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. Last Updated: 07/27/2016

Too Early to Increase Tax on Gas, Nabiullina Says

The government should not raise the mineral extraction tax on natural gas, Economic Development and Trade Minister Elvira Nabiullina said Thursday, in comments that point to Gazprom continuing to pay lower taxes than oil firms.

"I don't think we are ready to raise mineral extraction tax on gas," Nabiullina told reporters.

The fixed tax currently amounts to 147 rubles ($6) per 1,000 cubic meters of natural gas compared to $37.5 per barrel of oil, a level that changes every two months together with oil prices.

The Finance Ministry has been pushing to levy higher gas taxes to channel export revenues into the stabilization fund, designed to safeguard the budget and insulate the economy from inflationary money supply growth.

Gazprom can expect a revenue windfall next year from a 25 percent hike in domestic gas prices, as well as major price rises to export markets.

Gazprom continues to enjoy preferential treatment compared with oil firms -- which pay as much as 90 cents on the dollar in tax on crude exports -- thanks to its political clout.

Speaking after a Cabinet meeting, Nabiullina said it would be tough to hit next year's inflation target of 8.5 percent after a double-digit rise in consumer prices this year.

"We realize this task will be extraordinarily difficult, but this is a task we need to fulfill," she told reporters, adding that fiscal restraint would be vital to curb price growth.

President Vladimir Putin on Wednesday asked the government to curb spending but at the same time create room for wage hikes in the three-year budget and boost economic growth through development institutions.

Nabiullina said her ministry would calculate inflationary effects of proposed wage hikes and activities of development institutions, which until now have been mostly used to support liquidity levels in the banking sector.

The development institutions should receive a total of 640 billion rubles ($26 billion) of budget funds and Nabiullina said the amount was enough for now.

"It is important for them to start working before raising the issue of more funding," Nabiullina said.