One of the key reasons for low cooperative development among herders’ is the existing legal framework. Although cooperatives are defined as non-profit organisations by the Civil Code (2002), the Cooperative Law (2002) makes cooperatives operate like for-profit corporations by allowing surpluses to be distributed according to share capital, which conflicts with the International Cooperative Alliance (ICA) principles. The current law does not exempt VAT cooperatives’ revenues from selling members' goods, which is a major barrier against herders joining any cooperatives as herders do not pay any taxes on sales revenues.
ILC member Center for Policy Research (CPR) has advocated in cooperation with civil society organisation the National Association of Agricultural Cooperatives (NAMAC), and the Ministry of Food, Agriculture and Light Industry (MOFALI) stakeholders, to amend the law so that herders’ revenues from selling livestock products will be exempt from any taxes.
During the online consultations, CPR introduced key recommendations on the livestock tax to the following stakeholders:
- In late December 2020, relevant representatives from the Government Authority for Veterinary Services (GAVS) at the Ministry
- On 5 and 9 February 2021, to the Sustainable Livelihoods Project (SLP) staff members from aimags as well as the Ministry of Finance who were working on updating the local development fund rules that would regulate the revenues and spending of newly introduced livestock head taxes
The law has been approved by Parliament in May 2021, but key recommendations by NES have not been clearly included in this law. Therefore, in cooperation with other NES members, CPR is preparing NES recommendations for the amendments to the Tax Code of Mongolia to clarify if cooperatives are subject to tax exemption and to which form of community organisations the herder cooperatives should be classified.
Story is written by NES Mongolia and edited by ILC Asia