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Russia looks at one-off big business tax as oil revenues drop

Russia looks at one-off big business tax as oil revenues drop
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By Reuters
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By Darya Korsunskaya and Caleb Davis

MOSCOW - Russia is looking at introducing a one-off, voluntary windfall tax on big business, an official said on Wednesday, as the country's monthly revenues from oil and gas drop to their lowest levels since 2020.

Three sources familiar with the discussions later told Reuters that authorities were considering a one-off budget contribution from businesses of about 200-250 billion roubles ($2.8-$3.5 billion).

The price of Russian oil has fallen around 20% since early December, when Western countries set a $60 price cap on Russian oil exports. Urals oil is currently trading at about $56 a barrel, much lower than the $70 needed to balance the budget.

The finance ministry said last week that it was trebling its daily sales of foreign currency to cover the shortfall, but analysts have warned that tax rises are inevitable if Russia is going to continue ramping up defence spending.

"A voluntary contribution from business... is being discussed, a one-off contribution," First Deputy Prime Minister Andrei Belousov said, in comments published by Russian news agencies.

"The fact is that last year's financial results were very good and many companies, especially in the first half of the year... for the first three quarters, had results that were sharply higher," he said.

'NOT A TAX INCREASE'

According to The Bell news outlet, the idea of a windfall tax has drawn criticism from at least one of Russia's largest business unions, which offered a counter-proposal to raise corporate income tax rates by 0.5%.

The finance ministry issued a public rebuttal of the business union's suggestion, arguing that while the basic parameters of the tax system would remain unchanged this year, companies had made excess profits over the last two years and this would need to be looked at.

"This is not a tax increase. It is a windfall tax, a concept in tax practice known as a one-time tax collection," Belousov said, adding that the measure would be voluntary in nature.

However, one of the sources who spoke to Reuters said it was unlikely that any company would be prepared to refuse payment.

Unless prices for Russian oil recover in the coming months, Moscow's budget deficit could hit 5.5 trillion roubles ($76.5 billion) this year, equivalent to 3.8% of GDP, analysts at Credit Bank of Moscow warned last week.

The government has already sharply increased the tax burden on the oil and gas industry for 2023-2025, the biggest such rises in its history, as Russia's "special military operation" in Ukraine grinds on towards its first anniversary.

Western sanctions over the conflict have upended some sectors of Russia's economy, cutting its biggest banks from the SWIFT financial network, curbing its access to technology and restricting its ability to export oil.

While the government and central bank have acknowledged "difficulties", Moscow says its economy is resilient and that sanctions have boomeranged against the West by driving up inflation and energy prices.

($1 = 71.90 roubles)

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