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Russia's Energy, Finance Ministries might soon reach compromise on tax maneuver

According to Novak, the issues of completing the tax maneuver and stimulating oil refining are different, unrelated topics.

MOSCOW, April 6. /TASS/. The Russian Ministry of Energy expects in the near future to work out a compromise proposal on the timing of completing the oil industry tax maneuver with the Ministry of Finance. The parties are in a constructive phase of negotiations, Russian Minister of Energy Alexander Novak told reporters.

"We are now in a rather constructive dialogue with the Ministry of Finance," he said. "I think that in the near future we will work out certain proposals that will be a compromise for everyone," Novak added.

According to Novak, the issues of completing the tax maneuver and stimulating oil refining are different, unrelated topics. "In fact, these are two different topics. The first concerns stimulating measures to support oil refining plants, that marginality has dropped dramatically due to tax maneuvers. The second is a proposal on export duty," he said.

According to the Minister, clear and long-term rules of the game for the main players on the market are the main incentive for modernizing oil refineries. "Oil refining is a big investment, a cycle of modernization and commissioning of plants," Novak said, "We need to define the rules of the game and the goals for refining. And then attract financial resources that could be used for modernization," he added.

Speaking about the deadlines for completing the tax maneuver in the oil sector, Novak added, "the main thing for the industry would be that it should have zero effect, so that there is no additional tax burden." "This is a redistribution of the existing tax burden," he said.

On March 21, the Russian Finance Ministry criticized the statement of the Energy Ministry about the need to postpone completion of the tax maneuver in the oil industry until 2023, when the modernization of oil refineries will be completed. Earlier, Energy Minister Alexander Novak said that the tax maneuver in the oil industry should be completed after said modernization, that is, not until 2023.

Over the past few years, Russia has been reforming taxation in the oil sector. An important direction of the reform is the completion of the tax maneuver with zeroing of export duties on oil simultaneously increasing taxation of production. The Ministry of Finance proposes to zero the export duty on oil from 2018. The Ministry of Energy argues against this step, believing that this could lead to a decline of refining volumes by 20% and the closure of a number of refineries.

According to the Ministry of Energy, modernization of oil refineries should be stimulated by the so-called reverse excise duties - actual partial refunds of excise tax on oil for refineries that invest in modernization, if their oil products are sold in Russia. So far, no single approach has been chosen.