The Atlantic featured an article that stated, “No definition of populism will fully describe all populists. That’s because populism is a ‘thin ideology’ in that it ‘only speaks to a very small part of a political agenda,’ according to Cas Mudde, a professor at the University of Georgia and the co-author of Populism: A Very Short Introduction”. The article is considered the most well-written explanation of populism to date.
However, one of the key elements in recognizing populism would be justification; the justifications of the decision that is made by a politician or a government. There are certain solid arguments to believe that the prime minister’s recent decisions concerning the COVID-19 lack justification, therefore, they are likely going to fall into the category of populism.
Thankfully the government is finally taking measures to support the private sector and labor force, which it should have done in the very beginning of all these quarantine related restrictions. These measures should have come even before closing schools and certain businesses, and banning public activities and domestic travels.
The response plan introduced by the prime minister indeed was unreasonable and unjustifiable in the point of view of the current situation of the economy and the actual consequences. Especially the decisions to exempt individuals in the private sector from social insurance fee and personal income tax, and to exempt private companies from social insurance fee and corporate income tax on certain conditions. These decisions will face challenges of both from the standpoint of legality and finance.
First of all, as we have seen, the decision that was introduced by the prime minister himself already has been “changed” to certain limitations when it was clarified upon by the minister of finance. Therefore, it’s too early for us to plan how to spend the money we are going to save from being exempted from the social insurance fee and personal income tax. The saying “count one's chickens before they're hatched” seems particularly appropriate in this situation.
It must be mentioned that Parliament is the only “organization” that holds to power to make decisions on exemption of taxes and social insurance fee. According to the General Tax Law, Parliament of Mongolia shall have the sole right to establish, change, exempt and/or void unless otherwise (i) the tax rate has been stabilized under the investment agreement; or (ii) it’s a for the establishment of a special tax regime in a free zone, as per articles 4.1.1 and 4.1.2.
Whether Cabinet has the power to make this decision is not the sole consideration. Financial capability of the government is also in question and experts are expecting and demanding the government to make amendments to the fiscal budget because state income is much less than it was expected and there are certain planned costs which the government can postpone until next year.
According to the Customs Authority of Mongolia, the total turnover of foreign trade for the first two months in 2020 amounted 1.52 billion USD, 410.4 million USD or 21.3 percent decrease against the same period of last year. Also, exports generated 770.7 million USD, a plunge of 29.5 percent compared to the same period of last year. As of now, there are only four ports are permitted for mineral export at much lower capacity that before COVID-19. For example, about 40 vehicles pass by Shiveekhuren and Gashuunsukhait ports a day, which have a capacity of more than 800 vehicles.
Everyone except those in government is demanding an amendment to the 2020 state budget. First, the state tax income is definitely going to see a plunge even without the proposed exemptions. Even the minister of finance himself mentioned in one of his interviews that the expectations of state income will short by 200 billion MNT or so.
Secondly, all the proposed exemptions and other monetary support were not and still are not planned in the fiscal budget. Additionally, there are substantial costs that the government will incur during this time of crisis. For example, the Ulaanbaatar Mayor’s Office is now renovating the “park” in front of the Sukhbaatar Square at the cost of 3.2 billion MNT. Many people believe that the garden was good enough and it’s just needless spending on nonessentials to do an expensive makeover in this time of crisis.
For these reasons, the “populist” decisions that prime minister introduced to us is definitely not something that we should be thanking for. Accordingly, the Cabinet is continuously making changes to their own decisions on the COVID-19 situation. In addition, we must also consider how these measures may be adjusted or changed during the approval process by Parliament. We must not succumb to populism in this critical time as it will have debilitating impacts down the future.
