RE: Devil's Advocate
Why not an excess profits tax?
1. It does not help Mongolia.
This tax would only give a short term boost to government revenues and in the longer term 'creative' actions would be taken by existing tax payers to avoid and minimize the amount of tax payable. In addition to this the short term boost in revenues would be spent inefficiently at best and most likely a lot would be lost to corruption.
In the longer term Mongolia must offer a tax regime that is both competitive and attractive to foreign investment or no new mines will be developed. The true wealth for Mongolians lies in the development of the vast resources of the country that have not yet been developed.
2. It does not allow foreign companies to accomplish their goals. The company's goal is to establish a business that contributes to the economy and builds a strong and vibrant economy. If it does that it is rewarded not so much by earnings and dividends as by being awarded a higher stock price. If the business does not continue to operate satisfactorily the stock price will be knocked down and this will create tremendous pressure for the business to operate satisfactorily.
Any company that starts a mine in a foreign country is many many years away from being in a position where they have expatriated both their capital and a fair return on that capital. If the country is attractive to foreign investment 'profits' are re-invested in similar businesses until such a time as the country becomes fully modern and does not need additional investment capital. By this time Mongolians are fully employed and living prosperous lives.
People who have no money are rarely capable of efficiently deploying 'windfall' profits since they have too many short term problems to be resolved.