The Finance Ministry may again hold a tax exemption of oil and Gazprom

The Ministry of Finance of Russia discussed the question of extending the action of the increased severance tax from oil companies and Gazprom. This is due to the large budget deficit

The removal of 200 billion roubles of oil and 100 billion rubles devaluation profits from Gazprom through the partial freezing of the tax maneuver in the past year called a one-time action. However, as reported by the newspaper “Vedomosti” Federal official, “it is obvious that the extension of the action of the increased severance tax is inevitable amid a large budget deficit this year and next year.” Information about what such a proposal informally discussed at the Ministry of Finance publication confirmed another Federal official and industry lobbyist involved in the discussion.

As explained to the newspaper, one of the interlocutors in difficult times, when budget expenditures of 2017 decided to freeze in nominal terms, while non-programme costs to a reduction of 5%, “oil industry needs to help the country.”

In addition, the Ministry of Finance believes that the oil and gas industry there are opportunities for additional exemptions since the next year production will grow by no less than 10 million tonnes after the launch of new projects.

According to Fitch, Gazprom will continue to pay mineral extraction tax at an increased rate by 100 billion rubles more than in 2015, In this case, the group may, and in 2017 will generate negative free cash flow. As for the oil industry, the severance tax may be increased in exchange for the imposition of added tax revenue for new and some old fields.

According to the Director of the Moscow oil and gas center Denis Borisov EY, tax exemptions as a percentage of revenue in Russia is one of the highest in the world: to the fall of oil prices — about 73% to about 35% of global majors are now about 58% versus 12%. In his opinion, potential new projects, on which work began in 2000-e years, will be exhausted in the coming years. The fall of the same production at old fields may lead to stagnation or decline.

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