Russian govt clears first step in oil tax cuts

MOSCOW Mon May 26, 2008 1:15pm BST

MOSCOW May 26 (Reuters) - The Russian government cleared on Monday a proposal to reduce the mineral extraction tax on oil, the first of many steps it is planning in order to revive production growth in the key industry.

The government approved amendments to the tax code under which the tax-free threshold for mineral extraction tax will rise to $15 per barrel from the current $9. The amendment needs to be approved by parliament.

Finance Minister Alexei Kudrin has said the measure will allow oil firms to save over $4 billion annually and invest this money into new projects to spur production growth.

Former president and current prime minister Vladimir Putin has also promised to introduce tax breaks for new oil-producing regions such as the Arctic shelf, Yamal and Timan-Pechora. (Reporting by Darya Korsunskaya, writing by Dmitry Zhdannikov; editing by Amie Ferris-Rotman)