There is no price for Russian oil
And the methods for calculating it too
A month ago, Vladimir Putin, preoccupied with the problem of taxation of the oil industry, during a personal meeting with the Minister of Taxes and Duties Gennady Bukaev, instructed him, together with the Ministry of Economic Development, to develop a methodology for determining domestic Russian market prices for oil by December 15, 2000. Kommersant has obtained documents that the ministries sent on December 18 to the presidential administration. It follows from them that the market price for oil will not yet be set by officials, but by the market.

The Ministry of Taxation and the Ministry of Economic Development managed to compose an analytical report “Problems of taxation of the oil industry”, a letter signed by the heads of these departments Gennady Bukaev and German Gref on the same topic, as well as drafts of various legislative and regulatory acts aimed at streamlining the taxation of oil companies. It’s a paradox, but the authors actually came to the conclusion that oil workers do not cause any damage to the state. “As a result of the analysis, it was established that the use of intra-corporate prices by companies (the prices at which transactions are made within one vertically integrated company and with the help of which, as is commonly believed, oil companies evade taxes - Kommersant) does not affect the overall tax revenues to the federal budget ", the letter says.
Moreover, it turned out that the calculations of tax payments by oil companies presented by Deputy Minister of Finance Sergei Ignatiev in the summer of 2000, as the oil companies claimed, were untenable. But they were the reason for starting the fight against intra-corporate or transfer prices: “Based on actual tax accounting data, calculations were made of the total tax burden of oil companies per ton of oil produced, excluding factors that previously distorted the tax burden indicators. Increase in tax payments to the budget for the nine largest Russian oil companies significantly exceeds the growth rate of world oil prices,” the authors of the documents conclude. They recognize the use of transfer prices as completely legal and, moreover, believe that these prices help to carry out “financial management of the company’s activities” and “carry out its own investment policy.”
Nevertheless, in order not to completely disappoint the president, the oil workers were still charged. Basically, they boil down to the fact that, using intra-corporate prices, oil companies “optimize their taxation” to the detriment of regional and local budgets. However, there is no secret in this. It is indeed more profitable for oil workers to artificially transfer the bulk of taxes to those regions where they can receive the most favorable tax breaks. As always, the root of all evil was considered to be ZATO, where, according to the authors, all the profits of oil workers are transferred. True, in fact, back in 1998, ZATOs lost the right to provide federal tax benefits and are now virtually no different from any other region. Nevertheless, officials from the Ministry of Taxation and the Ministry of Economic Development proposed to repeat this legislatively once again in the law “On Closed Administrative Tolls” (now this is established annually by the budget law).
The second area in which oil workers, according to the authors, are successfully fighting the tax authorities is artificially lowering export prices. To solve this problem, a method for comparing export contract prices with world prices was specially developed. However, nothing prevents customs officers or, for example, tax officials themselves from comparing prices even now.
And finally, the third charge is “criminal tax evasion using shell companies in the sale of petroleum products on the domestic market.” The latter outraged the oil workers the most. “Let the authorities deal better with shell companies in other industries. In the oil business, at least by large companies, such schemes are not used,” said a representative of one of the large oil companies.
One way or another, the task of the President of the Ministry of Taxation and the Ministry of Economic Development failed - officials never came up with a method for calculating domestic market prices for oil. The best they could offer was to set so-called reference prices. That is, in fact, introduce state regulation of oil prices, which, most likely, will ultimately lead not to an increase in the collection of oil taxes, but to a sharp increase in gasoline prices and subsequent inflation.

GALINA Kommersant-LYAPUNOVA

Newspaper "Kommersant" No. 239 dated December 21, 2000, page 1