FSUOGM: Russia expands profit-based oil tax

Russia plans to transfer around 25-30% of its oilfields to its new excess profit tax (EPT) system by the end of the year, Deputy Finance Minister Alexei Sazanov said on July 30.

Moscow launched the EPT system in 2019, envisaging it as an eventual replacement of the export duties and mineral extraction tax (MET) that has long served as the primary way that Russia collects tax receipts from its oil resources. The finance ministry implemented a rapid overhaul of oil taxation that stripped many projects of the exemptions from export duties and MET they enjoyed. This has prompted operators to move more fields over to the EPT system, to reduce their taxable base.

“Quite a lot of fields have already been transferred to the EPT,” Sazanov told reporters at TASS. “I think that by the end of this year, taking into account the transfer of depleted fields to the EPT, we can expect that about 25-30% of fields will come under the system.”

The finance ministry was initially no fan of EPT, with Sazanov himself estimating last year that the system had cost the Russian budget some RUB213bn ($3.05bn) since its trial launch in 2019. He described its introduction as the biggest mistake in his career.

As part of its taxation overhaul last year, however, the finance ministry tweaked the system to ensure that it generated more tax payments, and is now happy to see more projects transferred to it.