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Search for New Taxation of Russian Oil and Gas Industry

Search for New Taxation of Russian Oil and Gas Industry

The taxation issue is becoming a key one for development of the Russian oil and gas industry. The reason is simple – significant investments in new and rather complicated regions are required.

It is necessary to raise the oil recovery index and to work efficiently at brownfields. Moreover, there are more speculations about development of unconventional oil. All these projects are impossible without tax incentives.

At the same time, our companies operate on the global market, and they are beginning to compare returns on investments in the domestic market and abroad. Moreover, the state is encouraging Russian concerns to go abroad viewing this as expansion of its geopolitical influence. But in this case the problem of increase in investments in Russian projects can be solved only by introducing competitive taxation in Russia. And this is where problems emerge.

The most interesting thing is that the state claims it is allegedly ready to amend the taxation system. But in reality only taxation preferences and exceptions are employed. Executive authorities do not support the idea of changing the philosophy of taxation, e.g. taxing profits of companies, not revenues, although the sector needs a fundamentally new approach, rather than preferences.

The problem is that direct taxes and customs duties on oil and gas companies account for half of the federal budget revenues.

Executive authorities are afraid of risking under such circumstances. Moreover, the system of preferences blends very well with the psychology of functionaries. Clear-cut and common rules of the game decrease the administrative weight of the bureaucracy, while granting special preferences, on the contrary, increases this weight.

Possible taxation novelties in the oil and gas sector are the central topic of this report.

Key topics of the report:

  • Views of main players on taxation novelties

    • Positions of oil and gas companies and relative ministries
    • Putin’s opinion as the supreme arbiter; difficulty of selecting between the current budget interests and strategic tasks in the fuel and energy sector
  • The first results of application of the 60-66 system: insufficient changes

  • The fate of oil production tax and export duties

    • Latest proposals by the finance ministry on altering tax rates, consequences of their application
  • Struggle for preferences

    • Main procedures of taxation exceptions for oil and gas companies
  • New system of taxing production of hard-to-recover oil: correct direction but questionable way

  • New formula of gas production tax:

    • New complexity without economic logic
    • What does it carry for Gazprom and independent gas producers?
  • Prospects of developments

    • Political possibilities and restrictions of transfer to a new taxation system

Contents of the report:

Introduction 3
Chapter 1. First Results and Prospects of Taxation Restart 4
Chapter 2. Search for Way Out of Taxation Deadlock 21
Chapter 3. Continuing Practice of Tax Preferences Vs. New Taxation Philosophy 32
Chapter 4. Taxation of Oil Products 44
Prospects of Developments 50
Date of release: September 9, 2013

If you are interested to obtain please contact » Elena Kim

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Analytical series “The Fuel and Energy Complex of Russia”:

State regulation of the oil and gas sector in 2018, prospects for 2019
Gazprom on Path to New Reality
Looking for Best Tax Treatment of Oil and Gas: Fiscal Experiments Continued
The subject of taxation became the absolute hit of 2018. The government once again decided to rewrite the rules of the game. President Putin’s new inauguration decree served as the main pretext. It turned out that about 8 trillion roubles extra was necessary for the new national projects announced. The Cabinet did not take long to decide where the funds should be taken. The result was acceleration of the so-called tax manoeuvre started as far back as 1 January 2015. It suggested shifting the tax burden to the wellhead: the effect on the state budget of gradual abandonment of the export duty will be more than compensated for by quicker growth in mineral resources extraction tax (MRET). The laws on tax reform have already gone through the parliament and will take effect as of next year. This means nothing good for companies.
Results of Pivot to the East in Oil and Gas Sector
New government structure and FES: Reformatting the state system administrating the sector

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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