The Ministry of Finance is thinking about increasing the mineral extraction tax for coal
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The coal industry, which was only exempted from the exchange rate export duty in January, again faces the threat of an increase in the tax burden. The Ministry of Finance wants to compensate for the lost budget revenues from the abolition of duties and, in connection with this, is considering an increase in the mineral extraction tax for coal. It is still unclear how exactly the tax increase mechanism will be structured. At the same time, external prices for Russian coal are falling, which has already made the export of thermal coal from Kuzbass unprofitable in most directions.
The Ministry of Finance is considering the possibility of increasing the mineral extraction tax on coal, several sources in the industry told Kommersant and were confirmed by the ministry. “Indeed, the Ministry of Finance is working on this. Lost budget revenues must be compensated through the mineral extraction tax,” the press service of the Ministry of Finance told Kommersant. According to one of the sources, the increased mineral extraction tax should replace the exchange rate export duty, which was abolished at the end of 2023 with the resistance of the Ministry of Finance. It is still unclear by how much the mineral extraction tax will be increased and how exactly. The coal companies did not provide comments.
In recent years, the Russian government has increased the tax burden on the mining and metallurgical industry in general and coal miners in particular several times. Since the beginning of 2022, the mineral extraction tax on coking coal (used in metallurgy) has been linked to the global market: the rate is set at 1.5% of the average coal price in accordance with the SGX TSI FOB Australia Premium Coking Coal index, whereas previously it was fixed at in the amount of 57 rubles. per ton. At the same time, the idea of introducing export duties on coal, including thermal coal, if the price exceeds $150 per ton at the port of shipment was discussed.
As a result, tax revenues from the Russian coal industry doubled in 2022, to 360 billion rubles. In 2023, taxes also increased, but temporarily: from January 1 to March 31. The mineral extraction tax for anthracite, coking and thermal coal increased to 380 rubles. per ton, which should have allowed an additional 30 billion rubles to be raised into the budget.
Finally, in the fall of 2023, coal, along with most other goods, was subject to an exchange rate export duty of 4–7%, depending on the ruble exchange rate. In November 2023, the Kuzbass government estimated the annual losses of coal companies in the region from the introduction of exchange rates at 82.6–174.2 billion rubles.
The first deputy chairman of the Kuzbass government, Igor Malakhov, said that as a result of the introduction of duties, revenues from the income tax of coal companies (credited to regional budgets) will decrease; the lost amount could amount to 14–29 billion rubles. per year only for the Kemerovo region.
Since January, coal, at the insistence of the Ministry of Industry and Trade, has been exempted from export duties, but now the Ministry of Finance wants to compensate for the shortfall in budget revenues, which could amount to 150 billion rubles. per year at an exchange rate of 90 rubles/$.
The “Main Directions of Budget, Tax and Customs Tariff Policy for 2024–2026,” published on the ministry’s website, states that the tax burden in the coal industry is the lowest in the mining and metallurgical sector. Thus, the share of rent taxes in ferrous metallurgy is 10%, in non-ferrous and precious metals – 15%, in coal – 2%. At the same time, the profitability of the industries compared by the Ministry of Finance is completely different.
Now the export of Kuzbass coal through Western ports is unprofitable (see Kommersant, January 17). Coal production in Kuzbass in 2023 fell by 4%, to 214.2 million tons, exports – by 5%, to 114 million tons, the regional Ministry of Coal Industry reported. This year, according to the forecasts of the Kuzbass authorities, prices for energy coal will decrease by 12.5%, for coking coal – by 15%.
Coal taxation can be made dependent on prices, says independent industrial expert Maxim Shaposhnikov. The mineral extraction tax on thermal coal at a price of less than $100 per ton on an FOB basis can be left at the current level, and if the price rises by $25–30, the mineral extraction tax can be increased by 3%. The cut-off cost for coking coal could be $120 per tonne with the same escalation mechanism.
In this case, coal miners will have to pay an additional 30 billion to 150 billion rubles. in case of successful conditions. Such a mechanism, the analyst believes, will make it possible not to ruin the industry and at the same time replenish the budget when the market situation improves.
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