Legal Reform of Taxation in Mongolia: the Redistributive Function

The article addresses the redistributive function of consumption taxes with a particular focus on value-added tax (VAT). Historically, taxation has served primarily as a means to generate public revenue. However, since Mongolia’s democratic transition in 1991 and adoption of multi-sectoral market economy, the role of taxation has expanded beyond revenue collection to become a tool of economic policy. In this context, it has become essential to define tax policy based on private ownership and to legally establish the regulatory functions of taxation. The Constitution of Mongolia proclaims the goal of building a humane, civil, and democratic society. This provides a legal foundation for tax policy that ensures equality and social justice through redistribution. However, concerns about fiscal shortfalls and revenue loss have led to the neglect of the redistributive function in recent tax reforms. This is especially evident in the legal and policy frameworks governing VAT, where issues of redistributive justice and tax equity remain unresolved. We argue that improving the legal regulation of VAT from a redistributive perspective is a pressing need for ensuring equality in taxation and for fulfilling the constitutional goals of social justice.