Russian government backs profit-based oil tax law, says more work needed

MOSCOW: Russia's government has approved the concept of a new profit-based tax for the oil sector but said more work was needed on a law to introduce such a system, it said in a statement on Saturday.

Oil companies have lobbied for such a tax for years, arguing it would encourage investment in new fields. But the idea has faced opposition from the finance ministry, which fears that oil companies would exploit such a tax to lower their tax burden.

"The government of the Russian Federation supports the law in concept, but at the same time more work is needed," the statement said.

Russian officials said in June that the government favoured testing a new profit-based oil tax through a pilot scheme that would apply to selected fields.

Oil companies are currently taxed mainly in two ways: a Mineral Extraction Tax based on production, and export duties. Both of these are calculated with reference to international oil prices rather than profitability.

The government statement said that, in particular, more work was needed on the criteria for choosing oil fields to be included in the pilot scheme, as well as giving the government powers to confirm the list of these fields.