Hunt for “tax killer” of oil industry starts in Russia

Already in the spring session, the State Duma of the Russian Federation may consider a bill to replace the tax on mineral extraction (MET) by a tax on financial result (FRT) at several pilot fields. If this happens, it is likely a revolutionary change in the system of taxation of oil companies, which, in turn, can give a powerful impetus to the development of the Russian oil industry.

Unexpectedly

At the government meeting on March 12 of this year, the Prime Minister Dmitry Medvedev approved a bill to impose the tax to the financial result (FRT) on a trial basis at several oil fields. This decision was largely unexpected, as a different outcome was predicted.

Last autumn, the Ministry of Energy of the Russian Federation took the initiative to conduct an experiment with the introduction of the added income tax instead of mineral extraction tax at nine fields of Lukoil, Surgutneftegaz and Gazpromneft. However, the Ministry of Finance of the Russian Federation adopted the idea with hostility and sent a negative feedback on the proposed innovation to the Government. But in December, the Energy Ministry received a powerful ally in the main oil-producing region of the country: the legislative assembly of the Khanty-Mansiisk autonomous district submitted a bill to the State Duma to replace as an experiment MET by a tax on financial result at the "pilot" fields. Thereafter, the State Duma held parliamentary hearings on this issue, during which oil companies and representatives of the Khanty-Mansiisk autonomous district acted in a united front.