VYGON Consulting study “Tax Reform in Oil Sector: Focal Points”

Jan 26, 2017

Today the oil taxation system is standing on the verge of changes. The Main Tax Policy Directions for 2017 and for 2018/2019 Planning Period paper (“ONNP”) offers an option to activate the profit-based tax in oil upstream sector (“NDD”) for pilot projects and remove the export duties completely (as a tax reform option).

However, the ONNP paper only sets business targets over a three-year budgetary planning period. It is certainly insufficient for an industry where the exploration phase lasts from 5 to 10 years, and production more than 20 years. Furthermore, the ONNP paper fails to cover some crucial settings of the future tax system: what should the compensation mechanisms be for lifting the customs duties for oil refineries; how will the NDD scaling be applied; what will happen with MET and customs duty reliefs?

The tax policy should be more systematic to give investors clear and credible investment signals.

Our new study brings a strategic vision of the future oil taxation configuration that would solve the performance targets.

Managing Director
Director of Business Development
Chief Economist