Ulaanbaatar /MONTSAME/ The Government of Mongolia and Bank of Mongolia have reached a staff-level agreement with the International Monetary Fund on three-year Extended Fund Facility (EFF) program for USD 440 million. Among several arrangements to be made in the scope of the program, 7 types of taxes will be raised to increase budget revenue, according to Finance Minister B.Choijilsuren. Those include:

1. Excise tax on fuel has been lowered. The tax will be raised back in two stages in July and October, 2017.
2. Individual Income tax will have tax brackets and rate will be 10, 15 and 20 per cent depending on income.
3. Social insurance contributions of 10 per cent paid by employer and 10 per cent by insured person will be raised by 1 per cent respectively starting 2018.
4. Excise tax on passenger car will be up by 3-15 per cent, depending on its date of manufacturing. Moreover, tax on car with cylindrical capacitor of more than 4500 cubic centimeters will be raised by 40-250 per cent.
5. Excise tax on cigarettes, tobacco, vodka and alcoholic beverages and similar items will be gone up by 10 per cent in 2018, by 5 per cent in 2019 and 2020 each.
6. Tax will be levied on savings interest starting April 1, 2017, bringing the planned date of January 1, 2018 closer.
7. Five per cent customs duties on imported cigarettes, tobacco and similar items will be raised to 30 per cent.

Management of tax income is also required to be improved. Further to reduce budget expenditure, some strict measures as following will be taken.

1. Procurement of medicine and medical materials will be made through unified bid and spending for purchase will be lowered by 10 per cent.
2. Retirement age will be raised in stages and retirement age of 65 will be observed by men from 2026, and by women from 2036.
3. Salary will not be increased in 2017 and 2018.
4. Child allowance will be distributed only to targeted group and the number of recipients will be decreased to 40 percent, while currently, about 60 percent of all children under 18 years old, is provided with the monthly allowance. The saved money from the reduction will be distributed in form of food vouchers.
5. Duplicated welfare of social welfare will be eliminated
6. Law on ensuring legal status of Military personnel will be invalidated as MNT50 billion is needed for providing military persons with apartment or renting apartment.

The parliament should discuss budget adjustment and other relevant laws. Mongolian side agreed that budget expenditure should not be increased when parliament discuss budget. In case  of expenditure is to be raised for one subject, expenditure for another subject should be lowered to balance it.

The authorities will adopt a set of important fiscal reforms to ensure that budget discipline is maintained, building on the existing framework for fiscal responsibility. These include the creation of a Fiscal Council to provide independent budget forecasts and costing of new policy proposals, and provisions to give the government sole authority to determine the total amount of spending in the budget, as well as to require the Ministry of Finance approval of any proposals to cabinet with a budgetary cost. External audit will be conducted on active concession agreements and compensations will be paid next year.