Recent dissolution of the form Communist state of the Soviet Union to the Russian Federation. Russia’s economy is in transition from a a state-controlled to a market-controlled economy. •Vladimir Putin, moved to reduce the political influence of oligarchs soon after taking office, forcing some into exile and prosecuting others.
Still strained relationship between the Russian Federation and the West (U.S) rooted from the cold war
Uncertainty of control within the Russian government
2003 October – Billionnaire Yukos oil boss Mikhail Khodorkovsky arrested and held in custody over investigations into tax evasion and fraud. Mr Khodorkovsky had supported liberal opposition to President Putin. (bbc)
The energy giant Gazprom is close to the Russian state and critics say it is little more than an economic and political tool of the Kremlin.
Existing taxes on oil companies
* Royalty (6-16% of gross revenue). * Mineral resource tax (10% of gross revenue less the value of the taxpayer’ spending on exploration). * Excise tax (66 rubles/tonne of oil, equal to 2.5%, according to calculations of the Ministry of Finance based on the weighted average price of Russian oil and taking into consideration export and domestic sales). http://www.ogj.com/articles/print/volume-99/issue-33/special-report/the-russian-oil-gas-industry-analysis-raises-questions-about-russian-tax-proposal.html
Uncertainties about legal rights, infrastructure, ownership, and liability have slowed development despite the high hopes of many western corporations. http://archive.greenpeace.org/climate/arctic99/reports/blackice-8.html
Yet, by end of 1998, the oil industry was fully privatized, substantially deregulated, and had undergone significant internal restructuring (see Table 1 below). Even more recently, the Russian government has adopted (1998-2000) and enacted (1999-2002) a new Tax Code that by most accounts exceeds Western standards.5 For example, it introduced a 13 percent flat tax on personal income, capped corporate contributions to the social insurance fund, reduced the profits tax (a.k.a. corporate income tax) rate from 35 to 24 percent, abolished turnover taxes (as of 2003), tied export tariffs directly to the price of oil, and established new accounting procedures that are on par with
International Accounting Standards
Foreign Investment policies??
The Yukos crisis began when Mikhail B. Khodorkovsky, chief executive of Yukos and Russia’s richest man, was jailed at gunpoint Oct. 25 on charges of fraud, forgery and tax evasion. Mr. Khodorkovsky insists his arrest and the prosecution of other large Yukos shareholders are politically motivated. http://www.nytimes.com/2003/11/03/world/signs-of-damage-control-in-russia-s-oil-scandal.html
Tax and royalties http://new.aibse.org/wp-content/uploads/2012/02/Patton2008.pdf