Journal of Tax Reform
Taxes and Customs Duties as Instruments for Extracting Oil Rent into the State Budget: The Case of Russia
Dmitry Yu. Fedotov 1, 2, Vitaly Yu. Burov 3
1 Baikal State University, Irkutsk, Russian Federation
2 Financial University under the Government of the Russian Federation, Moscow, Russian Federation
3 Transbaikal State University, Chita, Russian Federation
Abstract
For countries focused on the extraction and processing of natural resources, including Russia, a crucial task is to ensure the rational extraction and distribution of natural rent. The tax model applied to natural rent should facilitate its optimal allocation to the budget without undermining the motivation of resource users to invest. This study seeks to gauge the extent of oil rent extraction into the Russian budget and suggest strategies to enhance the efficacy of redistributing oil rent to the state budget. Our hypothesis proposes that export customs duties, compared to the mineral extraction tax, prove more effective in achieving the desired redistribution from resource users to the budget. To assess the extent of oil rent extraction, we devised a methodology based on calculating the oil rent generated in Russia. This method involves measuring the difference between the income generated by the oil industry and the total expenses incurred by oil sector companies. Our analysis reveals that, from 2005 to 2022, up to 87% of the oil rent generated in Russia was extracted through rent payments to the state budget. However, in recent years, the degree of oil rent extraction has decreased to 56%. This decline can be attributed to the tax maneuver initiated in Russia since 2015, entailing a reduction and eventual elimination of export customs duties, coupled with an increase in the mineral extraction tax rate. Our results indicate a diminishing effectiveness of rent-based taxation in Russia due to the reduced fiscal significance of rent payments. Furthermore, their regulatory function, designed to incentivize taxpayers for investment contributions, has weakened. These findings offer valuable insights for shaping fiscal policies and lay the groundwork for further research in this domain.
Keywords
tax, oil rent, customs duty, mineral extraction tax, tax maneuver, investments, budget
JEL classification
E62; H21References
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Acknowledgements
The research was funded through the state assignment of the Financial University under the Government of the Russian Federation.
About Authors
Dmitry Yu. Fedotov – Dr. Sci. (Econ.), Associate Professor, Professor of the Department of International Relations and Customs Affairs, Baikal State University (11 Lenin St., Irkutsk, 664003, Russian Federation); Main Researcher at the Institute for Research on Socio-Economic Transformations and Financial Policy, Financial University under the Government of the Russian Federation (49/2 Leningradsky Ave., Moscow, 125167, Russian Federation); ORCID: https://orcid.org/0000-0001-9908-802X; e-mail: fdy@inbox.ru
Vitaly Yu. Burov – Dr. Sci. (Econ.), Associate Professor, Head of the Department of Economic Theory and World Economy of Zabaikalsky State University (30 Alexandro-Zavodskaya Str., Chita, 672039, Russian Federation); https://orcid.org/0000-0001-8061-1749; e-mail: burovschool1956@yandex.ru
For citation
Fedotov D.Yu., Burov V.Yu. Taxes and Customs Duties as Instruments for Extracting Oil Rent into the State Budget: The Case of Russia. Journal of Tax Reform. 2024;10(1):19–37. doi.org/10.15826/jtr.2024.10.1.154
Article info
Received January 10, 2024; Revised February 22, 2024; Accepted March 8, 2024
DOI: https://doi.org/10.15826/jtr.2024.10.1.154
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