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The Tax System of Outer Mongolia, 1911–55: A Brief History

Published online by Cambridge University Press:  23 March 2011

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The Mongolian People's Republic, or Outer Mongolia as it is more commonly known, is a country of some 600,000 square mile area which is bounded on the north by Soviet Siberia, on the south by China, with Manchuria to the east and Sinkiang to the west. Many centuries ago, the western world lived in fear of the Mongol hordes which swept westward as far as the Danube laying waste to all which lay before them. Over the years, the power and importance of Mongolia declined and it fell, at different times, under Russian and Chinese influence respectively. More recently it was under Chinese domination in the first decade of the twentieth century. In 1911, as a result of internal disorders within China, the Mongolians were able to break loose and set themselves up as an autonomous nation. This so-called period of autonomy lasted until 1921 at which time the Soviets gained de facto control of the government. Actual power still resided legally in the hands of a local theocratic ruler. Upon his death in 1924, the present government was established. Since 1924, Outer Mongolia has been a Soviet satellite in the same sense that the eastern European nations have been since the end of World War II. In fact, Outer Mongolia has the dubious distinction of having been the first “People's Republic” to survive as an “independent” nation. Recently, this small nation has been in the public eye as a result of the Soviet Union's unsuccessful attempt to secure for it UN status.

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Copyright © The Association for Asian Studies, Inc. 1957

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References

1 For documentation of Soviet policies, see this writer's Soviet Taxation: The Fiscal and Monetary Problems of a Planned Economy (Cambridge, Mass., 1955). A discussion of Mongolian budget expenditures is contained in this writer's “The Public Expenditures of Outer Mongolia,” Public Finance, to be published in 1957.

The author wishes to acknowledge the generous assistance of the Human Relations Area Files, Inc. in making this present article possible. Materials were collected under the project on Outer Mongolia operating under contract with the Human Relations Area Files, Inc. [HRAF Subcontract HRAF-10 Washington-1].

2 Government archives containing the financial records for this period were destroyed by fire. The only information which remains is contained in I. Maiskii, Sovremennaya Mongoliia [Contemporary Mongolia] (Irkutsk, 1921).Google Scholar

3 Maiskii, , p. 284.Google Scholar

4 Maiskii, , p. 282.Google Scholar

5 Ia. Ryzhik, “Khoziaistvennoe i kulturnoe stroitel'stvo Mongol'skoi Narodnoi Respubliki” [“Economic and Cultural Construction in the MPR”], Planovoe khoziaistvo (1936), No. 6, pp. 170177Google Scholar

6 I. Ia. Zlatkin, Mongol'skaya narodnaia respublika—strana novoi demokratii [Mongolian People's Republic—Country of New Democracy] (Moscow-Leningrad, 1950), pp. 171174.Google Scholar

7 Schleifer, I. O., “Osnoynye problemy piatiletnego plana khoziaistvennogo i kulturnogo stroitel'stva MPR” (“Basic Problems of the Five Year Plan of Economic and Cultural Development of the MPR”], Khoziaistvo Mongolii (0506 1930), p. 23.Google Scholar

8 Ryzhik, , p. 175.Google Scholar

9 Zlatkin, , p. 192.Google Scholar

10 Zlatkin, , p. 190.Google Scholar

11 Admission by Soviet writers of inflation in nations in their bloc is quite atypical.

12 Zlatkin, , pp. 211, 223.Google Scholar

13 Tsaplin, F. S., “Sel'skoe khoziaistvo” [“Agricultural Economy”], Mongol'skaia narodnaia respublika, ed. Zlatkin, I. Ia. (Moscow, 1952), p. 110.Google Scholar

14 Vargin, N. T., “Finansy,” Mongol'skaia narodnaia respublika, p. 226.Google Scholar

15 Cf. Holzman, Ch. ix.

16 Imports are mainly from the Soviet Union and consist primarily of food products and industrial consumers' goods.

17 These rates are taken from a decree of 1943 and appear to be in force at present. No earlier rates are available.

18 That is to say, a government cannot tax its own enterprises.

19 For an explanation of why the Soviets use both a turnover and profits tax, see Holzman, Ch. iv.

20 See the statute of Jan. 22, 1942, “On Social Insurance in the MPR,” Part I, Art. 3.

20 Iurev, I. G., “Gosudarstvennaia i kooperativnaia promyshlennost'” [“State and Cooperative Industry”] Mongol'skaia narodnaia respublika, p. 164.Google Scholar

22 Tsapkin, N., “Gosudarstvennyi biudzhet Mongol'skoi narodnoi respubliki na sluzhbe ekonomicheskogo i kul'turnogo stroitel'stva” [“State Budget of MPR in the Service of Economic and Cultural Construction”], Finansy i kredit SSSR (1953), No. 7, p. 69.Google Scholar

23 Tsapkin, , p. 68Google Scholar; Zlatkin, , pp. 209, 255Google Scholar; Vargin-Zlatkin, , p. 233.Google Scholar

24 Maslennikov, V., Mongol'skaia narodnaia respublika na puti k sotsializmu [The MPR on the Road to Socialism] (Moscow, 1951), pp. 138139.Google Scholar

25 Holzman, Ch. viii–ix.

26 This statement is based on the fact that the direct taxes are mildly progressive and the indirect taxes probably mildly regressive.

27 For a fuller discussion of this point see this writer's “Equity of the Livestock Tax of Outer Mongolia,” to be published in 1957 in the American Slavic and East European Review.

28 Yakimov, A., “Uspekhi Mongol'skogo naroda na puti k sotsializmu” [“Progress of the Mongolian People on the Road to Socialism”], Voprosy ekonomiki (1954), No. 12, p. 55.Google Scholar

29 This is an increase in exemptions since the amount planned for the following year usually exceeds the amount held in the previous year.

30 Yakimov, , p. 55.Google Scholar

31 Most Soviet commentators claim that from ⅔ to ¾ of national income comes from livestock even at present.

32 Ryzhik, , p. 176.Google Scholar

33 Vargin-Zlatkin, , p. 214Google Scholar. Vargin admits that these wage increases left real wages unchanged implying a price increase of at least the same amount.

34 Maslennikov, , pp. 129130Google Scholar; Bol'shoi, p. 206Google Scholar; Iurev-Zlatkin, , p. 174Google Scholar; Yakimov, , p. 57Google Scholar; Kuibyshev, A., “Ekonomicheskoe razvitie Mongol'skoi narodnoi respubliki” [“Economic Development of the MPR”], Vneshnaia torgovlia (1950), No. 11, p. 40.Google Scholar

35 In the Mongolian case, as in the Soviet Union, since the bulk of the goods which are subject to the sales tax are sold to the population by the state, there is no possibility of a shift in incidence from consumer to entrepreneur.

36 Suppose that the state pays the nomad a nominal price of 10 tugriks for a certain amount of meat, that costs of processing and distributing amount to another 20 tugriks for total cost to the state of 30 tugriks. Suppose further that the cost of production of the meat to the nomad was 50 tugriks and the state price to the consumer was 100 tugriks. In this case the turnover tax would be 70 tugriks (100 – 30), the tax on the producer would be 40 (50 – 10), and the tax on the general consumer would be 50 (100 – 50).