October 7, 2016 / 2:33 PM / 3 years ago

Russia's FinMin proposes higher extraction tax on oil

MOSCOW, Oct 6 (Reuters) - Russia’s Finance Ministry has proposed bumping up the Mineral Extraction Tax (MET)on oil by changing the way it calculates it to help reduce the country’s budget deficit according to finance ministry documents.

Weak oil prices have added to pressure on Russia’s public finances from Western sanctions over the Ukraine conflict, and on Thursday the government approved an amended 2016 budget that envisages a larger deficit because of the low prices.

Under the formula proposals, the MET rate would rise by an extra 306 roubles per tonne in 2017, by 357 roubles in 2018 and 428 roubles in 2019, the ministry said in its draft tax policy guidelines for the next three years.

Reuters estimates that the increase could replenish the budget by more than 160 billion roubles ($2.58 billion).

The ministry said the document had been submitted to the government and the State Duma lower house of parliament for approval.

The existing MET formula is calculated at an average of the monthly price for Urals crude oil and rouble rate per dollar.

Under the current MET formula, in 2017, the MET rate on oil is expected to rise to 919 roubles per tonne from 857 roubles.

Given the current Urals crude prices and the rouble/dollar rate, the new formula could mean an MET rate increase of around 434 roubles per tonne in January 2017, according to Reuters’ calculation.

The ministry has declined to comment on the issue. ($1 = 62.0305 roubles) (Reporting by Maxim Nazarov, translated by Tatyana Vodyanina; editing by Susan Thomas)

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