Russian oil firms to offload tax increases on drivers
* Rise in taxes to net more than $5 bln in three years
* Retail fuel prices increasing after elections
* Government needs more money to fund social spending
By Vladimir Soldatkin and Olesya Astakhova
MOSCOW, Oct 16 (Reuters) - Russian oil companies will escape a blow from future tax hikes after getting a nod from the government to raise fuel prices for motorists, analysts and officials say.
The government will raise more than 170 billion roubles ($5 billion) over the next three years from increases in taxes on the domestic oil industry, helping to cover the cost of higher state spending ordered by President Vladimir Putin.
But with Putin now settling into a third Kremlin term and not due to face voters again until 2018, drivers - not the oil industry - will end up footing the bill.
"The consumer will pay out of his own pocket for the increase in the fiscal burden," said Vitaly Kryukov, an analyst at brokerage IFD Kapital.
"It looks like the Russian bureaucracy has already adjusted to the idea of more expensive fuel - domestic demand in Russia is growing, there are no elections in the near future, and they can see higher prices in Europe."
The oil and gas industries are an easy target, generating more than half of Russia's federal revenues. The government has quietly abandoned plans to balance the budget by mid-decade, but is still seeking new revenue sources.
The tax changes will shift the burden to oil production from exports. If passed on to drivers, that would narrow the gap between the amount they pay for fuel and the higher prices charged at filling stations in Europe.
Under the changes, the base rate for calculating mineral extraction tax (MET) will rise to 559 roubles per tonne in 2017 from 470 roubles now. The marginal rate of crude oil export duty would fall to 55 percent by 2016 from 60 percent.
According to Denis Borisov, director at Ernst & Young's oil and gas centre in Moscow, the tax increase will shave $0.30 off the net income on a typical barrel of crude oil produced and exported, assuming oil prices of $100.
The tax increase will likely be funded by consumers, not the companies - despite Energy Minister Alexander Novak's assurances that the industry will, on balance, be better off after the tax changes are fully implemented in three years.
Fitch Ratings reckons the tax increases will have no material effect on integrated companies with large upstream divisions, such as Rosneft, Tatneft and Lukoil.
The tax move will probably have the biggest negative impact on Bashneft and Alliance Oil, whose refining volumes far exceed production.
Tweaks to the tax system in recent years have reduced the marginal tax rate on each barrel of crude exported to 82 percent from around 87 percent.
The increase in MET has been approved by Putin, but the cuts in export duty have not.
Even if they are, the marginal tax rate on exports will creep up, raising concerns over whether higher taxes will endanger the Kremlin's goal of sustaining oil output at over 10 million barrels per day through this decade.
DEVIL IN THE RETAIL
Using its administrative and political clout, the government effectively froze retail fuel prices for several months ahead of the March 2012 presidential election.
According to data compiled by CIS Commodities Insight, a Reuters pricing and markets service, the average gasoline pump price has since jumped by 15 percent.
Deputy Finance Minister Sergei Shatalov, Russia's top tax official, has said gasoline prices may rise by just 1.4 roubles (4 U.S. cents) a litre next year if the planned oil tax changes are fully implemented.
But oil industry executives and analysts believe the price increase will be more dramatic.
Vagit Alekperov, head of Russia's No.2 oil firm Lukoil, expects retail prices to jump by between 10 and 15 percent next year from around 34 roubles ($1.05) per litre for premium gasoline. Deputy Prime Minister Arkady Dvorkovich put the figure at between 6 and 10 percent.
Russian drivers pay slightly more than their counterparts in the United States, a richer country where regular gasoline costs around $3.40 per gallon ($0.90 per litre), but less than the 1.50 euros ($2) charged in Germany for unleaded fuel.
Motorists in Russia are a well-organised lobby, launching protests in the far east of the country when imports of right-hand-drive Japanese cars were banned. Drivers joined protests against Putin's election to a third term last year, forming long convoys around Moscow's Garden Ring road.
Alexander Kotov, Moscow head of a trade union representing professional drivers, said further fuel price hikes could trigger renewed protests. "The government is playing with fire. You can't smoke in the dry haystack," he told Reuters. ($1 = 32.2852 Russian roubles) ($1 = 0.7406 euros) (Writing by Vladimir Soldatkin; Editing by Douglas Busvine and Dale Hudson)
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