Russia’s finance ministry is looking to raise as much as US$1.93 billion (143 billion Russia rubles) in taxes from the oil industry over the next two years, as the oil price crash has shrunk Russia’s key revenue stream—oil.
According to a document on a Russian government website, cited by Reuters, the finance ministry is looking to receive more tax proceeds by amending the tax code and the recently implemented profit-based tax.
The government and the Russian oil industry are heading for a dispute over the proposed tax amendments, Russian business daily Kommersant reported on Monday, citing sources familiar with the matter. According to Kommersant’s sources, the proposal – if passed – would negatively affect mostly Gazprom Neft, the oil division of gas giant Gazprom, and Rosneft, the biggest oil producer in Russia.
The profit-based tax, introduced as an experiment last year, has led to the Russian budget not receiving US$2.9 billion (213 billion rubles), according to the sources.
The Russian companies, however, strongly disagree that they should repay that sum under a new tax amendment, and the issue could be escalated to President Vladimir Putin, Kommersant reported.
The possible changes to the tax code would be harmful to the fundamentals of Russia’s oil industry, Reuters quoted VTB Capital as saying in a note.
Currently, Russia’s economy is suffering the consequences of the oil price crash it helped create with the temporary rift with its OPEC+ partner Saudi Arabia in March. The Russian ruble crashed, and Russia’s oil income shrank as a result of the plunge in oil prices.
The oil price crash, along with the coronavirus-driven global recession, will result in Russia’s economy shrinking this year by 6 percent, or by the most in 11 years, the World Bank said in its latest economic report on Russia earlier this month.
Russia is said to be considering whether to adopt a kind of state oil hedging program, similar to Mexico’s oil hedge, to protect government revenues from oil price crashes in the future.
By Tsvetana Paraskova for Oilprice.com