Russia’s FinMin eyes oil industry tax cut from 2009

Banking

Russia’s Finance Ministry will propose a 100 billion rubles ($4.2 billion) reduction in tax on the oil sector from 2009, Deputy Prime Minister and Finance Minister Alexei Kudrin said on Tuesday.

“We will put forward a proposal to lower the tax burden on the oil sector by 100 billion rubles from 2009,” Kudrin said at an annual meeting of the Economy Ministry. The comment represents a victory for the oil lobby, which has been complaining in the past years that heavy taxation is reducing the industry’s ability to invest in new fields, although its scale has yet to be evaluated. Kudrin said the Finance Ministry will submit a new set of tax reform proposals by the end of this week which will include tax breaks for the oil industry, aimed at boosting innovation in the oil-based economy, as well as changes related to the profit and amortization taxes.

Prime Minister Viktor Zubkov, speaking earlier at the same gathering, asked both the Finance and Economy Ministries to present detailed calculations on the impact of a proposed cut of the value-added tax (VAT) by August 2008. Kudrin, an opponent of the VAT cut, said that any decision on the issue will not come into force earlier than 2010. “Any decision will be incorporated in the next three-year period,” Kudrin said. Russia’s Economy Ministry last week proposed to cut the VAT to 12 to 13% from the current 18% from 2009 as a measure to boost growth in non-energy sectors of the economy. But VAT brings about one third of Russia’s budget revenues and Kudrin argues the cut would badly affect the budget. (Reuters)

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