September 4, 2008 / 7:06 AM / 12 years ago

RPT-Kazakhstan drafts new oil, metals tax rates

(Repeats to additional Reuters clients)

ALMATY, Sept 4 (Reuters) - The government of Kazakhstan has proposed to set mineral extraction tax rates for oil producers at 7-20 percent of crude’s market value from 2011, with higher rates applied to larger producers, according to a draft law.

The resource-rich central Asian state plans to introduce a new tax code from next year which would shift much of the tax burden onto the oil and mining sectors through a new mineral extraction levy.

But the rates set by the tax code will only kick in from 2011 while another draft law sets the rates for 2009 and 2010 [ID:nL381702].

The government has submitted the draft tax code to the parliament.

A portion of the draft obtained by Reuters sets the mineral extraction tax for oil at 7 to 20 percent of the commodity market value depending on a company’s annual output. Higher rates apply to larger producers.

The tax will be calculated based on benchmark crude oil grades such as Urals and Brent, the draft says. Oil sold on the domestic market will be taxed at halved rates, it says.

The tax rate for exported natural gas in 10 percent while gas sold domestically will be taxed at 0.5-1.5 percent of market value.

The mineral extraction tax rates for metals are flat regardless of output with calculations based on LME prices. The tax rate for copper is 8.0 percent, zinc — 9.0 percent, gold and silver — 5.0 percent, aluminium — 0.3 percent.

The government suggests taxing chrome ore at 17.0 percent, iron ore at 3.0 percent and pellets at 3.5 percent.

A mineral extraction tax makes up the vast bulk of Russia’s heavy tax burden and has gained notoriety for pressuring oil company profitability to the point that production growth has stalled.

Kazakhstan is offering a major exemption for companies working under production sharing agreements and the Chevron-led (CVX.N) Tengizchevroil joint venture, which produce the majority of Kazakhstan’s oil.

The government has said earlier that the mineral extraction tax would replace royalty payments and compensate for the corporate income tax cut.

It has proposed to cut the corporate income tax, currently at 30 percent, to 20 percent in 2009, 17.5 percent in 2010 and 15 percent from 2011.

Kazakh parliament, dominated by President Nursultan Nazarbayev’s Nur Otan party, rarely makes significant changes to key laws submitted by the government. (Writing by Olzhas Auyezov; Editing by Melissa Akin)

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