Russia to increase severance tax and to cut oil export duty

March 19, 2014

The Russian government is planning a sharp cut in crude oil export duty with a simultaneous sharp growth of severance tax. The Finance Ministry discusses cutting oil export duty to $80 per ton from the current $384.4 while at the same time increasing severance tax to offset a decline in tax revenue.

Severance tax base rate for oil is to amount to 530 rubles per ton next year. In this case, severance tax may exceed 1,100 rubles per ton, Vedomosti has reported, citing calculations by the Moscow Center for Oil and Gas.

Russia will approve the tax maneuver if it fails to agree with the customs union partners Belarus and Kazakhstan to prolong tariff and non-tariff restrictions. If it is approved, oil companies will suffer because they will not be stimulated to develop new deposits. Currently such projects are viable thanks to low export duty rates. Also, the tax maneuver would make several oil refineries unprofitable.

Copyright: Pravda URFO, 2014