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Law on tax on additional income from hydrocarbon production may come into effect in 2018

November 12, 2016, 0:25 UTC+3 MOSCOW
According to Grigory Vygon, the introduction of the new tax cannot be considered separately from abolition of export duties
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MOSCOW, November 11. /TASS/. The law on tax on additional income from hydrocarbon production may come into effect in 2018, Grigory Vygon, head of Vygon Consulting, told TASS. The expert took part in the development of the concept and setting the main parameters of the new tax.

"2018 is quite a realistic date which takes into account terms of bureaucratic procedures and approval of the bill by different departments. Besides that tax on additional income from hydrocarbon production should be reflected in the budget, but it is not in the budget for 2017," the expert said.

According to Vygon, the introduction of the new tax cannot be considered separately from abolition of export duties. He noted that zeroing of export duties may last for an indefinite period of time.

According to him, now is the most favorable time to make a decision to zero duties. The price of oil is low, if the price at $40-50 per barrel remain, the duty will amount to about $80 per tonnes, which allows the government to carry out this operation (zeroing of duties) relatively painlessly, the expert said.

Russia’s Finance Ministry proposes to restrict deductible expenses for defining tax on additional income from hydrocarbon production for brown fields to 9,520 rubles ($152.5) per tonne and set its rate at the level of 50%. That is according to Ministry’s draft fiscal policy guidelines for 2017-2019 obtained by TASS.

"It is suggested that the rate of tax (on additional income) is set in the amount of 50%. For the purpose of restricting incentives to overstate expenditures and minimizing the shortfall in budget revenues, deductible expenses for brown fields are to be restricted to 9,520 rubles per tonne of extracted hydrocarbons, adjusted for inflation," the document says.

The new taxation system for pilot projects, including both green and brown fields, aims at encouraging the development of new fields and rational use of mineral resources, the Ministry said. The new system implies a reduction of total amount of taxes, which depend on gross figures (mineral extraction tax on oil and customs duty on oil) and introduction of taxes on additional production revenues.

Vygon Consulting is an independent national industry consultant in the development of fuel and energy complex of Russia.

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