Russian officials, metals and fertiliser firms debate tax changes

© Reuters. FILE PHOTO: An employee works at Nadezhda Metallurgical Plant of Nornickel company, the world's leading nickel and palladium producer, in the Arctic city of Norilsk, Russia August 23, 2021. REUTERS/Tatyana Makeyeva

MOSCOW (Reuters) - Russian officials and representatives of metals and fertiliser producers failed to reach consensus on Wednesday on how to implement the government plan to change taxes for them, six sources familiar with details of their meeting told Reuters.

Moscow has been searching for additional proceeds for the state budget and has been concerned about rising costs of defence and state construction projects amid high global inflation and increasing prices for metals.

It imposed temporary export taxes on Russian steel, nickel, aluminium and copper, which will cost their producers $2.3 billion from August to December 2021, and is preparing a permanent mechanism to "accumulate part of the profits from these superfavourable market conditions."

The metals and fertiliser producers met finance ministry and other officials on Wednesday to discuss the ministry's proposals, which so far have been focused on pegging a mineral extraction tax (MET) levied on the producers to the global price of their products.

"The finance ministry still seems to tend towards raising the MET on a 'fair' basis - a flexible rate that takes revenue and the global prices into account," said a source who attended the meeting, adding that no calculations were disclosed as of yet.

"The business proposed leaving the MET as it is and basing a 'fair' tax system on profits or free cash flow," he added.

Ideas from both sides, according to four other sources, who were present at the meeting or briefed about its results, include a higher MET tax, a higher profit tax and linking the profit tax to the size of dividends and investment.

"It seems that the government representatives have listened to us carefully. Whether they have heard us will be revealed in the near future. But the fact that the dialogue has finally taken place is certainly a positive development," steel producer Severstal said in a statement.

The final decision will be taken by Prime Minister Mikhail Mishustin after the finance ministry supplies its proposals to him this week, one of the sources said.

The finance ministry declined to comment.