UPDATE 2-Russia may cut oil taxes by up to $8.4 bln from 2010
(Adds details, Kudrin quotes)
ST PETERSBURG, Russia, June 7 (Reuters) - Russian oil firms are set to receive another round of tax cuts worth up to $8.4 billion from 2010 as recently approved reductions would not be enough to revive output growth, top officials said on Saturday.
The Russian government last month cleared a proposal to reduce the mineral extraction tax on oil, a move that is expected to boost oil firms' earnings by over $4 billion annually. The decision triggered a stock market rally.
"Our calculations show that the approved measures are enough to stabilise production. It is not enough for growth," said Arkady Dvorkovich, the top economic aide to President Dmitry Medvedev and an advocate of a large-scale fiscal loosening.
Russian oil production has been falling this year in sharp contrast to previous years, when it rose steeply. Oil companies have complained loudly that their tax burden is too high.
Dvorkovich said new tax breaks for the oil sector planned from 2010 would bring savings of about 200 billion roubles ($8.40 billion) for oil companies, with about half that figure resulting from cut in the mineral extraction tax alone.
The announcement comes amid renewed concerns among investors about the risks of Russia's oil sector due to a fierce dispute over strategy and future ownership at BP's (BP.L) Russian joint venture, TNK-BP (TNBPI.RTS).
Prime Minister Vladimir Putin has promised to introduce tax breaks for new oil-producing regions such as the Arctic shelf, Yamal and Timan-Pechora and has said production will soon rise.
DESIRED EFFECT
The latest proposals would include changing the way the mineral extraction tax is calculated, better administration, flexible taxation of different oil fields and amortisation tax breaks, Dvorkovich said during the St Petersburg Economic Forum.
The Kremlin aide told reporters the new proposals were still in their early stages, but calculations were already under way. "We hope these measures will bring the desired effect," he said.
Finance Minister Alexei Kudrin, a fiscal hawk who agreed to earlier tax breaks in the hope they would save the Russian budget from an even larger scale fiscal loosening, gave a lower estimate for the measures: 100 billion roubles ($4.2 billion).
But he said the final amount was hard to calculate.
Kudrin said discussions were under way between officials about the mineral extraction tax differentiation -- an instrument allowing oil companies to pay lower taxes on oil extracted from depleted or remote fields. Continued...
