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Experts doubt effectiveness of existing tax system in Russian oil and gas sector

January 26, 14:51 UTC+3 MOSCOW

The experts note that until now the state has not used the institution of state expertise of design documents to analyze the effectiveness of preferences

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© Yegor Aleyev/TASS

MOSCOW, January 26. /TASS/. Russia’s current tax system in oil and gas industry implies preferences to the companies for the sum of about 400 bln rubles ($6.7 bln) annually, Russian consultancy Vygon Consulting said in its research presented on Thursday at the press conference in TASS.

"Today preferences are granted to about one third of oil producers and more than half of gas producers, the sum of these preferences amounts to about 400 bln rubles annually," according to the document.

The experts doubt the effectiveness of the existing tax system because it has become too complicated and corruption-prone.

"The system of preferences is effective if it prompts positive changes in investment decisions. Judging from the experience in assessing specific projects in oil production it is clear that in some cases preferences are not enough to bring the project’s economy into the area of positive values and in other cases they are redundant," according to the research.

The experts note that until now the state has not used the institution of state expertise of design documents to analyze the effectiveness of preferences.

"Introduction of the new classification of hydrocarbon reserves provides an opportunity to assess in every particular, if preferences lead to growth of commercially viable reserves. After assessment of a representative volume of stocks a well-grounded reform of the system of preferences could be conducted," Vygon Consulting experts said.

"Tax policy should be more systematic, giving investors sound, credible investment signals. Today the task is to move from manual control of the fiscal regime, when a constant increase of the tax burden is compensated by introduction of numerous targeted preferences to the long-term system of taxation in the oil industry, which would not need any constant tactical changes either in favor of the budget, or in favor of individual companies," the research said.

Vygon Consulting is an independent consulting firm in the field of the Russian fuel and energy sector development.

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