Kazakh Ministry of Energy and Mineral Resources has come with an offer to impose oil export duties starting from January 1, 2009 on subsoil users, who are not enjoying a stable tax regime under their contracts, Interfax-Kazakhstan reports.
"Subsoil use contracts could be classified into three categories: subsoil use contracts stipulating fixed customs payments; the contracts that could be interpreted as not providing a total stability in terms of export customs duties, this category still enjoys stable tax regulations, but is not liable to stable export customs duties though; and the last category that is not subject to stable customs charges,” Energy Minister Sauat Mynbaev told the government in Astana on Tuesday.
"An attempt to impose export customs duties on all three categories of subsoil users could lead to a wide-scale confrontation with certain repercussions. These are the things that we all could live without. I think, that we could levy export customs duties on the third category of subsoil users only and hold individual negotiations on the matter with the rest, “ Mynbaev said.
According to Mynbaev, some subsoil users might not be subject to export customs duties in the end.
"For instance, the North-Caspian project talks aimed at restoring the balance of Kazakhstan’s economic interests has been already finalized,” he said.
"What possible oil amounts we might expect, if we impose export duties on the third category of subsoil users only? The answer is 27 ml tons of oil. The owners of the assessed oil amount will be facing two options: exports of hydrocarbons but with regard to the imposed customs duties or an oil supply to the domestic market. That volume of oil, if supplied to the domestic market, will ensure competition and create a price gap between the global and domestic markets,” the Minister added.
"Therefore, the action plan is to impose export duties starting from January 1, 2009, but with the emphasis that those subsoil users liable to no such duties by the legislation will be exempt of them,” Mynbaev said. He, however, added that by the indicated date “those subsoil contracts that make it impossible for imposing a customs duty should be singled out.”
Prime Minister Karim Masimov has approved of the proposal and offered his Cabinet to support it as well.
The Russian approach is deemed the most suitable for imposing the exports duty, Mynbaev said. “First, the benchmark oil price is set for the customs duty at zero. "If the oil price raises the export customs duty is calculated as a percentage of the price margin between the global price and the benchmark price,” he said.
"At the equal profitability of domestic and export markets with the forecasted oil price for the next year standing at 60 dollars per barrel, an oil customs duty could make 103.4 dollars per ton,” the Minister said. “If the oil price rises to 88 dollars per barrel, as its stands now, an oil customs duty will total 173.8 dollars per ton," Mynbaev said.
"Budget net revenues will amount to either $1.3 bl dollars or $2.2 bl under the second price scenario,” Mynbaev said.
"The given figures are budget net revenues with regard to a cutback in other taxes,” Masimov said.
According to Masimov, export oil duties should be introduced along with the cutbacks in the corporate income tax and the excess profit tax.
The Energy Minister admitted that the export duties could hold back Kazakhstan’s negotiation efforts to join WTO.