Will Russian Finance Ministry cancel tax benefits for oil industry?

Russia's Finance Ministry is preparing tax reform for the oil industry, which may lead to the abolition of privileges for certain oil fields, Reuters agency reports, citing sources in the Ministry of Finance and the Ministry of Energy of the country and a draft copy of proposals.

The agency's interlocutors did not specify how many oil fields will be affected by this reform: it can affect all the Greenfields (new oil fields), as well as the already existing fields, which already receive various tax benefits.

In total, various tax benefits currently apply to 198 oil fields in Russia, RBC reports.

The cancellation of tax benefits is part of a wider reform on tax administration of oilmen, which involves the introduction of a tax on added revenue in addition to the already-existing tax on mineral extraction and export duties.

The Russian Finance Ministry has been in favor of the abolition of privileges and their replacement with the tax on added revenue for a long time, which was stressed a year ago by the director of the Department of Tax and Customs Tariff Policy of the Finance Ministry, Ilya Trunin.

"We do not understand on what are these benefits are provided. We see that the taxpayer arrives, provides an application, that he has a very low yield from this field, it is impossible to check anything, but it is necessary to provide benefits for export duty. The Energy Ministry is unable to maintain control over the budget of the project ... they are a supervisory authority in the field of politics. Everything works extremely inefficiently. If this mechanism will be given to the tax service in the form of a new tax, a tax on added revenue, it would be correct," he said.

The tax on mineral extraction for oil companies and the export duty on oil and oil products yielded 6.6 trillion rubles (87 billion dollars) to the budget in 2014, or 46% of revenues. It is still unclear how much tax the new reform will bring, because its discussion is not finished yet, the sources explained.