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Putin says higher mining tax can affect gas industry’s competitiveness

April 23, 2012, 22:59 UTC+3

The commission also decided to raise the oil production tax by 6.7 percent in 2012 and by 5.4 percent in 2013

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MOSCOW, April 23 (Itar-Tass) —— A higher mining tax can have a negative impact on the competitiveness of the gas industry if the growth of gas tariffs is curbed, Prime Minister Vladimir Putin said.

“We suggest raising the mining tax but curb the prices. There can come a time when investment possibilities of gas companies will be very modest and our advantage will shrink,” Putin said at a meeting of the board of the Ministry of Economic Development on Monday, April 23.

The financial position of Russian Railways Company is more modest than that of the gas and oil industry due to heavy dependence on loans.

Minister of Economic Development Elvira Nabiullina suggested raising tariffs by 15 percent a year for natural gas, 10 percent for electric power, and at a rate matching inflation for railway transportation.

In the middle of 2010, the government commission on budget projections decided to raise the tax on the production of natural gas by 61 percent in 2011. The tax will be further raised according to inflation in 2012 and 2013.

The commission also decided to raise the oil production tax by 6.7 percent in 2012 and by 5.4 percent in 2013.

The Russian Finance Ministry suggested raising the oil and gas production tax in a bid to increase budget revenues.

The ministry suggested raising the oil production tax not from 2011 but from 2012 by 5 percent and by another 5.4 percent in 2013.

It said that a higher natural gas production tax would increase budget revenues by more than 51 billion roubles from 2011, by 60.4 billion roubles in 2012, and by 69 billion roubles in 2013.

A high oil production tax will generate an additional 78 billion roubles in budget revenue in 2012, and 147 billion roubles in 2013.

At the same time, the government said it would preserve tax preferences for oil and gas companies that develop new fields.

The decision to raise the mining tax and some other payments charged to oil and gas companies was prompted by the need to replenish the federal budget and make up for growing expenditures.

“But they [oil and gas companies] will continue to have benefits related to the development of new fields that require big capital investments,” Putin said earlier.

“On the whole, the fiscal burden will be increased selectively -- only for those sectors of the economy where positive tendencies have continued for a long time and there are favourable world prices,” the prime minister said.

The Finance Ministry's measures are designed to increase overall budget revenues by 370 billion roubles in 2012, and by 500 billion roubles in 2013.

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