Page 22 - bne_newspaper_June_22_2018

Opinion
June 22, 2018 www.intellinews.com I Page 22
MAPLECROFT:
Russian Finance Minister Anton Siluanov manoeuvres into position with oil tax reform
Daragh McDowell of Verisk Maplecroft
In an early policy win for Finance Minister Anton Siluanov, Russia is preparing a major change in how it taxes oil. The second phase of the so- called “tax manoeuvre” will shift the tax burden entirely upstream by increasing the Mineral Ex- traction Tax (MET) while zeroing out export duties from 2019-2024. This completes a shift to putting the tax burden squarely on upstream that started in the first phase of the manoeuvre, from 2014- 17, which saw export duties halved and MET almost double.
The tax manoeuvre is closely associated with Siluanov. Alongside his promotion to First Deputy Prime Minister in the post-election reshuffle, the policy’s well-publicised approval is a sign that his star is in the ascendant.
Minister of Finance Anton Siluanov’s tax manoeuvres will cut oil exports to zero and move the burden upstream.
For purchasers of Russian oil exports the ma- noeuvre should be cost-neutral, at least at first. The impact will be largely felt by refineries, in the form of higher gate prices, which the government expects will encourage investments to improve efficiency and value-add. Over time, the quality of Russian refined oil products entering the Euro- pean market should improve.
Lower tax with broader base
The below graph illustrates how the tax split on each barrel of oil will change as the manoeuvre is completed, both in terms of the marginal and ef- fective rates of MET and export duties. The model assumes an average Urals crude price of $60 per barrel, and a $/RUB exchange rate of 62.