Russia Agreed Upon on New Formula for Mineral Extraction Tax

SEATTLE (Scrap Monster): The Russian administration has agreed upon a new formula of mineral extraction tax (MET) with producers of steel, iron ore, coking coal and metal firms, which is expected to contribute significantly to the country’s economy.

At the same time, it has decided to drop the idea to introduce a formula-based profit tax which will be directly linked to previous dividends and investments. Alexander Shokhin, head of Russian Union of Industrialists and Entrepreneurs noted that the proposal needs some revision and that it will not be implemented at least until 2023. The very idea of profit tax is likely to cause significant damage to the investment climate prevailing in the country, he added.

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The new MET would result in additional contribution of approximately 160 billion roubles ($2.2 billion) by metal companies to the 2022 state budget. The Finance Ministry expects more or less the same budget contribution from these companies during the next two years as well.

The new MET for iron has been set at 4.8% starting next year, compared to the proposed rate of 5.5%. Meantime, the tax on semi-finished steel products will be 2.7%, down from 3% proposed by the Finance Ministry.