13 Jun 2023 14:53

Authorities seeking to replace fertilizer duty with another mechanism as funds collected are lower than expected - newspaper

MOSCOW. June 13 (Interfax) - Russian authorities are seeking to cancel the export duty on mineral fertilizers put in place for this year and collect the planned amount by means of another mechanism or fundamentally adjust it, the Vedomosti newspaper reported, citing its sources.

The duty was to bring in about 120 billion rubles for the budget in 2023 (according to the Finance Ministry's forecast). The export duty is imposed when the export price of fertilizers exceeds $450 per ton. The rate is 23.5%, and the duty is universal for all types of mineral fertilizers.

As a source close to the government explained to the newspaper, revenues for the budget were not comparable to the amounts that plans had called for. The benchmark of $450/tonne is the cost of delivery based on the customs declaration. The content of useful substances in a ton of fertilizer varies, with the concentration varying even within the same type. To optimize their fiscal burden, companies sell more fertilizers with a relatively low concentration: formally, the price per ton is below the cutoff, but in fact this is manipulation of the terms, the source stressed. "Combined with transfer pricing, as manufacturers sell products through subsidiary traders, this allows companies to pay virtually no duty," the source explained.

A Finance Ministry spokesperson said that the duty generated about 5 billion rubles for the budget in 2023. "This is several times less than we had planned," the ministry said. But so far no decision to cancel the duty has been taken and the mechanism remains in force, the ministry spokesperson said.

A source close to the government said that most likely collections from producers to the budget will be tied to some rent payments. In particular, fertilizer producers will have to pay taxes on extraction of minerals or additional income, he said. Another source said that it is possible to fine-tune the mechanism of the duty - to differentiate the benchmark depending on a subset of fertilizers, i.e., in fact, on the concentration of useful substances, or to peg the duty to world prices, not to export prices.

At the beginning of the year, Mikhail Rybnikov, head of Phosagro , asked the president to equalize the burden of the export duty for producers of different types of fertilizers. He suggested lowering the cutoff price for cheaper nitrogen and potash fertilizers, because the current approach, he said, discriminated against "more technologically advanced but less high-margin" producers of phosphate and complex fertilizers.