Russia May Raise Oil Extraction Tax as It Cuts Export Duty

Russia, the largest oil producer, may raise its tax on extraction and cut duty on exports of the fuel, potentially adding to the fiscal burden on the industry.

The finance ministry will probably finish proposals by mid-May to cut crude export duty about 2 to 3 percentage points a year from as early as next year, Ilya Trunin, head of its tax department, said today in Moscow. The rate is now 60 percent of oil prices. Cutting crude rates automatically lowers oil-product taxes, which are calculated as a fraction of crude, Trunin said.

The state may still gain as much as 30 billion rubles ($970 million) extra a year including the cuts, by increasing mineral-extraction taxes, Deputy Finance Minister Sergei Shatalov said.

Russia’s oil industry has been seeking tax relief as aging Soviet-era deposits of the fuel and the need to tap fields in more remote regions raises the cost of sustaining output. At the same time, the budget deficit and spending on projects such as the 2014 Winter Olympics and 2018 World Cup curbs the ability of the nation, which relies on oil and gas sales for about half of its revenue, to award tax breaks to the crude industry.

Before it's here, it's on the Bloomberg Terminal.