Russian lawmakers give initial nod to hefty tax hike for mining, oil

MOSCOW (Reuters) - Russian lawmakers on Tuesday supported a plan to increase taxes for some mining and oil companies, as Moscow seeks to plug the gaps left by lower oil prices and the COVID-19 pandemic, while facing industry opposition and criticism of its changing rules.

FILE PHOTO: A labourer operates a bulldozer on a stockpile of coal at Vorgashorskaya mine outside the far northern city of Vorkuta, Russia September 17, 2018. REUTERS/Eduard Korniyenko/File Photo

The lawmakers, also in the first reading, backed tax breaks for certain oilfields in Western Siberia, the heartland of Russia's oil industry, with energy champion Rosneft ROSN.MM seen as the main winner.

Russia announced the plan, which is expected to bring in 340 billion roubles ($4.5 billion) a year, last week against the backdrop of a falling rouble, loans to support crisis-stricken Belarus and expectations of three years of budget deficit.

For the oil sector, the planned increase is 260 billion roubles for 2021 alone, equivalent to 3.3% of the government’s tax take in 2019 from the Russian oil and gas sector, Renaissance Capital estimates show.

“More important than the financial impact is the potential loss of credibility in the sanctity of Russian fiscal rules,” it said.

Russian oil producer Gazprom Neft, in comments sent to Reuters, said it hoped the government and industry will find a way to balance the needs of the budget and business.

Russia plans to triple the mineral extraction tax (MET) on metals and fertiliser producers, to scrap a zero MET on high-viscosity oil and get rid of a lower rate of MET for mature oilfields.

The higher tax rate will affect metals producers, including Russia's Norilsk Nickel GMKN.MM, RUSAL 0486.HK, Evraz EVRE.L, MMK MAGN.MM, NLMK NLMK.MM and Severstal CHMF.MM.

The lawmakers, just a few minutes after supporting the tax increase, also voted in the first reading for lower MET for some fields in the Khanty-Mansiisk region of Western Siberia.

This could amount to 3.83 billion roubles ($50.5 million) less tax per month for any company with fields in this region, provided the oil price exceeds the breakeven level set in the country’s budget, or $43.3 per barrel for 2021.

Neither lawmakers nor the finance ministry have said which companies will be eligible for the tax breaks. Rosneft, headed by Igor Sechin, a close ally of President Vladimir Putin, is developing the huge Priobsky oilfield in the region.

“Rosneft has managed to preserve or secure at least some tax breaks for its fields, confirming management’s skill at negotiating the politics of what is, effectively, a regulated utility,” BCS brokerage said in a note.

($1 = 75.9600 roubles)

Reporting by Darya Korsunskaya, Anastasia Lyrchikova, Olesya Astakhova and Vladimir Soldatkin; Writing by Polina Devitt and Alexander Marrow ; editing by Louise Heavens and Barbara Lewis