of 2012, the tax goals are being fulfilled for the countryside. But tax incomes to the state from large business enterprises are 20% behind schedule. In general, about 80% of total tax collected comes from about 300 economic entities. They are mostly mineral resources, mining and construction companies.

Due to the weather conditions of Mongolia, their operations become smoother by April of any year. So according to that, we decided that we would collect 40% of the taxes in the first half of a year, and the remaining 60% would be collected in the second half of a year.

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