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UPDATE: Russia Seeking To Raise $33 Billion Through Tax Hikes
Jul 22,2010 09:34CST
industry news
Source:SMM

MOSCOW, July 22 -- Russia's Finance Ministry is seeking to raise 1 trillion rubles ($33 billion) for the federal budget in the next three years, in part by raising taxes on oil, gas and copper.

The measures--which include a 61% hike in the mineral extraction tax on natural gas this year--will add RUB200 billion of additional revenue to the budget in 2011, an additional RUB370 billion in 2012, and RUB500 billion in 2013, the ministry said in a statement Wednesday.

Prime Minister Vladimir Putin has called for the country's first budget deficit in a decade to be eradicated by 2015. Russia's budget gap this year is forecasted to be $77 billion, or 5.4% of gross domestic product this year, although it could be decreased by higher than expected oil prices.

The Finance Ministry's proposal calls for the tax to be hiked by 61% in 2011, 6% in 2012 and 5.4% in 2013. The ministry also proposes slapping a 10% export duty on copper from 2011 or before, as well as a tax for nickel starting at 5% of the market price above a minimum of $12,000 per metric ton.

Russia has sought for ways to fill its budget deficit in recent months. A proposed tax hike on alcohol that would have tripled the minimum price of vodka was nixed because the government feared it would stir public discontent and lead to a boost in moonshine manufacturing. Other schemes, including a proposal to reduce the country's 900,000-strong army of bureaucrats, have won more support.

Higher export duties on nickel and copper could reduce Norilsk Nickel's (GMKN.RS) earnings before interest, taxes, depreciation and amortization by up to $800 million a year, Citigroup said, assuming a 20% export duty on nickel and a 10% duty on copper.

"We see the news as potentially negative for the stock, at least until there's more clarity on the exact method for the variable nickel export duty calculation," Citi said.

Norilsk Nickel traded +2.5% at RUB4950.22 at 1249 GMT.
 

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