Kasyanov Approves Six-Fold Increase In Gas Export Tax

by Tatiana Smolenskaya, Tax-News.com, Moscow

22 August 2003

Russian Prime Minister Mikhail Kasyanov this week signed a resolution that will increase export duty on natural gas from 5% to 30%, a government statement has revealed.

The move has received a negative reaction on the local markets, and some analysts have predicted the extra tax will cost GazProm as much as $1.5 billion in annual revenue.

The decision could also have ramifications beyond Russia's borders as the energy giant currently supplies Europe with 25% of its gas demand equating to 130 billion cubic metres per year. At present, export prices vary between $80 and $140 per 1,000 cubic metres.

The plan has come as no surprise to many observers after the firm reduced its tax bill by $800 million between 2002 and 2003 by utilising accelerated depreciation on its network of pipelines. "The measure will more than offset the gains from 2002 and 2003," observed Troika analyst Kaha Kiknavelidze in a Reuters report.

The new tax is expected to commence in 2004, though it is unclear whether it will extend to gas imported from Central Asia and re-exported to Europe.

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