Russia raises income tax on LNG exporters
Russia has raised the tax rate on LNG exporters from 20 to 34% for the 2023-2025 period, in a bid to replenish budget funds that have been expended on its costly war in Ukraine, and hit by sanctions and other political fallout from the conflict.
The Russian State Duma's committee on budget and taxes approved amendments to the tax code to implement the increase, which will only affect companies that began exporting LNG before the end of this year. This means that it will apply to both the Gazprom-led Sakhalin-2 project in the Far East and the Novatek-run Yamal LNG terminal in the Arctic.
Gazprom's small-scale Portovaya LNG plant in northwest Russia will also be affected, and Novatek's even smaller Cryogas-Vysotsk facility in the same area.
The hike in LNG tax comes after Russia's finance ministry was reported by Moscow-based Kommersant in September to be considering an increase in taxation on all energy exports, in a bid to raise around 1.4 trillion ($50bn) in 2023. The finance ministry projects that the tax on LNG supplies alone will bring in an extra 200bn rubles ($3.25bn) in government revenues next year.
Russian oil and gas companies already pay some of the highest rates of tax in the world, and so the further hike could cause investment to suffer. Some Russian oil and gas companies are enjoying record profits thanks to the global energy crisis, but the exchange rate for the ruble, kept strong through government controls, has offset some of the impact.