Russian Ministry of Finance to offers its ideas of the reform of oil industry taxation

Last week, the Deputy Finance Minister Sergei Shatalov held a meeting with oil companies on development of draft law on value added income tax (VAIT), its three participants report. The Ministry wants to take revenge, the companies think: to prepare an alternative to another bill - a tax on financial result (NFR). Last year, this project was submitted to the State Duma by the Khanty-Mansiysk autonomous district with the active participation of the Ministry of Energy, and in June, the Prime Minister Dmitry Medvedev in defiance of the Finance Ministry supported the experiment for the pilot fields. But the Ministry of Finance is not going to finalize the draft of NFR, but wants it replaced it with a more satisfied VAIT system, say officials and employees of the companies.

This will return control over the reform to the Ministry of Finance and will allow it to gain time - before 2016, the draft of VAIT won’t be able to be prepared and adopted, it will start working only from 2017, stresses an official. The reform is large-scale, it should be carefully designed, and the project of NFR, in the opinion of the Ministry, is a non-systemic solution. A representative of the Ministry of Finance didn’t respond to the request.

As NFR, as VAIT in contrast to the current severance tax are taken not from the cost of crude oil, but take into account the cost of its production. But the base of the taxes is different, and the expenses are accounted in different way. NFR is a tax on the difference between income from the sale of oil and the cost of its production and transportation, capital expenditures are written off rapidly (additionally 40% in four years), but only the current ones, not cumulative. The base of VAIT is revenue less the same operating costs and all capital investment, but the rate is floating and depends on R-factor (the ratio of accumulated income to accumulated expenses). That is, with the increasing profitability, the load will also grow. In addition, NFR will replace MET only at existing fields, while VAIT - at new ones. The basis of the project can be taken the VAIT project, prepared by Rosneft, but it will be very worked out, says the federal official familiar with the position of the Ministry of Finance.

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