Mongolia's Copper Tax Is Too High. Can Parliament Cut It?

Mongolia's mining minister Gongoryn Damdinnyam wants to cut copper royalties and advance 10 projects. The investment case for doing so is unambiguous. A typical large-scale open-pit copper project in Mongolia carries an effective tax rate (ETR) of up to 53% at the build stage, which is among the highest of any copper-producing nation.

Copper projects sit largely idle in Mongolia. The global copper supercycle is running. The minister's logic is difficult to argue with. Parliament and politics are another matter.

The effective rate is not a single problem. Other problems compound each other. Mongolia levies a progressive royalty on copper output. For example, state-owned Erdenet Mining Corporation bears an effective royalty burden exceeding 21%. On top sits other taxes and fees, standard across sectors. 

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