Russia will squeeze oil and gas producers for additional funds by assessing higher taxes, according to a new Russian draft budget.
The move is telling both of the state of Russia’s oil and gas producers as they rake in additional profits on higher market prices, despite Western sanctions, and the need for additional funds to assist with the country’s budget deficit.
Russia’s draft plan is to increase taxes on oil and gas companies by 3 trillion rubles, or $50 billion, starting in 2023 and running through 2025. The Russian government had previously said it had approved a budget bill for 2023-2025. The bill will now go to parliament for debate, after which it will need a signature from President Vladimir Putin.
The key tax hike proposals for the budget include increased export duties on the country’s pipeline gas exports, higher taxes on LNG, new export duties on coal, increasing the mineral extraction tax for oil, and keeping the damping fuel tax mechanisms.
The latter damping mechanism enables oil companies to be at least partially compensated for lost profit from supplying motor fuel to the domestic market when export prices exceed domestic prices. It also compensates the state for a shortfall in revenue if the reverse is true. In 2019, this law was revised to increase the federal budget revenue through a number of measures, including what constitutes a middle distillate.
According to RIA, Russia’s finance ministry expected a deficit of 0.9% of GDP, or $22 billion. The ministry is planning on borrowing $28.7 billion next year, according to a document seen by RIA, with even higher figures slated for 2024 and 2025.