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Russia may cut corporate tax rate to 20% in three-year plan - extended

Russia may cut its corporate profit tax rate to 20% from 24% as part of a three-year tax policy plan, Deputy Finance Minister Sergei Shatalov said.

The government may also increase the tax on extracting gas to make up for the resulting revenue shortfall. That rise „is being very carefully calculated with Gazprom, the Economy Ministry and Industry and Energy Ministry,” Shatalov said in Moscow today. „A mistake is very dangerous here.” The Cabinet will discuss the Finance Ministry's three-year tax plan on March 2. Shatalov said the total tax burden in Russia will not increase through 2010 and may in fact fall. He stressed that the final decisions on which tax rates would be cut and by how much have not been made. Russia, the world's largest oil producer after Saudi Arabia, calculates its federal budget according to the price of Urals, Russia's benchmark blend of crude. Oil prices will probably drop to $55 a barrel in 2007 from $61 a barrel, the Economy Ministry said in a forecast on February 19. Russia has recorded a budget surplus for six consecutive years. The federal budget's revenue reached 436.8 billion rubles ($16.72 billion) in January, when the surplus was 213.4 billion rubles, according to Finance Ministry data.

Shatalov reiterated the ministry opposes lowering the value-added tax. „This is the single tax that is not connected to oil and gas” and it should not be touched, Finance Minister Alexei Kudrin said yesterday. The excise tax on oil products will not increase next year. It may be changed in 2009 or 2010 to tax lower grade fuel at a higher rate than higher grade fuel, Shatalov said. He also said that excise taxes on tobacco products may increase 20%, outpacing annual inflation. VAT, the tax on extracting mineral resources, the corporate profit tax and excise taxes are among the greatest contributors to the budget's revenue, Shatalov said. The others are personal income tax, the unified social tax and customs tariffs. (Bloomberg)