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Putin adviser's tax proposal on mining companies may raise additional US$7.5B

Andrey Belousov, the top economic adviser to Russian President Vladimir Putin, proposed that the government should increase taxes on mining companies, including PJSC Norilsk Nickel Co. and PJSC Alrosa, Bloomberg News reported Aug. 10.

The tax proposal could raise as much as 500 billion rubles, or about US$7.5 billion, per year, with the additional budget revenues to be used to help pay for Putin's commitment to boost spending after his re-election this spring. It will also affect chemical and fertilizer producers.

According to the letter obtained by the news wire, mining and non-energy companies have benefited from a commodity price surge and the devaluation of the ruble, but are not paying taxes from the "excess income."

There are no indications that Putin ordered the Russian government to act on the proposal, the Bloomberg News report added.

Russian miners are said to benefit from a weaker ruble, as its costs are based on the local currency and output is sold to international markets in U.S. dollars.

Further, Russia's energy sector had lobbied for increased taxes on other sectors, primarily on the metals and mining sector. However, companies in those industries warded off the plans, disputing that their businesses should not be levied with higher taxes, compared to the more profitable oil and gas producers.

As of Aug. 9, US$1 was equivalent to 66.27 Russian rubles.