Russia’s Finance Ministry seeks to raise taxes on oil and gas

Russia’s Finance Ministry seeks to raise taxes on oil and gas

MOSCOW (Reuters) – Russian Finance Minister Anton Siluanov said on Thursday a new Russian draft budget aims to attract more money from oil and gas producers as commodity prices soar as part of the government’s efforts to tackle its budget deficit.

Kommersant daily said, on Tuesday, citing sources familiar with the discussions, that Russia is considering raising taxes on the oil and gas sector by 3 trillion rubles ($50 billion) in 2023-2025.

On Thursday, the government said it had approved a bill covering 2023 budgets and 2024-2025, without mentioning any benchmarks. The bill is submitted to Parliament for debate and then needs to be approved by the President.

Speaking at a televised government meeting, Siluanov said the main proposals of the new budget are to increase export duties on pipeline gas exports, taxes on liquefied materials, and introduce export duties on fertilizers and coal.

Siluanov said the Finance Ministry also wants to raise taxes on the oil industry by keeping the so-called disincentive fuel tax mechanism and changes to the mineral extraction tax.

The government expects the budget deficit to reach 2% of GDP next year, declining to 0.7% by 2025.

RIA said the Finance Ministry expects this year’s budget deficit to be 0.9% of gross domestic product, or 1.3 trillion rubles ($22 billion).

Olga Belenkaya of Finam brokerage said the central bank will take the planned increase in the deficit into account when deciding on monetary policy.

โ€œEven the budget parameters being discussed could be exposed to a worsening geopolitical backdrop,โ€ she said, citing a buildup in Russia to bolster its forces fighting what she calls a โ€œspecial military operationโ€ in Ukraine as well as referendums on whether to join Russia held in Russian-controlled territory in Ukraine.

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Siluanov said the government plans to focus on domestic borrowing to fill the budget gap.

According to a document seen by RIA, the ministry plans to borrow 1.7 trillion rubles ($28.7 billion) in 2023, 1.9 trillion rubles in 2024, and 2 trillion rubles in 2025. (One dollar = 59.2500 rubles).

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