Russian oil companies may face additional tax payments

At present the Russian government is considering the possibility to increase the tax burden of oil companies. The Russian Finance and Economy Ministries are thinking of raising oil export taxes, analysts point out.

According to Aton analysts, the single tax on oil production is likely to be changed. The introduction of this tax last year enabled the government to raise an additional $4bn in revenues. As a result, tax payments (except profit taxes) of YUKOS jumped 70 percent in the first nine months of 2002 and those of LUKoil doubled. According to analysts, the planned increase in this tax will cost $1.5-2bn to oil companies.

Within the framework of current legislation, Russian oil companies receive less and less revenue, if the price already exceeds $25 per barrel of oil. The recent proposals will bring the companies' share in profits from high oil prices, to almost nothing. It could mean that oil shares are unlikely to be sold on the stock market amid expectations for a decrease in oil prices. In fact, a slight drop in oil export prices practically will not influence these companies, experts say.

The tax rate on oil production is planned to be increased from $1.5 to $1.75-1.85 per barrel.

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