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Tuesday, October 25, 2016

The excise tax on gasoline is tied to the dollar

The FAS has proposed to change excise rates on fuel every month, it is happening now with customs duties and tax on mineral extraction (met). For this excise duty are going to link to a number of indicators: the price of Urals oil on the wholesale exchange in Rotterdam the previous month, the average exchange rate of the ruble to the dollar. If the innovation is approved by the government, the price of gasoline and diesel fuel even more will depend on market conditions. And, most likely, they will grow.

photo: Kirill Iskoldsky

Revenues from Russian oil exports in January–July 2016 fell 30% to $39.4 billion In the search for new sources of money and the struggle with the budget deficit, the government seems to have decided to turn to the domestic reserves. And change the formula for setting excise duties on fuel. “While the excise tax, unfortunately, change is unpredictable, and occasionally simultaneously, is either growth, or decline, — said Deputy head of FAS Anatoly Golomolzin. And it is difficult to forecast the magnitude, however, this factor can have a significant impact on the levels and dynamics of prices”.

As you know, this year the rate of excise duty on petrol and diesel have been increased twice: in January and April. Petrol excise duty is currently 10 and 13 thousand rubles per ton of fuel, and the excise tax on diesel fuel — 5.29 thousand RUB per ton. If the count per liter of fuel, the total increase amounted to RUB 3 gasoline and 2 diesel RUB.

While the FAS of Russia noted that the current situation in the oil market remains stable. “As of mid-September 2016 the diesel prices were at the beginning of the year, there was zero growth on diesel fuel. As for gasoline — AI-92 and AI-95 — we are also behind the rate of inflation,” summed up Anatoly Golomolzin.

The majority of respondents “MK” experts say that by the end of the year, most likely, the price level will not exceed the Ministry of economic development projected inflation at 6.5%.

Speaking about the new formula, the head of FAS on the regulation of FEC Dmitry Makhonin said that “the level of tax rates in excise duties on fuel should take into account the forecasted growth of prices in the domestic market, calculated on the basis of the principle of “net back” at a certain level of oil prices, sustainable prices ratio of oil and fuel, as well as the calculated values of the export duty and mineral extraction tax. The EU regulatory mechanism for flexible changes in excise duties on fuel will encourage the production of better autofuel and reduce the impact of fluctuations in world prices on the domestic market.

The FAS are confident that the excise tax should be tied to the cost of Urals oil. That is, the excise tax could vary monthly according to the same principles as changing the severance tax and customs duties.

Last week, the proposal was considered at a meeting on energy with Deputy Prime Minister Arkady Dvorkovich. While the issue is being worked out with other agencies and oil companies.

If innovations are approved, the price of gasoline and diesel fuel to a much greater extent than now, will be tied to the world situation. While the representatives of the FAS did not disclose how much. For example, the service declined to say what will be the size of the excise tax, if Urals falls to $35 per barrel, or, conversely, will rise to $50. It is the latter figure is included in the 2016 budget as the average cost of Urals with a deficit of 3% of GDP.

However, Anatoly Golomolzin insists that the result of such a maneuver revenues will grow. Means, will increase fuel prices that will inevitably fall on the shoulders of ordinary citizens and businesses.


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