Russia’s deputy finance minister Alexei Sazanov said that the country would collect more than USD10 billion in revenue from oil firms in 2020 due to the tax maneuver. The additional money will help finance the country’s post-pandemic recovery.
This year, Russia’s economy is estimated to shrink to the steepest decline in a decade, as much as 6%, on the back of coronavirus-related lockdown and the crashing oil prices, the country’s main export. Russia plans to boost activity with an allocation of RUB5 trillion (USD71 billion) until the end of 2021.
The finance ministry is raising more debt and utilizing the National Wealth Fund (NWF) to meet increased spending commitments as low oil prices alone would wipe RUB2 trillion (USD28.6 billion) from this year’s budget.
Additional support for the program will come from the retracting of the government’s oil subsidies to oil companies as oil prices are as low as USD30-40/barrel at the moment. The budget could reach an additional RUB700 billion (USD10 billion) in a year, or RUB3 trillion (USD42.9 billion) in five years.
Other than that, oil firms’s payment for mineral extraction tax and export duties, along with the higher borrowing and spending from the NWF would mean the country would not need wider tax hikes.
Separately, the ministry is testing a tax for some oil fields based on profits that would replace other taxes and aim to boost oil output. However, the system actually costs a lot and according to Sazanov, this is not the time to apply it widely.
