The Raise of Excise Tax Rates Will Hamper the Tax Maneuver

Abstract

In 2013–2014, the government undertook a reform of the taxation system applied in the oil industry, which was called ‘the tax maneuver’ by the expert community. Essentially, the reform is aimed at equalizing the domestic and world prices of oil (less transport costs): the reduced rates of export duties and excise taxes on petroleum products will be offset by the correspondingly increased rate of the mineral extraction tax (MET) (the revenues generated by the new MET are expected to be approximately twice as high as the lost amount of export duty). As a result of the tax maneuver, the subsidizing of the domestic oil-refining sector, which is producing negative value added in terms of world prices, should be scaled down. When the domestic and world prices of oil and petroleum products become equal, the prices of the latter will soar in the domestic market, if excise taxes are not reduced by way of compensation. However, the excise taxes on petroleum products are continually being raised, and this may forestall the implementation of the entire reform in the nearest future.