28 Nov.2018

What Can One Expect from a Tax Manoeuvre? / Presentation of the Results of a Petromarket RG Study at Moscow’s Interfax News Agency

At a press conference held at the Interfax news agency in Moscow, Ivan Khomutov, General Director of the Petromarket Research Group, presented the results of a new study undertaken by the company: «Completing the Tax Manoeuvre: What Consequences Should We Expect?»

ВThe event was attended by representatives of big business and the main government regulatory bodies: Anton Rubtsov – Director of the Oil and Gas Processing Department of the Ministry of Energy of the Russian Federation, Alexey Sazanov – Director of the Tax and Customs Policy Department of the Ministry of Finance of the Russian Federation and Pavel Karchevsky – Advisor to the CEO and Head of the Department of Federal Government Relations at Gazprom Neft PJSC.

During presentation of the study, Ivan Khomutov pointed out that the most important result of the new reform will be the complete elimination of the system of export duties on oil and petroleum products by 2024. Together with the duties, the mechanism of automatic redistribution of oil revenue for the benefit of oil refining (through the difference in export duties on oil and petroleum products) and petroleum product consumers (by the reduction of wholesale prices to the value of export duties) will be abandoned. Instead of unconditional duty-free subsidies to refineries and consumers (not only in Russia, but also in a number of countries able to import duty-free oil and petroleum products from Russia), a new investment income management mechanism will be gradually introduced between 2019 and 2024, which should make the subsidising of economic entities more efficient, making it targeted and recipient-focused in character.

In his address, Alexey Sazanov made mention of the fact that for the Ministry of Finance, the key task of the tax reform is to increase budget revenues – not by increasing the tax burden on the oil business in general, but by improving revenue administration measures. Alexey Sazanov noted that the Petromarket RG study contains a detailed review of many aspects of the tax reform and confirms the main expectations of the Ministry of Finance.

Elaborating, Anton Rubtsov confirmed that it was extremely important for the Ministry of Energy to carry out the reform, not only to ensure its progression, but also as a means of supporting refinery modernisation projects. Anton Rubtsov remarked upon the depth of Petromarket RG’s research and the correctness of its main conclusions, although the Ministry of Energy is already more optimistic about the prospects for modernising individual refineries as part of the tax manoeuvre.

Pavel Karchevsky touched on the topic of surrogate fuel supplied to the domestic market by technologically-backward Russian refineries, which is a topic relevant to all market participants. Pavel Karchevsky also pointed out that the study made by the Petromarket Research Group demonstrates that the problem of surrogates will not be solved by the tax reform and that further measures to combat it must be developed. The Ministry of Finance’s representative confirmed that the regulatory authorities are already working on the problem.

The press conference delegates noted the importance of the work undertaken by independent industry consultants and expressed gratitude to Petromarket RG for its up to date and informative study.