Russia's MinFin waiting for conceptual decision from govt on replacing fertilizer duty with new instrument - Sazanov

ST. PETERSBURG. June 15 (Interfax) - Russia's Finance Ministry is waiting for a conceptual decision from the government on the possibility of replacing the export duty on fertilizer with a different mechanism for collecting windfall profits that would generate the 120 billion rubles of budget revenue planned for this year, Deputy Finance Minister Alexei Sazanov told reporters.

"At this point only one thing is being discussed. As was fairly noted in the article, the revenues that we have now total about 5 billion-6 billion rubles, which is already for almost half the year. However, we expected 120 billion rubles for half the year. In other words, we are collecting far less from the duty than we planned. Accordingly, we pointed this out to the government and propose to get these 120 billion rubles by other means since this money is already factored into the budget. But the final decision is up to the government," Sazanov said.

"So far there is basically no decision on whether we can abandon the instrument of the duty and collect the required amount with some other instruments. Specific mechanisms are not being discussed, the discussion is conceptual at this point. There is no final decision on this score," Sazanov said.

Business daily Vedomosti, citing sources, reported earlier that the authorities want to revise the parameters of the export duty on mineral fertilizers or cancel it altogether and collect the revenue factored into the 2023 budget using a different mechanism.

The export duty is now 23.5% on the export price of fertilizer above $450 per tonne. The duty is the same for all types of mineral fertilizer.

Vedomosti, citing a source close to the government, said the threshold of $450 is the export price based on customs declarations. Nutrient content per tonne of fertilizer differs and to optimize their tax burden companies are selling more fertilizer with relatively low nutrient concentration so that the price per tonne stays below the threshold for the duty.

"Combined with transfer pricing, since producers sell their product through subsidiary traders, this enables companies to essentially not pay the duty," the paper quoted the source as saying.

Sources said the authorities are discussing collecting the planned revenue from the sector through the mineral extraction tax (MET) or excess profit tax (EPT), or by revising the duty mechanism by differentiating the threshold price depending on the subgroup of fertilizer, meaning, essentially, by nutrient content, or pegging the duty to world prices instead of export prices.

PhosAgro CEO Mikhail Rybnikov appealed to the Russian president at the start of the year to even out the export duty burden for producers of different types of fertilizers. He proposed lowering the cut-off price for nitrogen and potash fertilizers to be lowered, as prices for them had fallen below this threshold. The current approach to the duty discriminates against "more technological but lower-margin" producers of phosphate and compound fertilizers, Rybnikov said.