O. Tengis, Head of the Legal
Department of the Mongolian Tax Administration, does not think the decision of
Altan Dornod Mongol, a Russian-owned gold mining company, to take the Mongolian
Government to international arbitration over the 68% windfall profits tax
should be seen as a challenge to the country’s judicial system. It is true that
the company has lost its case in domestic courts, but the issues before the
tribunal are not quite the same as those decided in Mongolia. Tengis also said
Altan Dornod could have gone in for a 15-year Sustainability Agreement, much
like what Boroo Gold had done, but instead decided on controversy and
confrontation.

The tax system in Mongolia is simple
to understand and apply. Corporate income tax has just two stages, at 10% and
25%. The second applies to those whose annual taxable income is more than MNT3
billion. Only 1% of taxpayers, most of them mining companies, belong to this
bracket. With the repeal of the windfall profits tax, Tengis felt, foreign
investors should find Mongolia’s taxes light and the tax environment favorable.