Russian oil companies complained about the decline in profitability of the fuel sales business

Russian oil companies have complained about an increase in taxes on the industry, as a result of which their fuel sales business is at a loss. The discussion is related to the increase in fuel prices in September and the discussion between the Ministry of Finance and the Ministry of Energy about which sources will be used to compensate for budget expenses for the payment of the damper.

Large oil companies are dissatisfied with the high share of taxes in the cost of fuel, which, in their opinion, leads to losses in its production and retail trade. Thus, on October 4, the head of the State Duma Energy Committee, Pavel Zavalny, sent a request to oil companies asking them to assess their tax burden and the impact of the “tax component” on the price of fuel. The discussion arose in the context of a sharp rise in fuel prices in September and radical measures by the government, which banned the export of gasoline and diesel fuel from September 21 (with some subsequent relaxations).

In response, the head of Tatneft, Nail Maganov (the company owns the TANECO refinery, which processed 16 million tons of oil in 2022), pointed out that the increase in the tax burden on production and refining leads to a reduction in the profits of the retail business (taking into account the regulation of fuel prices by the state), in due to which this business becomes unattractive for investment and development as part of large oil companies.

The top manager indicated that in September, in the structure of the retail price for AI-92 and diesel fuel, the tax burden was 77.2% (together with transportation costs – 85.7%) and 77.3%, respectively.

At the same time, the company receives a loss of 10 rubles from the production and sale of AI-92 and diesel fuel within the country. and 3 rub. per liter respectively. The total tax burden, according to company estimates, increased from 52% of revenue in 2018 to 61% in 2023.

Surgutneftegaz describes the situation even more dramatically in its response letter to the State Duma, whose tax burden in 2022–2023 “remains at an extremely high level, significantly exceeding the level of other industries, and reaches more than 67%.” According to estimates of the company, which has the Kirishi Oil Refinery in the Leningrad Region, in the oil refining sector the tax burden, taking into account the current rates of VAT, excise taxes, as well as rent payments on oil (MET, AIT), in September-October amounted to 110% of the sales price of AI gasoline. 92 and 102% of the price of diesel fuel. Thus, the letter says, the sales price of fuel is not enough to cover the full amount of rental taxes, excise duty and VAT.

In the retail segment, according to Surgutneftegaz, the tax burden on gasoline exceeds 103% of the sales price, and on diesel fuel – 91%.

Since 2018, the government has been carrying out a tax maneuver, the meaning of which is to gradually reduce the export duty on oil and simultaneously increase the mineral extraction tax. The duty, which will disappear completely in 2024, reduced the price of oil on the domestic market and served as an indirect subsidy for refineries. To partly compensate for the loss of this subsidy, the government provided companies with a reverse oil excise tax and a fuel damper, the payments of which are financed by taxes on oil production. Although the authorities initially wanted to cut the damper this year, in October they decided to keep it, and now the Ministry of Finance and the Ministry of Energy are discussing which sources to finance it from. Previously, in such cases, the mineral extraction tax on oil was always increased.

Over the past year, about a third of the amount collected in the form of mineral extraction tax and duties was returned to the industry in the form of an excise tax on oil raw materials (taking into account the damper and investment coefficients), reminds independent expert Boris Lutset, noting that these revenues are enough to cover operating and investment expenses. He also notes that back in the spring the Ministry of Finance estimated the refining margin in Russia at 8 thousand rubles. per ton, which is “very good.” At the same time, taxes in the industry are progressive – with a rising oil price and a weakening ruble, the nominal tax burden continues to increase and is distributed unevenly between companies depending on the volume of refining, the size of the damper and the number of fields with mineral extraction tax benefits. Therefore, Boris Lutset believes that investment opportunities depend not on the share of taxes in the price of fuel for a certain specific period, but on cash flows from the budget in the form of mineral extraction tax benefits and processing subsidies.

Dmitry Kozlov