Income from Tax on Mineral Resources Extraction will now be fully transferred to the federal budget

On 24 September, Russia’s President D. Medvedev legislatively authorized the new procedure for transfer of income from Tax on Mineral Resources Extraction (TMRF) to the federal budget, in accordance with which income from raw hydrocarbons, oil, and gas condensate must be transferred in full to the federal budget.

It should be pointed out that previously the rate of transfer of this tax to the federal budget was established at 95%. Apparently, the present measure, which is aimed at consolidating income from mineral resources extraction in the federal budget, will result in a growth of its revenue side, especially against the background of a rise in prices for energy carriers observed at world markets.

Although the regions are now deprived of one of the tax sources for replenishing their own budgets, which is taking place in conditions of an economic crisis and rigid budgetary restrictions, this is unlikely to have any considerable effect on the balancing of regional budgets. Budgetary statistics indicate that in recent years the volume of TMRF-related transfers to the budgets of subjects of the Russian Federation has never exceeded 1.5 – 2% in the structure of revenues of regional budgets. Moreover, we can expect that the lost revenues will be in part made good by the envisaged increase in the rate of excises on alcoholic products and automobile fuel as well as in the rate of transport tax.

E. Fomina – Research Fellow, Department for Budget Policy