An assessment of proposed energy resource tax reform in Russia: A static general equilibrium analysis ¬リニ

a r t i c l e i n f o A large part of government revenues in Russia comes from royalties and export taxes on crude oil, oil products, and gas. Recently, the Russian government has considered reducing export taxes on crude oil and oil products compensated by an increase in the royalty on crude oil. The objective of the paper is to analyse the economy-wide effects of this proposal. Moreover, a hypothetical replacement of export taxes and royalties with a pure rent tax is analysed. A static, single-country, multi-sector computable generation equilibrium (CGE) model is employed. The primary findings are as follows. A replacement of export taxes on crude oil and oil products with a royalty on crude oil provides substantial allocative efficiency gains, but this policy is not a superior one. Welfare could be substantially improved when the export taxes and royalty are replaced with a pure rent tax that can be implemented in the form of a cash-flow tax. On the negative side, reducing export taxes on crude oil and oil products results in a strong appreciation of the currency. As a result, domestic producers become less competitive in domestic markets, and there is a massive increase in import demand. Russia is one of the world's largest producers and exporters of fossil fuels. The Russian economy is very energy and carbon intensive (EIA, 2014). A large part of total government revenues comes from export taxes, excise taxes and the mineral extraction taxes on gas, crude oil and oil products. For example, export taxes on crude oil, oil products, and gas accounted for approximately 21% of total government revenues in 2012 (Roskazna, 2012). The main purpose of resource taxation is to capture resource rents. As known, taxation of resource rents is neutral because supply of ex-haustible resources is fixed. Moreover, high taxes on energy resources could be motivated by income distribution considerations. The theory suggests that the government should use a pure rent tax, which could be implemented in the form of a cash-flow tax (Boadway and Flatters, 1993); however, the implementation of a cash-flow tax is problematic in some respects. For example, revenues from a cash-flow tax may be quite unpredictable and unstable. Moreover, a cash-flow tax could lead to the so-called transfer-shifting problem. Therefore, authorities often rely on sub-optimal taxes such as royalties and export taxes, which has been the case in Russia. Recently, the …