Source Pravda.Ru

Ministry of Industry and Energy hails increase in export duty and severance tax

Due to the rise in the export duty and in the tax on the extraction of minerals the budget will additionally receive 1.68 billion dollars in 2004. This forecast of the Ministry of Industry and Energy was published on Monday.

"According to the ministry's estimates, under last year's Urals oil prices of 27.2 dollars per barrel and last year's amount of the oil extraction and exports the measures taken to increase the tax burden on the oil complex will give the budget additionally 1.6 billion dollars due to the rise of the export duty, and some 0.6 billion dollars - due to the rise in the tax on the extraction of minerals. The total increase, taking into consideration the lowering of the profit tax, will amount to 1.68 billion dollars, the ministry's press release says.

On May 12, a federal law was officially published, providing for increasing the export duty with the oil price higher than 20 dollars per barrel.

With the price from 20 to 25 dollars per barrel, the export duty equals 12.78 dollars per ton, plus 45% of the difference between the price of the Urals oil in dollars per ton and 146 dollars (where 146 is the price of Urals oil in dollars per ton).

If the price of a barrel is higher than 25 dollars, the duty equals 29.2 dollars per ton, plus 65% of the difference between the Urals oil price in dollars per ton and 182.5 dollars (where 182 is the price of Urals oil in dollars per ton).

The law also provides for changing the formula of calculating the tax on the extraction of minerals (severance tax) towards increasing fiscal withdrawals.

"The transition of the system of taxing oil extraction to a rent basis has been provided for by the Energy Strategy of Russia for the Period of up to 2020, the press release says.

"The tax reform has already made it possible for the state (due to flat export duties and severance tax which depend on the world oil prices) to withdraw an economic rent from the oil industrialists, that is, part of the profit which has been accumulated because of the monopoly high prices of the world market against the background of the sectoral marginal costs," the press release says.

"In contrast to the economic rent, the natural or differential rent depends on the quality of the resource," the Industry and Energy Ministry's experts point out. This part of the profit, brought by deposits with lower than marginal costs for oil extraction, so far remains in the hands of those oil companies which, in the process of privatization, received deposits with a higher productivity