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Russia to receive $10 billion in tax revenue from local oil firms

Russia to receive $10 billion in tax revenue from local oil firms

Moscow, June 16 - Neftegaz.RU. Due to Russia’s taxation system, the Russian budget will receive up to US$10 billion more from local oil firms in 2020, Deputy Finance Minister Alexey Sazanov told Reuters in an interview published on June 15, Oilprice reported.

Russia’s economy is struggling this year because of the measures to contain the coronavirus pandemic and the plunge in oil prices, which is reducing the budget revenues from Moscow’s principal export, oil.

While it would lose revenues from lower crude oil sales and lower oil prices, the Russian budget will benefit from up to $10 billion (RUB 700 billion) in additional taxes from the oil companies, Sazanov told Reuters.

That is because of the Russian tax mechanisms and its policy to keep fuel prices broadly stable, regardless of the movement of the major international crude oil benchmarks. When crude oil prices are low, oil companies pay the budget. When oil prices are high, Russia pays the companies for keeping fuel prices stable.

This year, at oil prices between $30 and $40 a barrel, the Russian budget will receive up to $10 billion from the oil firms, due to the tax system, Sazanov said. “When the budget especially needs cash to meet its obligations ... this works well. Under no circumstances we are going to abandon or revise it”.  

However, the amount of money that the Russian budget will receive from this particular tax policy will not be nearly enough to offset the losses for the budget from the low oil prices.

Russia’s revenues from oil and gas will be $42.8 billion (RUB 3 trillion) lower than planned, Russian Finance Minister Anton Siluanov said in the middle of March.

Russia’s economy is not going as well as one would have hoped, the finance minister admitted after prices started sliding in March, saying that the oil price factor alone is set to reduce the country’s budget income by $40 billion compared to earlier estimates.

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