Gazprom to Fight Yeltsin's Tax Hikes

Russia's giant natural gas monopoly Gazprom said Monday it would protest a presidential decree that removed the tax-free status of the company's huge so-called stabilization fund and imposed higher excise duties on gas extraction.


"An increase in excise taxes will cause serious damage to Gazprom," the company's press service told RIA-Novosti. "And an end to tax exemption may strike a blow at many of Gazprom's projects that are financed through the stabilization fund."


President Boris Yeltsin's decree, signed Friday, boosted the powerful company's tax bill by raising excise duties on natural gas from 25 percent to 35 percent.


Yeltsin's edict also removed the special status of the company's stabilization fund, containing a large portion of its hard-currency export revenues, which has been shrouded in secrecy.


Oksana Dmitriyeva, a member of the State Duma's committee on taxes, said the fund is currently worth around 20 trillion rubles. But specialists said it was difficult to predict how much revenue could now be raised from the fund, just as it is unclear which taxes can be levied.


A huge company, Gazprom produced 570 billion cubic meters of natural gas last year, making it the world's largest gas producer. It sold about 110 billion cubic meters abroad at world prices last year.


Gazprom's 1994 annual report shows the firm paid taxes of almost 10 trillion rubles ($2.2 billion) on revenue of 38.4 trillion rubles. But many economists say the company's real revenues are likely much higher at $24 billion, or around 8 percent of gross domestic product.


Russia -- struggling to close a budget deficit -- desperately needs new sources of revenue. Privatization receipts have been disappointing this year and a senior Finance Ministry official said last week that the tax service has failed to collect between 30 and 40 percent of its budget.


By bringing Gazprom into line with the rest of Russian business, the president could provide a major boost to the treasury's coffers, economists said Monday.


"It is very serious money and a very serious help," said Alexander Pochinok, deputy head of the State Duma's committee on the budget, taxes, banks and finance.


But he added that the extent to which the fund would help the budget depended on which taxes Gazprom would now have to pay, something that is still unclear."I am not ready to be happy about money we haven't received yet," he said. "Everything depends on how fully and quickly [the decree] is implemented."


Dmitriyeva of the Duma's tax committee said tax revenues from Gazprom's stabilization fund are included in this year's budget. All non-budgetary funds were supposed to have been eliminated at the beginning of 1995, she said.


Sergei Pavlenko, director of the governmental Center for Economic Reform, said Gazprom will face further problems when a law on domestic monopolies and control over energy prices comes into force later this year.


The law sets a ceiling on energy prices, which cannot rise by more than 70 percent of the inflation rate in the previous quarter, he said. It will also force the mining, sales and transportation departments of Gazprom to work under different regulations, he said.


"In a year, or a year and a half, Gazprom itself will understand that it is easier to work as different corporate bodies within one company," Pavlenko said.