MOSCOW, April 28 (RIA Novosti) - The government will introduce tax holidays of up to ten years for companies developing oil deposits in East Siberia, a deputy finance minister said Friday.
Sergei Shatalov said the planned amendment was one in a series that would be made to tax legislation in 2007-2009 to encourage oil production.
Minister of Economic Development and Trade German Gref said the tax holiday decision and a new pipeline project from East Siberia to the Pacific to deliver oil to energy-hungry Asia-Pacific countries, and in particular China, would help increase oil production in the region to 45 million metric tons per year (903,561 bbl/d) by 2015.
"It is this oil that is meant to fill the East Siberian pipeline," Gref said, adding that this would give a direct boost to economic growth.
Construction work on the ambitious $11.5-billion East Siberian pipeline project was launched Friday at a ceremony in the Irkutsk Region town of Taishet, some 3,100 miles east of Moscow.
He said the move was designed to encourage oil production in East Siberia, which had virtually stagnated.
"Hardly any oil is produced in East Siberia, nor does it have infrastructure," Gref said, adding that despite the region's oil wealth it produced less than a million metric tons of oil a year (20,000 bbl/d).
But companies developing oil fields in West Siberia's Timano-Pechersky basin will not be granted tax holidays, Shatalov said.
"They are close to infrastructure, which makes the project less costly," he said, adding that the deposits in question would remain attractive for investors even if no tax holiday is given.
Shatalov said a decision was still pending on tax holidays for oil deposits on the continental shelf.
"This exemption has not been approved, but mainly for formal reasons," he said, adding that the government would seek to restore a favored tax regime for shelf deposits during upcoming parliamentary debates.
"I think deposits in the Arctic and Barents seas need a privileged treatment," Shatalov said.
The government has also approved plans to introduce a sliding coefficient of mineral extraction tax for oil fields with high production, in a move designed to take seals off oil deposits and thus raise production, Shatalov said.
He said cuts to the VAT rate would be considered in a few years' time.
Economics minister Gref said tax holidays would be granted at the moment a new deposit is licensed, and added that it usually took three or four years before the deposit came onstream.
"Thus, the privilege will last six to seven years," Gref said.
