The Russian government has proposed cutting the Natural Resources Extraction Tax on crude oil, a measure intended to prevent stagnation in the oil sector.
The recently re-appointed Minister of Economic Development Elvira Nabiullina said on Thursday that there is a real risk of production stagnating if such decisive measures are not taken. “The oil sector has always been fundamental to the Russian economy, especially in terms of its competitive abilities, and has given high revenue to our budget. What is happening now – some stagnation in terms of revenue – is, of course, troubling us. In order to support the development of the oil sector, it is necessary to make concrete decisions including ones pertaining to taxes.” Russian oil producers could save up to $US 4 billion dollars next year, thanks to the new extraction tax formula, according to the Economic Development Ministry. The government will consider various options for cutting oil taxes next week. One likely approach is tax holidays for some fields, or even for all new deposits. Speaking to Business Today, Deputy Minister of Economic Development Stanislav Voskresenskiy suggested some possible forms this might take. “Tax holidays for oil companies are an additional measure. There are three possible scenarios: first, to postpone the tax payments, second, to introduce a zero extraction tax rate for a certain period, and third, to use a tax reduction coefficient. One option will be chosen after consultation with the oil companies.”