FINANCE MINISTRY PROPOSES TAXING OIL PRODUCTION PROFITS

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MOSCOW, October 13 (RIA Novosti) - The Finance Ministry thinks it is necessary to tax the profits from oil production, director of the ministry's tax and customs tariff policy department Mikhail Motorin said at a tax conference in Moscow.

He said an appropriate draft law was already in the State Duma (the lower house of parliament).

"In that version, it is a tax on an additional income from the production of hydrocarbons," Mr. Motorin said.

"This tax will stimulate investments into the development of new deposits," he noted.

He explained that the tax would be raised only when the initial expenditures on the development of a deposit are covered by earned revenue.

Speaking about the changes in the tax legislation, Mr. Motorin noted that they would not only concern proper taxes, but also other payments.

He said he supported differentiating the fiscal load. "Differentiation of the fiscal load is necessary of course, but it should be divided between a number of taxes," Mr. Motorin said.

In his opinion, there should be two systems of differentiating the tax on producing minerals.

"The system must be more complicated," he said, "one system for old deposits and another for the deposits to be developed." He said that there were 220 systems of taxing the oil industry in the world and several systems in one country.

According to Mr. Motorin, eventually the correlation between this tax and the export duty will change: the export duty will be lowered, while the main fiscal load will be placed on the minerals production tax. He did not exclude that eventually the export duty on oil products would be annulled, but that it would not happen in the next year or two.

Mr. Motorin also said that in 2005, the government would formulate a system of taxing the oil industry designed to preserve oil production levels.

"In 2005, we must make decisions which will determine the taxation system for the oil industry for the next decades," he said.

"It is necessary to prevent drops in oil production after 2010-2015," Mr. Motorin added.

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