Transition to Market
Chapter

Chapter 15 Mongolia: Opportunities for Simplicity in Tax Policy Design and Implementation

Editor(s):
Vito Tanzi
Published Date:
June 1993
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Author(s)
Jacques Baldet and Geoffrey Walton 

In the past two decades many developing countries have embarked on reform programs aimed at overhauling their trade regimes and supporting their tax systems. The impetus for these reforms has been fueled by a growing acceptance of the contribution of transparent, neutral, and well-coordinated tax systems to economic growth, welfare, and fiscal stability. On the whole, the successful programs were forthrightly implemented and relied on single, transparent policy instruments for the achievement of each policy goal. The successful programs were accompanied by a practice of maintaining competitive real exchange rates and budget deficits were kept smaller in relation to output than in the less successful programs. These lessons of experience are no less relevant for the economies in transition from central planning to market orientation than they are for those market economies attempting to dismantle distortive policy regimes that have failed to promote efficiency and structural change.

As one of the more recent countries in transition from a centrally planned to a market-based economy, Mongolia 1 is in a unique position to gain from the hard-learned experience of others, including its Eastern European counterparts, many of which are by now well advanced in their reform efforts. Several important characteristics distinguish Mongolia from the other case studies. First, it is a vast, landlocked, sparsely populated country, bordered by two large economies, Russia and China. Both of these neighboring countries are themselves undergoing economic transformation. Mongolia's command economy, dating from the late 1930s, was characterized by increasingly strong economic and political ties with the then U.S.S.R. Its current geopolitics represent a considerable challenge to the reforms now under way, because the old economic bonds will need to be replaced by a widened integration into the world trading community. Second, reliance on the state enterprise sector for government revenues (essentially through a number of budgetary transfers) has been extremely heavy, representing nearly half of GDP in recent years. Third, opportunities for growth and structural change in the private sector will be constrained in the medium term by poor infrastructural development that cannot support even moderately increased trade with the West and by the currently narrow base of economic activity that relies on animal husbandry and rudimentary processing of animal by-products.

In spite of the challenges inherent in these characteristics, the Mongolian authorities have shown a propensity for openness and progressiveness in the reform initiatives taken to date. This has been no less evident in tax policy. This case study will focus on how Mongolia has faced these challenges by seeking to plan and implement, from the outset, a simple tax system as an integral component of its overall reform efforts that avoids many of the costly mistakes made by other developing countries in the past. The paper first provides a brief background to the recent economic developments in Mongolia and describes the pre-reform structure of government revenues. It then examines the main features of the tax reform pursued during the initial phases of the transition period. Finally, it examines directions for future reforms.

Pre-Reform Situation

Economic Developments Leading to Reform2

In 1985, the then Government of Mongolia instituted modest steps to improve economic management and reduce central control, while permitting some internal political openness. These changes were accompanied by similar restructuring taking place in what was then the U.S.S.R. Although the policy of political openness was formally established in 1987, political and economic developments in the U.S.S.R. and economic reforms in China during the 1980s outpaced Mongolian restructuring, leading to intensified socioeconomic tensions and, finally, to the establishment of a new reformist Government in March 1990.

The Government in office in 1985 sought to expand agricultural production, improve food supplies, extend electrification, and create a metalworking sector. During 1986, it took modest steps to strengthen public sector finances and to increase trade with the convertible currency area. Wholesale prices were raised to take into account past increases in production costs and higher import prices and to maintain budget revenues from import price differentials.3 The adverse effect of the price reform on selected industries was ameliorated by a reduction of domestic turnover taxes and an increase in selected production subsidies. Profit taxes were reduced so that a larger share of enterprise investment could be financed from retained earnings.

In 1987, a new strategy of economic restructuring, framed on the Soviet policy of perestroika, was implemented. Under this policy, the role of state planning was limited to setting overall investment policy, while the ministries and state committees were responsible for its implementation. Similarly, state enterprises were accorded increased autonomy, although production, profits, and distribution remained centrally planned. During 1988-89, the pace of reform quickened, although measures continued to aim principally at improving the efficiency of the command economy. During this period the decentralization of revenue collection and expenditure decisions to the local level intensified. Local authorities' control over revenues and expenditures rose to almost half of the total by 1989. Although farmgate prices remained unchanged, agricultural production (except for meat) that exceeded state delivery quotas could be marketed freely. A new law permitted the formation of cooperatives, with private sector participation. To encourage surrender of convertible currencies to the State Bank, the authorities introduced a preferential rate of Tug 20 per U.S. dollar, compared with a commercial rate of Tug 3 per U.S. dollar.

Key reforms during 1989-90 further reduced the number of controls and operating norms over state enterprises. These included the introduction of limited price flexibility, the elimination of monopolies enjoyed by state foreign trading companies, an increase in the amount of foreign exchange that could be retained by state enterprises, and the introduction of differential price incentives for producers to promote exports to the convertible currency area.

The Government that took power in March 1990 embarked upon a comprehensive program of economic transformation toward a market economy. The envisaged three-year program–now in progress–aims at expanding the role of the private sector, diversifying the economic base, promoting exports, generally increasing trade with the convertible currency area, and introducing indirect forms of economic management.

As a first step, the Government eliminated all restrictions on private ownership of herds and announced increases in farmgate prices with effect from January 1991. Selected retail prices were to be freely determined within a set range. In January 1991, most retail prices were doubled with compensating adjustments in civil service wages, pensions, and other benefits. The reforms also included the promulgation of a Foreign Investment Law to encourage investment in the private sector with various incentives, the establishment of a Customs Affairs Department for introducing a tariff system, changes in the system of taxation of corporations and individuals to incorporate the expanding role of the private sector, and the creation of a new Incomes and Taxes Department within the Ministry of Finance to focus on tax administration.

Pre-Reform Structure of Government Revenues

In Mongolia, the basic taxes used in the pre-reform phase included a personal income tax, a company income tax, so-called import and export price differentials, and domestic turnover taxes. Table 1 provides details on the structure of government revenues obtained from these and some other relatively minor taxes at the outset of the reform.

Table 1.Mongolia: General Government Budget Revenues, 1989
Consolidated
Budge't AmountPercentage
Revenue Source(In percent of GDP)Distribution
Profit taxes22l.243.4
Profit deduction1l 6.333.3
Fund payments4.28.6
Labor payments0.10.3
Development fund0.61.2
Import price differentials116.233.2
Export price differentials1.53.1
Domestic turnover taxes4.89.7
Taxes on individuals0.51.0
Wages and salaries0.20.6
Childless persons0.10.2
Self-employed
Other0.2
Agricultural cooperatives0.51.1
Natural resource use0.20.5
Social security2.44.8
Stamp taxes and fees0.20.6
Other1.32.6
Total revenue448.9100.0
Source: Ministry of Finance.

The personal income tax existing prior to the reform consisted of two different rate schedules applicable to wage or salary income and selfemployment income. In 1989, revenues from this tax amounted to about 1 percent of total general budget revenues. The personal income tax on wages and salaries was levied at low and barely progressive rates ranging from a minimum of 2.6 percent to a maximum of 2.9 percent. Numerous exemptions reduced the yield of this tax. Administratively, payments of the tax were made via a withholding mechanism and were considered final. No personal tax returns were required. All collections entered local budgets directly. The self-employed were taxed under schedular rates far different from those imposed on wage and salary incomes. The tax rate schedule, compared with that for wages and salaries, was wide and rapidly progressive, ranging from a minimum rate of 4 percent to a maximum rate of 65 percent. Tax payments were made on a quarterly basis according to self-assessments made by taxpayers. The bias against private economic activity, typical of many economies in transition, is clearly evident.

In 1989, the company income tax generated more than 40 percent of total budget revenues. It was divided into four components: the profit deduction, the so-called fund payment to the state budget, labor payments, and the scientific and technological development fund. The first component generated just over 75 percent of planned profit tax revenues and was levied on profits, after the state budget payment. Rates of profit deduction were also enterprise specific. The second component, levied at industry-specific rates ranging from 3 percent to 12 percent, was based on the value of enterprises’ fixed assets. This contributed about 20 percent of planned profit tax revenues in 1989. The remaining parts of the company income tax were of minor revenue importance.

Of the three types of indirect taxation in Mongolia, import price differentials were the most important contributor to state budget revenues. These amounted to about one third of revenues in 1989 and represented transfers to the budget by state foreign trading enterprises on their sales of imported goods. Again, typical of the experience of economies in transition, these implicit taxes were based on the difference between negotiated foreign contract prices and fixed retail prices.4 Prior to 1986, wholesale prices were fixed usinjg a 1974 base. In January 1986, wholesale prices were increased by an average of 12 percent to account for changes in production costs and foreign contract prices. Wholesale prices remained at their 1986 levels untill the beginning of the reform period.

Export price differentials accounted for about 3 percent of government revenues in 1989. These were determined as the difference between an “adjusted” producer price5 and the foreign contract price. Profits arising from a positive differential between the contract price and the adjusted producer price were remitted to the budget, whereas losses were covered by transfers from the budget. In January 1986, the adjustment coefficients were abolished, although some were reintroduced in 1989. At the beginning of the reform period, export coefficients were applied only to trade with member countries of the Council for Mutual Economic Assistance.

Domestic turnover taxes contributed almost 10 percent of government revenues in 1989. These were levied on a number of generally nonessential goods and services and, as such, more closely resembled excise taxes than a multistage tax on gross receipts. The turnover tax mechanism apparently had several functions, the two most important of which were revenue generation and retail pricing policy. Other less explicit functions of the tax were to form a system of financial planning and control, to influence income distribution (by controlling retail prices), and to act as an instrument for balancing commodity supply and demand.

Initial Period of Transition

As an integral part of their overall efforts toward economic transformation, the Mongolian authorities embarked upon a reform of their tax system in late 1989 after some seven decades of economic planning. The key elements of the reform included revision of the policies and laws relating to the taxation of companies and individuals, the introduction of explicit import duties and export taxes to replace gradually the dual price differential regime, and the rationalization of “turnover” taxes into an explicit schedule of excise taxes. A policy decision was also made early in the reform program to introduce a sales tax at the manufacturing or import level. These changes required a substantial shift in the overall policy design of the fiscal system, the introduction of legislation to support the new fiscal objectives, and important changes in tax administration. The measures taken to date are outlined below.

Recognizing the ability of taxes on international trade to generate revenues quickly, the Mongolian authorities moved forthrightly to create a Customs Affairs Department as early as October 1990 to prepare for the introduction of a tariff system. Customs legislation was prepared soon after and enacted by parliament in March 1991. A customs tariff was enacted in conjunction with the law. In its original form, it contained two schedules: one for the application of explicit export taxes to selected commodities (designed to replace the export price differentials) and the other for the imposition of import duties (designed eventually to replace the import price differentials).

Export taxes, ranging from 5 percent to 25 percent, were applied for a short period to livestock, meats, hay, various types of minerals and ores, animal skins and hides, cashmere, logs, sawn timber, and scrap metal. However, export taxes were subsequently eliminated from the trade policy regime.

The transitional tariff system, adopted in March 1991, applied duties to 29 broad commodity groups at rates ranging from 5 percent to 100 percent. Because more than half of the rates were levied at either 5 percent or 15 percent, the resulting average tariff was estimated to be about 13 percent,6 with fairly narrow dispersion around the average. While few items were zero rated (children's food and clothing), approximately one third of imports were exempted from payment of duties. These exemptions were primarily afforded to Soviet joint-venture operations, although a number of others were granted, and heavily utilized, under the Foreign Investment Law.

When measured against the experience of countries moving to liberalize their highly distortive trade policy regimes, the Mongolian tariff system was, even in its embryonic form, rather simple with minimal inherent distortion to relative prices. However, the Mongolian authorities have taken the further desirable step of unifying the tariff into a single 15 percent rate for all imports and are considering ways of reducing the number of exemptions.

Because of the importance of import price differentials as a contributor to budget revenues, these have not been replaced by the tariff but rather the tariff has substituted for part of the differential. As a transitional measure this probably has some merit, as it allows importers time to adjust to the new form of taxation without increasing their total tax burden. However, the sooner the differentials are phased out the sooner will the tariff be able to perform its intended policy function of providing a moderate amount of protection to domestic economic activity while at the same time generating much-needed revenues.

Since 1992 a manufacturing or import level sales tax has been levied in conjunction with selective excise taxes. The sales tax is a transitional revenue measure that could, in the long term, be transformed into a fullfledged value-added tax (VAT). It is seen as an important element in the overall tax package, since it would facilitate the rationalization of existing domestic turnover taxes and prepare the taxpaying community for the eventual transition to a VAT system. The sales tax applies to all goods (both domestically produced and imported) and employs a credit mechanism for tax paid on inputs. This credit mechanism gives the sales tax features of a VAT. Export sales are zero rated and are entitled to input tax credits.

As of October 1991, excise taxes were levied on gold and silver jewelry, vodka, and beer. However, other products were being considered for excise coverage, again to help meet the country’s urgent revenue needs.

As regards direct taxation of individuals and corporations, new legislation was approved by parliament early in 1991 and was subsequently amended later in the year. The new personal income tax eliminated schedular income taxation by unifying all income into one rate schedule and adopted a broad concept of taxable income by covering wages and salaries, self-employment income, dividends, interest, inheritances, unemployment compensation, income from contract work, and noncash incomes. Tax rates range from 1.25 percent in the lowest income bracket to 50 percent in the highest. The uppermost rate, while somewhat high, is broadly in line with rates used in market-oriented economies, and for the present is set at an income level that will be reached by very few taxpayers. Thus, the rate structure and the tax base go well along the road to meeting the criteria of equity and transparency.

The proposed company income tax is intended to unify the fourfold system of taxation described above into a single profits tax that will be applicable to all types of enterprises that have more than five employees. Tax rates will range from 8 percent to a maximum of 60 percent, using the bracket method. Taxable income is defined as gross sales less all material costs, labor costs, and depreciation. Enterprises with foreign capital participation are to be taxed at the lower rate of 40 percent.

Directions for Future Tax Reform

Reforms Planned

As explained in the previous section, since late 1989 a number of important changes to Mongolia’s tax system have been introduced. Indeed, Mongolia has made remarkable progress in implementing a tax system more in tune with the requirements of market-oriented economies. In the direct tax field, the previous system of compulsory transfers from the state enterprise sector to the budget is being gradually replaced by income taxation that will treat state-owned and private enterprises equally. In the indirect tax field, the authorities have introduced a simplified customs tariff and a uniform rate sales tax with VAT features. Excise taxes on selected products are also in place.

Even at this early stage in its transition, Mongolia has the unique advantage of having adopted a simple and sound system of indirect taxation, which will be easy to administer and have a high revenue potential. This has been made possible principally because of the determination of its open-minded, coalition Government which has become aware that relatively simple taxes have the potential to meet large revenue requirements without defeating efficiency and equity objectives.

The new tax laws were conceived by policymakers only for the transition period, and some were prepared hastily. Thus, it is not surprising that legislation needs to be improved considerably. The authorities intend to amend the relevant laws as quickly as feasible, with technical assistance from specialized international agencies. They are also well aware of the need for a basic administrative infrastructure to implement a modern tax system. The small customs administration should be able to administer the simplified customs tariff, but the newly created Income and Taxes Department is not strongly positioned to perform the assessment, collection, and audit functions that will be required to administer income and sales taxation.

Although further refinement of legislation and supporting administrative reform will take time, there are pressing needs for new revenues. Like many other economies in transition, as Mongolia moves ahead with price liberalization and privatization, traditional sources of budget revenue7 are expected to decline rapidly and worrying signs are evident already. At the same time, the need to maintain a tight fiscal policy stance leaves little room for revenue to decline. This means that substantial receipts will have to be generated quickly from new taxes to cover a sustained level of budgetary spending, even after allowing for some government disengagement in economic activity.

Constraining Factors

Meeting the required revenue effort will constitute a formidable challenge, considering the many economic and institutional constraints. On the economic side, the main constraint will be the pace at which completion of price liberalization can proceed, considering the inevitably high social costs associated with accelerated liberalization. At the time of writing, prices of a number of final consumer goods were still controlled. Even a partial liberalization of prices, whereby input or wholesale prices are free while retail prices remain fixed, would jeopardize the profitability of public and private firms. Moreover, because of the low levels of income and financial savings in Mongolia, and only modest prospects for foreign investment, the privatization program can only proceed slowly. As experienced by countries in similar situations, such slow progress will also have a dampening effect on government revenue. Further, most new enterprises in the private sector will be small and medium-sized units with little, if any, experience in modern accounting practices. Therefore, until such practices can be adopted throughout the emerging private sector, it will be difficult to tax these new enterprises.

On the institutional side, Mongolia is still in the formative stages of developing basic banking, property rights, and business accounting legislation. A new banking law has been enacted, providing the legal and statutory framework for the establishment of a two-tier banking system designed to separate the commercial and central banking activities of the State Bank and to specify the modalities of the key central bank functions. Six commercial banks have also been established. Much remains to be done, however, with regard to the regulatory and administrative framework for commercial banking and the monetary and exchange rate management tasks of the central bank. Privatization is itself constrained by a lack of private ownership legislation. Laws to protect private ownership rights and facilitate property transfers are being drafted. Uniform business accounting rules defining, in particular, the notion of net economic profits, also need to be formulated and legislated. This will be essential if the privatization program and the increased financial autonomy recently granted to state-owned enterprises are to succeed.

Finally, the Mongolian tax administration is still at an early stage. As mentioned earlier, a Customs Affairs Department was created in October 1990. But this department will face increasing difficulties as foreign trade gains momentum. In January 1991, with the enactment of the Income Tax Law, a very elementary administrative apparatus was put in place, comprising a tax policy unit and collection unit within the tax department, staffed by 22 officers. Although the authorities have drafted legislation for a manufacturing stage sales tax, much work needs to be done to put in place an administrative structure for the collection of this tax.

Agenda for Institutional Reform

During the transition period, the absence of a proper tax administration has been a major impediment to aligning the Mongolian tax system to the requirements of a market-oriented economy. Clearly, the development of a well-structured and adequately staffed tax and customs departments should be of priority for the authorities in the coming years. The organizational features of an efficient tax administration, however, depend greatly on the type of taxes that will be put in place. Therefore, the first priority should be to formulate a carefully articulated medium-term policy strategy.

Medium-Term Objectives for Tax Policy

The main tax policy objectives for the medium term should aim at the following:

  • Consolidating the tariff reform by reducing the number of exemptions;

  • Establishing a broad-based sales tax with VAT features;

  • Improving the existing income tax legislation; and

  • Introducing real estate taxation.

Because its industrial sector is still largely uncompetitive and heavily dependent on consumer imports, Mongolia should make extensive use of import taxation to raise revenue. The levying of customs duties is a fairly easy way to tax consumption with relatively low administrative and compliance costs and high revenue potential. The uniform and low rate of tariff now adopted should have relatively few distortionary effects on resource allocation, provided exemptions are kept to a minimum.

As explained above, the authorities are replacing domestic turnover taxes with a coordinated system of indirect taxation consisting of a singlestage manufacturing sales tax with a credit mechanism for taxes paid upstream, complemented by excise taxes on selected commodities. Both apply equally to imports and domestically produced goods, confining the protection function to customs duties. Excises are currently imposed on jewelry, vodka, and beer. For revenue and equity purposes, their coverage should be extended to products such as gasoline, tobacco, and motor vehicles.

A desirable long-term objective for Mongolia should be to implement a full-fledged VAT–a broad-based sales tax on the value added by all the productive sectors of the economy, including the services and distribution sectors. The VAT is now used around the world and has recently been introduced in a number of Southeast Asian countries. The main reasons for its wide acceptance are that it generates proportionally more revenue as GDP grows and that it can be applied at relatively low rates given its broad base. Single rate VATs, with few exemptions and a turnover threshold to eliminate small-scale enterprises, are relatively simple to administer.

The income tax legislation, enacted in 1991, is a step in the right direction to place on equal footing public and private enterprises and to separate corporate and individual incomes for tax purposes. However, since it has several shortcomings, there is ample room for improvement. For instance, for taxing corporations, a single rate not exceeding 40 percent should be substituted for the present multiple-rate structure since the latter introduces unwarranted discrimination across economic sectors. For personal income taxation, the rate structure could be rationalized and, in the longer term, provision could be made for capital gains taxation.

Finally, the possibility of developing some form of land property taxation should be explored, as real estate tends to be a preferred investment for those high income earners prone to income tax evasion. Modern techniques, based on aerial photography, should ease the establishment of simplified fiscal cadastres that can be used for property tax assessment.

Strengthening Tax Administration

Until recently, the Customs Affairs Department relied on approximately 200 customs officers (40 at headquarters and 160 in the field) to carry out its tasks. Field officers currently control 20 border crossing points, and 24 others are staffed by the military police. Prior to the enactment of the new customs law, customs staff were responsible for the clearance of passengers at train stations and at the Ulaanbaatar airport. The Customs Affairs Department plans to recruit about 100 new officers to cope with the tasks mandated by the new legislation. It will need new skills to administer the customs law with respect to commercial operations, which are expected to expand rapidly. Extensive training programs will have to be implemented to master the techniques required to handle tariff classification, valuation, fraud investigation, and the administration of exemptions. Headquarters' responsibilities should be restructured to ensure effective and efficient management, and customs procedures should be computerized early enough in the reorganization process so that these can be coordinated with similar efforts in the sales and income tax administrations. The customs law also needs amending to deal more effectively with valuation problems and the physical and documentary control of goods.

The tax offices in the Ministry of Finance, which were responsible for the administration of the revenue system under the previous regime, are neither organized nor equipped to administer Western-type taxes. Staff lack accounting expertise, as well as basic training in assessment, collection, and audit techniques used in modern tax administrations. Mongolia is currently engaged in establishing new organizational structures and training to remedy this situation. The required reforms in sales tax administration are all the more manageable at this stage since the taxpayer community comprises only about 400 state-owned enterprises, including trading companies. Therefore, taxpayer identification and registration systems should be developed without delay, returns should be prepared, and a taxpayer master file should be established and possibly computerized to allow for the rapid processing of late filers' and nonfilers' forms. The collection function should also be organized quickly, possibly with the direct involvement of banks. Here again, recruitment and extensive training programs should be implemented as early as feasible, possibly with external technical assistance.

Concluding Remarks

At this stage in its transition toward a market economy, Mongolia should enjoy a substantial advantage in taxation, compared with many other former centrally planned economies. To capitalize on these advantages will require the authorities to pursue with determination a reform process that replaces the current revenue system with simple indirect taxes, requiring fairly modest administrational and compliance costs. Later in the transition, or possibly after the transition, Mongolia will need to strengthen its income tax legislation to capture the surplus of economic agents, particularly those in the emerging private sector. Therefore, the coalition Government's initial impetus must be sustained and the reform's emphasis on simplicity preserved.

In any society experimenting with democracy, there is a tendency to yield to pressure groups to try to satisfy conflicting interests. Failure to resist these pressures will lead to the acceptance of an ever-increasing number of exemptions that will hastily erode the tax base and result in a complex, costly-to-administer tax system. The erosion of the tax base will also create the temptation for tax rate increases and pressures for further concessions that will distort the price system and ultimately impede economic growth.

    CalvoGuillermoA. and FrenkelJacob A.“From Centrally Planned to Market Economy: The Road from CPE to PCPE,”Staff Papers International Monetary FundVol. 38 (June1991) pp. 26899.

    MilneElizabethJohnLeimoneFranekRozwadowskiand PadejSukachevinThe Mongolian People’s Republic: Toward a Market Economy IMF Occasional PaperNo. 79 (Washington: International Monetary Fund1991).

    MitraPradeepThe Coordinated Reform of Tariffs and Domestic Indirect Taxes World Bank Working PaperNo. 490 (Washington: World Bank1990).

    PapageorgiouDemetrisArmeaneM. Choksiand MichaelMichaelyLiberalizing Foreign Trade in Developing Countries: The Lessons of Experience (Washington: World Bank1990).

    TanziVito“Tax Reform in Economies in Transition: A Brief Introduction to the Main Issues,”IMF Working PaperNo. 91/23 (Washington: International Monetary Fund1991).

    TanziVitoed. Fiscal Policies in Economies in Transition (Washington: International Monetary Fund1992).

At the time this paper was written, Jacques Baldet was an Advisor in the Fiscal Affairs Department. Geoffrey Walton is a consultant in the same department.

Following student protests in early 1990, a new reform government was formed to lead the country toward its first multiparty elections and to develop a market-based economy.

For an expanded account of recent economic developments, see Milne and others (1991).

Import price differentials constitute a tax paid by state foreign trading enterprises and warehousing firms based on the difference between the domestic wholesale price and the foreign trade contract price of the good.

Some margins and discounts were allowed at various points in the distribution chain.

The adjustments were somewhat arbitrary and were used selectively to subsidize some exports and tax others.

IMF staff estimates.

Namely, import and export price differentials and compulsory transfers from the state enterprise sector to the government budget, which together still account for more than 70 percent of total government receipts and as much as 37 percent of GDP.

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