Russian Finance Minister Alexey Kudrin favored a different form of oil company taxation than was instituted in 2005.
Photo: Grigoriy Sobchenko
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Old Bill on Oil Income May Be Revived
The Finance Ministry has acknowledged that the current system of taxation of oil companies is unworkable in the long term. It may revive a seven-year-old bill on the taxation of supplemental income, and develop differentiated gasoline excise taxes and export duties. The taxation of the oil industry was discussed at a closed meeting yesterday at the Russia Forum hosted by Troika Dialog investment bank.
The Finance Ministry will submit a document called “Main Trends in Tax Policy for 2009-2011” for the government's consideration on February 14. It does not promise significant changes for the oil industry. Ministry officials consider the changes made in 2005, when the mineral usage tax was increased and export duties were adjusted, a success. The oil companies are less pleased with the situation. Rosneft vice president Peter O'Brien said yesterday that, while oil prices continue to rise, the company's export income is flat as production expenses rise as well. Ilya Turnin of the Finance Ministry's tax and customs policy department replied that tax reform featuring a tax on supplemental income was a possibility.
The Finance Ministry pressed for a tax on supplemental income as an alternative to a differentiated mineral use tax until 2005. At that time, it was proposed to tax the profit that is accumulated while a deposit is being developed. That profit is calculated as the difference between the income and expenses at the deposit, and it would rise with the level of production and fall with it as well. The Ministry of Economic Development and Trade objected to the complexity of the tax's calculation, however, and it was supported by Mikhail Kasyanov, prime minister at the time. Turnin admitted that that remained an issue.
www.kommersant.com
All the Article in Russian as of Feb. 01, 2008
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