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Russia Proposes Oil-Extraction Tax Increase to Raise Road Funds

Russia proposed to increase extraction taxes on oil, its biggest export earner, to raise as much as 60 billion rubles ($1.9 billion) for road building.

The government is considering a jump of about 5 percent in the levy as part of 2014-2016 tax policy, Finance Minister Anton Siluanov said today in Moscow. Ilya Trunin, a department head at the ministry, said it’s a “reserve measure” to raise funds.

“While tax increases are always negative, we believe the Russian government will take a balanced decision for the oil sector and we view any radical changes as unlikely,” Alexander Burgansky, an oil and gas analyst at Otkritie Financial Corp., said by e-mail.

Russia, which gains half its income from oil and gas revenues, is seeking to balance incentives to spur energy output with measures to boost funds for infrastructure and social programs. The price of Urals crude, Russia’s main export blend, has doubled in four years.

The tax proposal is a “back-up plan” should the state fail to agree on an increase in fuel-oil duties for next year, Trunin told reporters in Moscow.

Russia has proposed raising export duties on fuel oil to as much as 80 percent of standard crude duty from 66 percent, according to Siluanov. The Finance Ministry has suggested introducing the measure in 2014, a year earlier than planned, to ease the transition to equal duties in 2015, he said.

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