Page 84 - RusRPTOct20

In social policy, spending on protection of family & childhood (+247% y/y in August) benefited the most: they include spending on child benefits and maternal capital.
6.1.2 ​Budget dynamics - specific issues...
MinFin is targeting a major streamlining of Russia’s overly complex tax code​. Duma accepted the MinFin’s proposed bill on the 1st reading September 22. The MinFin does not expect a material change to oil production, while Tatneft and Gazprom Neft made public statements.
The debate over oil taxes began in earnest on September 22. It increasingly appears the MinFin’s goal is not so much to raise taxes, but to kick off a major streamlining of Russia’s overly complex tax code by moving more and more fields to the Excess Profits Tax (EPT or NDD).
News flow over the proposed tax changes has been heavy, with stories seemingly crossing Interfax almost hourly.
MinFin does not expect a material decrease in oil production, with Interfax quoting Deputy Finance Minister Sazonov that tax breaks for depleted fields and projects with cancelled export duty breaks will still receive tax support, as they are being offered to switch to the NDD.
“The tax burden on such deposits will not increase” if the companies continue to invest in the projects, he noted, but that if CapEx is cut then 50% of the savings will have to be shared with the government per the NDD formula.
Tatneft had a call with investors, stating that: (1) for the moment its 2030 Strategy, including a production target of 740kbd by that year (+25% vs 2019 levels), remains in place; (2) The company was surprised by the proposal to remove tax support for high-viscosity production (which is c10% of Tatneft’s total). This tends to confirm our view that most of Russia’s oil companies were unprepared for the MinFin’s proposal.
Gazprom Neft warned that taxation changes could harm oilfield services, equipment manufacturers, and regional budgets, not just oil companies. Company representatives stated that negotiations are on-going, and that it’s too early to make any concrete observations, and hopes a compromise solution can be found.
Russia’s Finance Ministry has submitted several bills to the State Duma that would radically overhaul the country’s oil taxation system, largely at a cost to producers​. As expected, the ministry has proposed changes to the excess profits tax (EPT) regime introduced last year, which it previously said had caused a loss of over $3bn to the budget. It has also called for the
84 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com