Support The Moscow Times!

Ministry May Hike Gas Extraction Tax

Businesses who thought that they were in for a tax break next year will be out of luck, and the government will try to fill other budgetary holes through tax hikes on gas extraction, Deputy Finance Minister Sergei Shatalov said Wednesday.

At the moment, "the ministry simply does not see any possibility for a taxes cut," Shatalov said, destroying hopes that some employers had that their taxes would be eased after the unified social tax is raised next year.

The government announced last October that it would raise the tax that businesses pay on employee salaries by as much as 8 percentage points in 2010 to allocate more funding for pension, medical and social funds.

While businesses will not be compensated for the tax increases, employers have already been given a number of breaks by the government, Shatalov said.

Last year, for example, a total 700 billion rubles ($22.4 billion) that would have otherwise been levied in taxes remained in private hands because of extraordinary tax measures, while businesses kept an additional 250 billion rubles because the state postponed its gas extraction tax hikes.

"One can look at these measures as advanced compensation for the future [tax] increases," Shatalov said.

To bring in an additional 50 billion rubles in budget revenue, the state may raise the gas extraction tax next year and could also lower duties on refined oil products to bring the tariffs closer in line with those on crude oil, Shatalov said.

The second decision would encourage producers to refine the oil they export, an agenda the government has been promoting.

To assist the country's new deposits, especially those in the Far East, the Finance Ministry is advocating a more lenient tax regime on recently developed fields.

"Before us stands the task of redistributing the tax burden from time to time to minimize taxes during the early and late stages of an oil field's development and instead collect more taxes during the times when the field is more productive," Shatalov said, declining to elaborate on how the state would accomplish this.

In the interim, the proposal will have to meet the approval of the Energy Ministry, which has previously argued that such a reform would lead developers to invest only in new fields instead of existing ones.

Shatalov, in turn, said it was important to remember that these investments would be good for the regions where the new fields were being built, as many developers would never choose to invest in these areas otherwise.

"This infrastructure needs to be built, and it requires a huge capitalization," he said.

Sign up for our free weekly newsletter

Our weekly newsletter contains a hand-picked selection of news, features, analysis and more from The Moscow Times. You will receive it in your mailbox every Friday. Never miss the latest news from Russia. Preview
Subscribers agree to the Privacy Policy

A Message from The Moscow Times:

Dear readers,

We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."

These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.

We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.

By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.

Once
Monthly
Annual
Continue
paiment methods
Not ready to support today?
Remind me later.

Read more