The new initiatives of the Kazakh government to tighten the tax burden will affect, first of all, oil-producing companies. But the industry intends to fight for its rights. Representatives of some ministries and major oil companies held a round table in Astana to exchange their views on the new tax code. A concept of the tax code is expected to be ready as soon as the first week of April.
The main discussions at the round table organised by the association of oil producing companies of Kazakhstan KazEnergy focused on two government initiatives: the export customs duty and the tax on extraction of mineral resources. These two taxes are linked to the world prices for crude: “We have compared our taxes with Alaska, Mexico, and Bolivia... appears that Kazakhstan today is a paradise for the oil producers, and if we raise the taxes a little bit now, nobody will die from it, instead everybody will be happy,” Kazakhstan’s Vice Minister of Finance Daulet Ergozhin said in Astana, responding to the industry’s main argument that the tightening of the tax burden would worsen the investment climate in the country.
According to his calculations, even after the introduction of the tax on extraction of mineral resources and the export customs duty, the tax burden of the oil-producing companies will constitute slightly more than 30 percent, whereas in Russia it is already in the order of 60 to 65 percent.
“Those willing to come and work in Russia have not reduced in number, nor have those willing to pay whaling sums for a drilling licence. And the cries that nobody will ever come here again are speculations,” the vice minister said. In their turn, the experts from the oil companies produced their counterarguments.
“As far as the introduction of the new taxes is concerned, we have a vivid example of Russia. To switch directly to the taxation conditions that exist in that country will be, in our view, a mistake,” Managing Partner of KMG (KazMunaiGaz) Consulting, Andrej Horunzhii said. According to him, a decrease in production and investment is observed in Russia’s oil industry today.
Russian oil major Rosneft is applying to the government for tax privileges because it said it simply cannot finance those parts of the shelf that were provided in the Far East, the expert gave an example.
According to Horunzhii, the parties should find a balance of interests to run with the hare and hunt with the hounds. In the meantime, discussions continue.