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Moscow Considering Windfall Tax to Cover Plunging Oil Revenues

Moscow is considering a one-time windfall tax on large corporations as a stop-gap measure for dangerously declining oil and gas revenues that have left the country with a $25-billion deficit

According to Russian state news agency RIA Novosti, Moscow is discussing a “voluntary”, one-off contribution from big businesses. 

Russian-language news outlet The Bell cited unnamed sources familiar with the discussions as saying that a proposal and counterproposal have been tabled so far. The first proposal comes from Russian Prime Minister Mikhail Mishustin, calling for members of the Russian Union of Industrialists and Entrepreneurs (RSPP) to pay a one-off amount of $2.8 billion to government coffers. The counterproposal from RSPP calls for a 0.5% increase in the existing 20% income tax on companies. 

The Finance Ministry says it is not considering an increase in income taxes. 

"This is not a tax increase. It is a windfall tax, a concept in tax practice known as a one-time tax collection," Deputy Prime Minister Andrei Belousov was quoted as saying, emphasizing that the contribution would be voluntary.

Russia’s budget revenues from oil and gas plunged in January by 46% compared to the same month last year due to the sanctions on Russian oil exports, which led to a slump in the price of Russia’s flagship crude grade.

In January 2023, the price of Russia’s flagship Urals grade averaged 42% lower than in the same month of 2022, as its discount to Brent Crude grew wider following the EU embargo and the G7 price cap, which came into effect on December 5. The average price of Urals in January, at $49.48 per barrel, was 1.7 times lower than in January 2022, when it averaged $85.64 per barrel, Russia’s Finance Ministry said earlier this week. 

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on February 08 2023 said:
    If this is true, then Russia is in good company with the United States, the UK and virtually all the EU countries who have already imposed a windfall tax on their oil companies.

    However, the repetitive unsubstantiated claims by authors of articles posted by oilprice.com isn’t only becoming tedious but also sounding as if all of them are reading from one hymn sheet prepared for them as a deliberate disinformation drive against Russia. They have no proofs to support their unsubstantiated claims but I do. Here it is.

    The fundamentals that prevailed in 2022 are still with us in 2023. Moreover, Russia had a current account surplus of $228 bn and a trade balance surplus of $290 bn in 2022. Russian crude oil and petroleum product exports averaged 7.8 million barrels a day (mbd) in 2022 with gas exports maintaining the same level of 2022. This level of exports hasn’t declined in any form or shape in January 2023 with Brent crude price today at $85.06 a barrel compared with $85.34 in January 2022.

    If both the exports and the price are the same how could a budget deficit of $25 bn emerge in January?

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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