Currently, multinational corporations are finding ways to take profits out of developing countries without taxation. Both Mongolia and Zambia claim they are losing billions of dollars in tax revenue because of loopholes and are seeking ways to prevent this from happening in the future.
Zambia passed a new law which requires multinational corporations to return profits from exports to Zambia so that the nation’s tax authorities can determine how much of profits can legitimately leave the country.
A former Mongolian official from the Ministry of Finance, B. Batjargal, estimates that Mongolia will lose $5.5 billion in tax revenue from the Oyu Tolgoi project alone.
Mongolia is working to terminate agreements with countries which allow companies from those nations to take dividends out of Mongolia without being taxed.
According to B. Batjargal, seventy percent of large-scale direct foreign investments are through companies which are registered as Dutch because of a treaty with the Netherlands that permits companies from that nation to take out dividends without being taxed. These companies include Turquoise Hill Resources, which is a Canadian owned company, but has routed its profits through a Dutch company called Oyu Tolgoi Netherlands BV in order to avoid taxation. Oyu Tolgoi Netherlands BV has no employees.
Mongolia has similar double taxation treaties with Luxembourg, Kuwait, and UAE.
The treaty with the Netherlands will end at the beginning of next year.
(Edited from BBC News)