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Changes in Russia's tax system to ensure production of up to 10 bln tons of oil in Siberia

December 29, 2015, 1:12 UTC+3 MOSCOW

Russian Minister of Energy said the existing tax system had outlived its usefulness

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MOSCOW, December 28. /TASS/. Changes in Russia’s tax system will make it possible to ensure production of an extra of ten billion tons of oil at Western Siberian fields, Russian Minister of Energy Alexander Novak said on Monday.

"According to our estimates that are about the same as those of the ministry of natural resources and oil companies, about ten billion tons of oil in Western Siberia are not economically unyielding for production," he said in an interview with the Rossiya-24 television channel. "Changes in the tax system are to create conditions to make production of this oil commercially viable."

The minister said the existing tax system had outlived its usefulness. Due to its drawbacks, oil production at Western Siberian fields, which accounted for the bulk of output in the past decade, has been demonstrating an annual decrease of one percent. He said companies should be motivated to extract tight oil.

"Production is declining there [in Western Siberia - TASS] because the existing system makes it impossible to use existing fields comprehensively. Wells are drilled where it is paying," Novak said.

According to earlier reports, it is planned to fix the excess profits tax rate at 70% The tax base will be estimated revenue from production of raw materials minus estimated transportation costs, exports duty and the extraction tax, and also minus actual operating expenses (except transportation costs) and capital investments. The excess profits tax will be levied only after a company recoups all of its expenses and achieves fixed profits of six percent in monetary terms. The tax will be applicable to both old and new field but previous expenses will be taken into account only for new field, for a year before the new tax’ use.

Russia’s finance and energy ministries have reached a final stage of talks on the would-be excessive profits tax. A relevant bill might be submitted to the State Duma lower parliament house in the spring of 2016.

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