Abstract
A large part of government revenues in Russia comes from royalties and export taxes on crude oil, oil products, and gas. Recently, the Russian government has considered reducing export taxes on crude oil and oil products compensated by an increase in the royalty on crude oil. The objective of the paper is to analyse the economy-wide effects of this proposal. Moreover, a hypothetical replacement of export taxes and royalties with a pure rent tax is analysed. A static, single-country, multi-sector computable generation equilibrium (CGE) model is employed. The primary findings are as follows. A replacement of export taxes on crude oil and oil products with a royalty on crude oil provides substantial allocative efficiency gains, but this policy is not a superior one. Welfare could be substantially improved when the export taxes and royalty are replaced with a pure rent tax that can be implemented in the form of a cash-flow tax. On the negative side, reducing export taxes on crude oil and oil products results in a strong appreciation of the currency. As a result, domestic producers become less competitive in domestic markets, and there is a massive increase in import demand.
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