MOSCOW, Jan 22 (Reuters) - Russia should abandon tax breaks for East Siberian oilfields in favour of a uniform levy on excess profits to protect the budget from declining oil output elsewhere in Russia, a Finance Ministry official said on Friday.
Ilya Trunin, head of the ministry's tax department, said the current round of tax breaks, which exempts 13 virgin East Siberian oilfields from paying export tax indefinitely from Dec. 1, would cost the Russian budget around $4 billion this year.
'In order to ensure the stability of the tax system, we need to move away from differentiated taxes adopted by the government for different oilfields,' Trunin said during a conference.
'We should move toward taxation of excess profits.'
Russia, currently the only country pumping more than 10 million barrels a day, returned to oil production growth in 2009 after suffering its first decline in a decade the previous year.
The long-promised zero export duty on East Siberia, whose beneficiaries include state-controlled sector leader Rosneft , TNK-BP and Surgutneftegaz, was designed to spur investment in hard-to-access regions.
Trunin said, however, that the current taxation system, created in 2003, was being 'eroded' while breaks were often not backed by calculations.
'The path of further differentiation of the mineral extraction tax and export duty is a dead end,' Trunin later told Reuters. 'We need to create a system which will be linked to profits and expenditure.'
He said there was currently no time limit on the export duty breaks for East Siberian fields, which are renewed on a monthly basis by the government.
MORE FROM EAST SIBERIA
A Reuters poll published on Dec. 22 forecast a further 1.1 percent increase in Russian oil production in 2010. The projected rise, however, relies heavily on East Siberian fields replacing mature deposits further west.
JPMorgan analysts forecast East Siberia will account for 2.3 percent of Russia's crude output this year, up from about 1.1 percent in 2009.
Trunin said the Finance Ministry would find it increasingly difficult to justify the zero duty for East Siberian fields while other deposits with similar technical and geological parameters were ineligible.
Russian oil majors have also argued for profit-based taxation, especially for new fields. Rosneft's vice-president for finance and investments, Peter O'Brien, told Reuters in September that tax breaks would be 'critical'.
Rosneft's Moscow-traded stock fell 3.5 percent by 1105 GMT versus a 2.2 percent fall on the wider exchange. BP , a 50 percent
shareholder in TNK-BP, extended losses following the news, down 0.6 percent.
(Writing by Robin Paxton; Editing by Keiron Henderson) ($1=29.65 Rouble) Keywords: RUSSIA OIL/FINMIN
