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Looking for Best Tax Treatment of Oil and Gas: Fiscal Experiments Continued

  • ID: 4744457
  • Report
  • December 2018
  • Region: Global
  • 55 pages
  • National Energy Security Fund
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The subject of taxation became the absolute hit of 2018. The government once again decided to rewrite the rules of the game.

President Putin’s new inauguration decree served as the main pretext. It turned out that about 8 trillion roubles extra was necessary for the new national projects announced. The Cabinet did not take long to decide where the funds should be taken.

The result was acceleration of the so-called tax manoeuvre started as far back as 1 January 2015. It suggested shifting the tax burden to the wellhead: the effect on the state budget of gradual abandonment of the export duty will be more than compensated for by quicker growth in mineral resources extraction tax (MRET).

The laws on tax reform have already gone through the parliament and will take effect as of next year. This means nothing good for companies.

Having lost the drafting stage when the texts of the bills were formed, the companies now try get at least some compensation. The Finance Ministry suggests that the law on additional income tax (AIT) should be viewed as such. It would seem the industry has long since dreamt of it.

It is a taxation system innovative for Russia that would make it possible to switch from taxing revenue to taxing profits. Oil companies fought for that for years. Today, however, they do not seem to be happy, not hurrying to switch to the new taxation system, but demanding that good old privileges should be kept.

In the new report we consider in detail the following questions:

  • Four years with the tax manoeuvre – the first results
    • What has the new tax treatment resulted in for the state budget and companies?
    • Preliminary financial results of 2018
  • Acceleration of the tax manoeuvre
    • What are the implications for the industry?
  • Excise refunds as an attempt to sugar the pill for the main victim, the oil refining sector
    • Will new mechanisms be able to prevent growth in petrol prices on the domestic market or should direct government regulation be expected?
    • Schemes of compensation to oil companies for the acceleration of the tax manoeuvre – the words and the deeds
  • AIT – why do companies not want to endorse the experiment?
    • A comparison of AIT with incentives
    • How the law on AIT will be amended
  • The fate of hard-to-recover reserves – will the new taxation system help start their development?
  • What new amendments are to be expected in the near future?
    • The government promises stability of the new tax treatment, but active rewriting of fiscal rules is under way even now
    • What novelties should the industry expect?
Note: Product cover images may vary from those shown
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Chapter 1. Debate on Tax Manoeuvre Completion: Finance Ministry Watching over Government Revenue    

Chapter 2. Deceptive Export Incentives for Oil Industry    

Chapter 3. Price of Tax Manoeuvre Completion: What Will Save Russian Oil Refining?    
3.1 Transitional Procedure for Calculating MRET on Oil    
3.2 Change of Mechanism for Calculating Excise on Petroleum Products    

Chapter 4. AIT: Dream Not Yet Come True    

Forecast of Developments

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All materials and sources used for issuing each report are thoroughly verified and analyzed by experts. The information is based on industry statistics, data of oil and gas companies, information of federal and regional mass-media, materials of conferences and round tables.

The analyst has pored on the following goals:

  • Analyses of oil & gas and power industries, political risks within the energy sector, geopolitical problems in connection with the production of hydrocarbons and their supply to the global market, strategic development of companies, new production and transportation projects
  • Consulting on the influence of political factors on the oil & gas business, decision-making within Russian energy companies and government bodies dealing with the energy industry
  • Development of energy business concepts in Russia
  • PR services for oil & gas corporations
  • Analysis of images and reputations of energy corporations