November 27, 2011 / 11:11 AM / 8 years ago

Russia considers tax shift to boost Arctic oil

BADEN-BADEN, Germany, Nov 27 (Reuters) - Russia will consider shifting the tax burden for high cost off-shore oil drilling from taxes on revenues to taxes on profits to encourage development of the Arctic, Deputy Finance Minister Sergei Shatalov said on Sunday.

“(Regarding the) development of off-shore, especially in the Arctic, there we are thinking of taking more vigorous steps forward,” Shatalov told the second session of the Russian Economic and Financial Forum in Germany.

“The idea is to support those companies that are prepared to operate off-shore, and the taxation system will be based on taxing the profit,” he said via an interpreter.

Because of the relatively high cost of drilling off shore, companies complain that taxes that hit revenues rather than profits make it unattractive.

“The taxation system should be changed in a way so that it reduces taxes related to income, but at the same time raises those taxes that are related to export profits,” Shatalov said. He added that designing such a system would be complicated.

In August, Exxon Mobil Corp and Rosneft signed an agreement to extract oil and gas from the Russian Arctic. The pact gives Exxon, the biggest U.S. oil company, access to substantial reserves in Russia, the world’s top oil producer.

Many other foreign investors, including Total of France and Statoil of Norway, have said they would be willing to develop Russian offshore Arctic deposits, but only if the tax burden is lowered.

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