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Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia

Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia

The tax system in the oil and gas sector continues to undergo radical changes.

The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT.

The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment.

The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.

Thinking better of it, the Finance Ministry even tried to persuade the President to impose a moratorium on incentives. Nothing helped, however.

Two cases became real hits of 2019: the one with the Priobskoye field and the fight for Arctic incentives to projects of Rosneft and its satellites. And by the way, neither case has fully been closed: for instance, debate is still under way about how the loss of revenue because of the Priobskoye project will be compensated for. Meanwhile, the spread of AIT was viewed among other things as an opportunity to cancel privileged regimes, but now the matter is again open to question.

Besides, discussion of taxation on the refining segment continued the entire year: the Cabinet tries to get vertically integrated oil companies (VIOC) not to raise prices for motor fuel in the domestic market as a condition for the decision to be passed.

The report gives a detailed account of the following:

  • The oil and gas sector as the key donor to the Russian budget

    • Collection of taxes from oil and gas companies in the context of the acceleration of the tax manoeuvre
    • Change in their share in the government revenue and the Russian GDP
    • Tax payments by the biggest corporations: common aspects and differences
  • AIT: the first results of the experiment

    • The difference in how the Finance Ministry and VIOC evaluate its effects
    • The prospects of the new tax
  • The fight for new tax breaks

    • The activity of Rosneft in the fight for new special treatment
    • The future of Arctic incentives
  • Oil refining in the context of the tax manoeuvre completion

    • Analysis of the mechanism of negative excises and its adjustment in 2019
    • Change of the rules of the game for motor fuel producers
    • Options for compensating for lost revenue through growth in mineral resources extraction tax: financial implications for VIOC
    • “Damper” for jet fuel
  • Taxation on the gas industry

    • Winners and losers
    • The Finance Ministry’s refusal to equalise the tax conditions for Gazprom and independent producers
    • The matter of the price of gas in the domestic market raised again

Contents of the report:

Introduction 3
Chapter 1. Oil & Gas as Key Donor to Russian Budget. Tax Revenue from Sector 5
Chapter 2. Oil Refining in Context of Tax Manoeuvre Completion 17
2.1. First results of new taxation on oil refining 17
2.2. ‘Tweaking’ negative excise system 23
2.3. Damper for jet fuel 33
Chapter 3. ‘Clash of Titans’: Fight for New Tax Breaks/td> 36
3.1. Epic with incentives for Priobskoye field 38
3.2. New Arctic incentives 41
Chapter 4. Taxation on Gas Industry: Winners and Losers 47
Forecast for Future Developments 51
Date of release: December 31, 2019

If you are interested to obtain please contact » Elena Kim

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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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