The Ministry of Finance Proposes a Gas Mineral Extraction Tax Increase
A draft bill from the Ministry of Finance is proposing a higher mineral extraction tax (MET) on gas. In a column for Nezavisimaya Gazeta, Valery Andrianov, an associate professor at the Financial University under the Government of the Russian Federation and a specialist at the InfoTEK analytical center, outlines what this change would mean. The proposal has already drawn attention from policymakers and industry observers alike as it moves through the early stages of the legislative process.
Under the bill, the MET on gas is set to rise from August 1, 2024, through the end of 2026. The State Duma recently gave its approval in the first reading. Andrianov notes that the additional revenue anticipated from the higher tax is already reflected in the draft federal budget submitted to the Duma. He argues that indexing gas tariffs and generating extra income provide the justification for introducing this measure.
The Ministry’s rationale centers on transferring to the budget the extra proceeds that companies accrue from tariff indexation for gas supplied to the domestic market. Andrianov emphasizes that this is money already owed to the treasury as taxes. He describes the move as a genuine tax increase that creates a mechanism for partial compensation of the financial burden, followed by an additional tax on this arrangement.
According to the expert, adopting the bill could have far-reaching consequences. He warns that the changes might not only affect gas producers but also impact ordinary consumers. The concern is that higher MET would translate into higher domestic gas prices, with the price rise then feeding the budget while shifting political risk onto producers in the process.
The plan to raise the MET involves adjusting the KCG coefficient. Andrianov states that the ministry’s proposal would alter the coefficient in a way that differs across companies. He notes that the current coefficient is uniform at 134 for all players. In the first half of 2024, the draft suggests setting it at 303 for Gazprom and 555 for independent producers. For the second half of the year, projections show 454 and 706, respectively. Beginning January 1, 2025, the figures would be 428 for Gazprom and 779 for independents. In the second half of 2025, the anticipated levels are 448 and 799, and from January 1, 2026, 464 for Gazprom and 863 for independents.
Andrianov highlights that the coefficient for independent producers would nearly double that applied to the gas monopolist, signaling a substantial shift in how tax obligations would apply across the sector. The broader implication is clear: a tiered approach to MET could reshape competitive dynamics within the gas market and influence investment decisions across both state-controlled and private players.
Observers will be watching closely to see how these changes influence gas pricing strategies, domestic supply planning, and the broader fiscal stance. As discussions continue, the government’s aim appears to be to capture additional revenue from tariff adjustments while balancing the potential impact on fuel affordability and industry stability. The evolving policy debate will likely focus on the fairness of the tax structure, its alignment with existing legislation, and the degree to which any compensatory mechanisms could mitigate financial pressure on producers and consumers alike.
In summary, the proposed MET increase for gas, coupled with a redesigned KCG coefficient, marks a significant shift in fiscal policy for the gas sector. The outcome will hinge on legislative negotiations, the financial health of gas producers, and the government’s ability to manage price expectations for households and industrial users across the broader market.