- Finance Ministry proposal would raise up to $6 billion in 2017
- State-run Gazprom, Rosneft seen among most affected: Sberbank
For all its efforts to diversify the economy, Russia keeps coming back to oil and gas.
The Finance Ministry is considering a tax increase for crude producers and for gas giant Gazprom PJSC that would bring in $5 billion to $6 billion next year, a government official said Thursday, asking not to be identified as the proposal isn’t yet public. Vedomosti newspaper reported earlier that oil-extraction taxes might rise by more than $3 billion a year through the end of the decade.
The biggest energy-exporting nation, which relies on oil and gas for about 40 percent of budget revenue, is struggling with its longest recession in two decades. As crude’s collapse blew a hole in the country’s budget, the government set out plans to tap one of two sovereign wealth funds, but may spare the other as elections loom this fall followed by a presidential vote in 2018.
Last year, the state promised not to change energy taxes after already adjusting them twice since 2014. Now the risk of a permanent change “seems to be materializing as we approach the end of the year,” Aton LLC analysts said in a note.
Such a move would go against Prime Minister Dmitry Medvedev’s claim that Russia is meeting its goal to diversify the economy away from energy. The nation’s revenue from oil and gas taxes dropped to 34 percent of the total from 45 percent last year, Medvedev said in June. That share had reverted to almost 41 percent by last month as oil prices rallied, according to Finance Ministry data.
While various options are being considered, the oil and gas industry is still seen as a major source of additional tax revenue to avoid depleting emergency funds, according to the government official, who said a meeting on oil taxes between ministries is expected in mid-September. The Finance Ministry will submit all 2017-19 budget proposals by Oct. 1, its press service said Thursday, declining to elaborate.
The ministry aims to collect about 170 billion rubles ($2.6 billion) of additional revenue from Gazprom next year, mainly through higher gas-extraction taxes that are set separately for the state-run company, the official said. Crude producers may pay about 200 billion rubles or more in increased oil-extraction levies, he said.
Oil and gas stocks were among the biggest losers in Russian trading on Thursday, sliding 1.1 percent as a group at 5:45 p.m. in Moscow, compared with a 0.4 percent decline for the Micex benchmark.
Gazprom, among the most affected by the potential change, may argue with the plan, citing falling export revenue amid weak gas prices in Europe, Aton analysts said. In oil, Rosneft PJSC, Surgutneftegas PJSC and Tatneft PJSC would be hardest-hit, Sberbank CIB analysts wrote in a note.