Disadvantages of using mineral extraction tax at flat rates and directions of its improvement

The article deals with the consequences that result in the use of extractive industries, especially in hydrocarbon extraction, tax on the extraction of minerals at the flat rate. These include the fact that mining is now carried out only in those wells, the minimum flow rate of which provides cost-effective production. The specified minimum yield is 84 tons per day. At lower flow rates, production becomes unprofitable and well preserved. This led to the fact that in Russia's oil industry, there is a big share of non-performing wells ("Lukoil" - 15%, of "Yukos" - 35%, "Sibneft" - 45% of the existing wells, data are given for the first years of use of tax on the extraction of minerals at the flat rate), which, in turn, leads to a sample (often predatory) development of more productive reservoirs. As a consequence, the current recovery factor (SIF) in Russia decreased in comparison with the Soviet planned economy by more than 2 times - from 50-55 to 20-25%. The use of a flat tax on the extraction of minerals leads to the fact that outside of the economic interests of subsoil users are hard-to-stock deposits located in extreme environments, deposits with elaborated high yielding deposits and watered stocks. At the same time in the US, deposits can be profitable even if the well production rate is 300 liters per day. The reason is that there is a differentiated approach to the taxation of subsoil use. In addition, in the US there is a legally enforceable definition of marginal wells, which are periodically reviewed to decrease flow rates. Therefore, a number of companies operate wells, production of which is about 1 bbl. / day. Another disadvantage of the mineral extraction tax (MET) is the fact that it performs a fiscal function, but does not perform the compensation and incentive functions. So, it almost does not apply to rental income arising under more favourable economic conditions, and does not interest subsoil users in more efficient use of natural resources. In order to eliminate the effects, the article suggests a mechanism of withdrawal a mining rent, based on the principles of settlement prices, in which the removal of mining rent tax is in isolation from the rest of subsoil users. Also, the use of our proposed mechanism for removal the mining rent will solve the problem with the use of transfer pricing and other tax optimization techniques to reduce the tax base and tax evasion. The need for transfer of pricing will simply disappear, because oil will be redeemed at the fields immediately after its production at predetermined group average prices.

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