Russian lawmakers give first nod to heavy mining and oil tax hike

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MOSCOW (Reuters) – Russian lawmakers on Tuesday backed a plan to raise taxes for some mining and oil companies, as Moscow seeks to close loopholes left by falling oil prices and the COVID-19 pandemic, while by facing opposition from the industry and criticism of its evolving rules.

FILE PHOTO: A worker bulldozers a stockpile of coal at the Vorgashorskaya mine outside the town of Vorkuta, in northern Russia, September 17, 2018. REUTERS / Eduard Korniyenko / File Photo

Lawmakers, also at first reading, backed tax breaks for some oil fields in West Siberia, the heart of Russia’s oil industry, with energy champion Rosneft ROSN.MM considered the big winner.

Russia announced the plan, which is expected to bring in 340 billion rubles ($ 4.5 billion) a year, last week amid a drop in the ruble, loans to support crisis-stricken Belarus and expectations of three years of budget deficit.

For the oil sector, the expected increase is 260 billion rubles for 2021 alone, or the equivalent of 3.3% of the government’s tax revenue in 2019 on the Russian oil and gas sector, according to Renaissance Capital estimates. .

“More important than the financial impact is the potential loss of credibility in the sanctity of Russian fiscal rules,” he said.

Russian oil producer Gazprom Neft, in comments to Reuters, said he hoped the government and industry would find a way to balance budget and business needs.

Russia plans to triple the mining tax (MET) on metal and fertilizer producers, remove zero MET on high viscosity oil, and get rid of a lower MET rate for fields mature oil.

Higher tax rate will affect metal producers, including Russian Norilsk Nickel GMKN.MM, RUSAL 0486.HK, Evraz EVRE.L, MMK MAGN.MM, NLMK NLMK.MM and Severstal CHMF.MM.

Lawmakers, just minutes after backing the tax increase, also voted at first reading to lower the MET for some fields in the Khanty-Mansiisk region of Western Siberia.

This could amount to 3.83 billion rubles ($ 50.5 million) in less tax per month for any company with fields in this region, provided the price of oil exceeds the breakeven point set in the budget. of the country, or $ 43.3 per barrel for 2021.

Neither lawmakers nor the finance ministry have specified which companies would be eligible for tax breaks. Rosneft, led by Igor Sechin, a close ally of President Vladimir Putin, is developing the huge Priobsky oil field in the region.

“Rosneft has been successful in preserving or at least securing tax breaks for its estates, confirming the competence of management to negotiate the policy of what is, in fact, a regulated utility,” the brokerage BCS said in a note. .

($ 1 = 75.9600 rubles)

Reporting by Darya Korsunskaya, Anastasia Lyrchikova, Olesya Astakhova and Vladimir Soldatkin; Writing by Polina Devitt and Alexander Marrow; edited by Louise Heavens and Barbara Lewis

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