SUBSOIL WEALTH IS THE STRENGTH OF THE COUNTRY


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Think long-term

For the development of hydrocarbon production Ukraine should create a flexible system of taxation of subsoil users
 
The system of taxation of subsoil users in Ukraine has changed: 07/31/14, Parliament approved amendments to the Tax Code, which resulted in increased rates twice as rent payments for oil, gas and condensate. Such measures may be forced to bring in additional state budget 4.8 billion USD, due to which the plan to ensure that the military needs. For companies operating deposits with high profitability of production, such changes will not be very noticeable, but for subsoil users working on remote and new fields, the rate hike will significantly reduce the economic benefits of the project for the production of hydrocarbons in Ukraine.
 
Under the control of
 
Raising the rent for the use of mineral resources, the state solves a number of short-term problems, to gain the understanding and support of the oil and gas complex. Nevertheless, the long-term tax policy of Ukraine should be the most stable and economically motivated to ensure the investment attractiveness of the industry.
 
In the context of the termination of the energy supply (eg, natural gas) from the Russian Federation to Ukraine actualized the issue of increasing domestic production and the dynamic development of the primary sector of the economy. To do this, you must attract significant private investment, because even for the exploration of mineral resources in the state budget is not enough money. Investor, in turn, is interested in participating in the prospective cost-effective projects, so it is important legislative stability and transparency of the taxation system, where the minimum price they extracted resources should include not only the production costs but also an attractive rate of return.
 
In respect of subsoil state plays a dual role of fiscal: it regulates tax policy, and is the owner of natural resources. In most cases, changes in tax policy aimed at the highest possible growth of government revenue derived from the exploitation of mineral resources, and reducing excess profits subsoil. In a situation with a deficit of natural gas in Ukraine loyal terms of tax administration could increase the investment attractiveness of new deposits, most of which occurs at greater depths and requires considerable resources to develop.
 
In Ukraine, the validity of special permits for subsoil use is 5 years and mining companies have to make a long-term program funding for projects on the basis of both existing and possible conditions of taxation, so the stability of the tax regime will enhance the transparency of relations between the state and private investors.
 
In turn, transparency and stability of tax policies affect the growth of revenue in the budget from another source - from the auctions for the sale of special permits for subsoil use.
 
The struggle for the investor
 
World practice of subsoil use based on the existence of competition when the market itself helps to determine the conditions acceptable to the industry, and then the profit is distributed quite reasonable. Conversely, in the absence of competition, the distribution of profits depends only on fiscal conditions. In Ukraine, formed by low competitive environment in the mineral resources: the segment of private gas production does not exceed 10 - 12%, and the cost of production, many companies large enough and often reaches $ 300 per 1 thousand cubic meters of gas. Tightening of the tax regime can lead to the development of the prevailing trend only large deposits, resulting in long-term government revenues from subsurface can be significantly reduced. At the same time, the change in the system of taxation of subsoil users with the development of a stable mechanism of tax payments and the use of programs, such as the needs of Ukrainian geological industry, will play a positive role in improving the budget revenues from the commodity sector of the economy and increase the volume of national production.
 
Competing with other countries in the struggle for investor and its own energy independence, Ukraine can stimulate their economic development through reasonable taxation system - at high potential risk for the investor, the State should reduce the tax burden, and only with an increase in energy prices in proportion to the level of taxation may rise . As a result, even small low-margin deposits can provide substantial revenue. If Ukraine will be able to create a more flexible system of taxation, including different rates and takes into account the geological conditions of production in a particular field, the specificity of hydrocarbon deposits, it will provide an opportunity in the future to encourage the development of fields with deep resources and the use of more modern technical equipment.
 
Thus, the main purpose of reforming the taxation of subsoil use should be not only to provide stable income to the state budget in the long term, but also the sustainable development of the geological industry and, ultimately - the economic growth of the state.
 
New rates of rental fee
 
Law of Ukraine №1621-VII from 07/31/14, "On Amendments to the Tax Code of Ukraine and some other legislative acts of Ukraine" temporarily until 01/01/15, at increased rates of payment for use of mineral resources for natural gas sold not for the needs of population for accumulations of gas to 5km - from 28% to 55% of the gas reservoirs over 5 km - from 15% to 28%. At the same period, set payment rates of 45% for oil and condensate deposits of up to 5 km and 21% - of deposits in excess of 5 km and pay royalties for iron ore at a rate of 8% of its value, taking into account the content of chemically pure metal .
 
In order to stimulate gas production to the rate of payment for subsoil use in the extraction of private companies from new wells in the two years since the start of operation of the well will apply a reduction factor of 0.55.
 
Roman Storozhev, president of the Association "Subsoil users of Ukraine"
magazine "Energobusiness" on August 19, 2014