Russia’s Finance Ministry is proposing to increase the multiple that is applied to the base rate of mineral extraction tax (MET) for potash and phosphate fertilizers, Bloomberg reported, citing unnamed sources familiar with the current draft of the proposal.
The Finance Ministry proposes to raise the multiple to 8.75 in 2022 from the current 3.5 coefficient. The coefficient is the multiple that Russian companies are required to pay on top of the base tax rate, and is set annually.
The ministry has sent a draft of the bill to the government for discussion, where it could be modified, according to Russian daily newspaper Vedomosti.
An increase in the mineral extraction tax for potash and phosphate fertilizer producers by 2.5 times is unlikely to have a significant impact on their production, according to Otkritie Broker commodity markets analyst Oksana Lukicheva, cited in the newspaper report. She said fertilizer prices are now quite high and will compensate for the increase in production costs.
Russia’s government also has been looking at how to implement “a floating” mineral extraction tax rate for producers of fertilizers and metals linked to global prices (GM Sept. 3, p. 31).
In another move to increase the fiscal returns from Russian minerals and metals companies, the government is also considering a differentiated profit tax (GM Sept. 17, p. 30).
The profit tax will be higher if the company’s dividend payout over five years exceeds investments for the period, with a link to amortization, according to a Bloomberg report this week. Thus, the profit tax will be higher for companies who prioritize dividend payouts over capital investments.
According to the report, the differentiated profit tax may be applied to all Russian companies, except for state-owned concerns and companies that pay less than RUB5 billion ($68 million) in the five-year period.