In Russia tax exemptions for oil sector may climb to RUB2.3 trillion

The quality of oil deposits is constantly dropping and this will require increasing tax exemptions for oil companies, according to presentations prepared by the ministries of finance and energy. In 2018 half of Russia’s oil deposits were subject to tax exemptions, which cost the budget around RUB1.1 trillion, but this share is forecast to increase to 70% in 2033 and over 90% in 2033, increasing the annual losses to the budget to RUHB2.3 trillion. The FinMin believes that the overall tax burden on the oil sector should not decrease, however, and the losses need to be compensated by oil companies themselves. Despite the growing tax exemptions, forecasts for oil production are rather pessimistic. According to the energy ministry, the annual oil output will fall to 310 million tons by 2035 compared to 556 million tons at present. The discussion is related to the argument between the FinMin and the EnergyMin on tax exemptions for oil projects in the Arctic shelf. The issue is reportedly to be discussed at a meeting with President Putin later this year.

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