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Russia wants to reduce the export tax on crude oil and petroleum products to zero.

Apr 29, 2019

The Russian government passed the decree twice successively in July and August 2018 to reform the taxes of its domestic oil industry. The general principle is to reduce the export tax on crude oil and petroleum products until to zero, and increase the oil exploitation tax in equal amounts. Although this tax reform will increase the price of domestic refined oil products in Russia in the short term, and the new tax refund system and dumping factor will make its oil tax system more complicated, in the long run, the new tax system will help increase government revenue and the competitiveness of Russian oil in the international market, can also promote the upgrading of its domestic refining industry, which does more good than harm to both the Russian government and the oil industry.

I. Eliminating export tariffs is not on the spur of the moment.
II. The tax reform is strong.
III. The positive impacts far exceed the negative ones.
(1) The new tax system increases government revenue while reducing the financial burden.
(2) It will increase the competitiveness of Russian oil, oil products and related companies.
(3) It can offset the tax losses of Russian oil exports caused by the low tariffs of the Eurasian Economic Union.

Without doubt, this reform has adverse impacts on Russia too. On the one hand, this tax reform introduced many new calculation formulas and tax measures, making the tax system of the Russian oil industry more complicated. On the other hand, Russian new oil tax system has an obvious "self-interest" color, which may affect Russia's relations with its some trading partners, especially Belarus, Kazakhstan, etc., and will increase the probability of local divergences of oil import and export.