Finance ministry again suggests raising gas production tax

To ensure a balanced budget policy in the next few years it is necessary to revise the gas and oil production taxes, finance minister Alexey Kudrin yet again publicly expressed his point of view. An important point for producers is the proposal to almost double the gas production tax from 147 to 294 rubles per 1,000 cu m. On this background fiscal authorities' desire to increase the oil production tax looks moderate - just an 11.6% rise to 468 rubles per ton.

The gas production tax has been unchanged for several years despite all the efforts of the finance ministry responsible for the state budget. The tax did not advance even in the crisis period - having secured support of the head of government Gazprom has managed to repel attacks in this direction.

However, the pre-election year 2011 that will inevitably lead to increased social payments and other state expenses may theoretically change the situation. There are too many serious players who want preferences from the state budget that is facing a deficit. Besides the gas monopolist, among those claiming tax preferences is powerful Rosneft with its political supervisors promoting the idea of accelerated development Eastern Siberian deposits catering for the ESPO pipeline. It is not ruled out that Gazprom will have to make concessions in this situation. A kind of swap may happen - the government's consent to raise domestic gas prices in exchange for hiking taxes on Gazprom, e.g. through the increased gas production tax.

By Stanislav Mitrakhovich, NESF leading expert