Priorities for improving taxation in oil industry in Russia

Abstract

Background/Objectives: The study is dedicated to analyzing taxation in oil industry that is one of the principal instruments of governmental regulation in subsoil resource control along with subsurface resource management, investment and antitrust policies. Methods/Statistical Analysis: While studying taxation in oil industry, statistical methods have been applied together with the methods of strategic and comparative analysis and systemic approach. Theoretical and methodological foundations of the study are represented by the investigations of domestic and foreign authors, Russian legislative and regulatory instruments relating to taxation problems, statistical and reporting data of the oil companies, the State Statistics Service and the Federal Tax Service of the Russian Federation. Findings: Basic trends and issues in developing the taxation system in oil industry in Russia have been identified. The priorities for its improvement have been suggested. Studying foreign practices of oil industry taxation, stages of developing tax regulations in Russian oil industry, key characteristics of modern tax system made it possible to identify the principal problems of taxation among which several major issues can be highlighted: The lack of tax incentives for the companies applying innovative technologies; absence of differential approach to calculating tax payments depending on the stage of the field development and tax advantages for the companies undertaking prospecting and exploration activities; tax distribution between the budgets; frequent amendments introduced to taxation schemes. These challenges make it difficult for the oil companies to elaborate and implement any long-term development strategy. In addition, the oil companies fail to take into account the changing business environment in the course of calculating tax payments, particularly, volatility of oil prices under current conditions and differences in the companies' export orientated businesses. Application/Improvements: Some measures have been suggested to improve efficiency. The results of the study have practical significance for developing the system of economic regulations in oil industry.