Total views : 328

Development of Methods for Determining Differentiated Rates of Mineral Extraction Tax in Recovery of Solid Commercial Components from Technogenic and Natural Fields

Affiliations

  • Financial University under the Government of the Russian Federation Moscow, Russian Federation
  • Bauman Moscow State Technical University, Moscow, Russian Federation

Abstract


Background: The article presents differential methods to determine ad valorem Mineral Extraction Tax (MET) rates for commercial components extracted from technogenic raw materials and from secondary mineral resources. Methods: Proposed objectives include restrictions on the minimum level of MET rates. MET is calculated by reference to stock exchange prices for finished products in formulas 1 and 2. This tax is calculated relying on the estimated value of extracted minerals in formulas 4 and 5. The forecasted MET potential is estimated as present value of expected payments to the budgets of the RF budget system. Findings: Increasing the complexity of the use of mineral resources through the development of state regulation of economic measures aimed at stimulating subsoil usage involves determining the optimal ad valorem tax rates on mining operations, which provide cost-effectiveness of the investment project organization engaged in the development of technogenic deposits. For this purpose, the study has developed and scientifically validated methods in terms of mining rent, where mining-and-geological (mill head grade) and technological (the value of throughout recovery of the component to the finished product) criteria have been highlighted in its structure which are prerequisite to establish economically justified level of tax exemptions of mineral extraction tax. Frequency of revision of MET rates is still debatable, whether it will be a period of development of the deposit or another period of imposing the tax rate. Improvements: The presented methods can be used in working out the directions of Russian tax system development, as well as the implementation of regional investment projects aimed at developing, in the first place, technogenic deposits under a separate license.

Keywords

Differentiated Tax Rates, Mineral Extraction Tax (MET), Solid Minerals Extraction, Technogenic Field (TF).

Full Text:

 |  (PDF views: 212)

References


  • Hotelling H. The economics of exhaustible resources. The Journal of Political Economy. 1931; 39:137-75.
  • Hung NM, Quyen NV. Sales tax: Specific or Ad valorem tax for a non-renewable re-source? Economics Letters Journal. 2009; 102(2):132-4.
  • Lund D. Rent taxation for nonrenewable resources. Annual Review of Resource Economics. 2009; 1:287-308.
  • Bambrick S. Resources taxation – Its dangers for the Australian economy. Australian Mining. 1978; 70(7):31-4.
  • Ayres RU. Metals recycling: Economic and environmental implications. Resources, Conservation and Recycling. 1997; 21(3):145-73.
  • Graham J, Rogers D. Do firms hedge in response to tax incentives? Journal of Finance. 2002; 57:815-39.
  • Smith CW, Stulz RM. The determinants of firms’ hedging policies. Journal of Financial and Quantitative Analysis. 1985; 20:391-405.
  • Leland HE. Agency cost, risk management and capital structure. Journal of Finance. 1998; 53:1213-43.
  • Miller M, Modigliani F. The cost of capital, corporation finance and the theory of investment. American Economic Review. 1958; 911-22.
  • Mayers D, Smith S. Corporate insurance and the underinvestment problem. Journal of Risk and Insurance. 1987; 54:45-54.
  • Ross M. Corporate hedging: What, why, and how? Working Paper; Berkeley: University of California; 1997.
  • Tufano P. Who manages risk? An empirical examination of risk management practices in the gold mining industry. Journal of Finance. 1996; 51(4):1097-137.
  • Froot K, Scharfstein D, Stein J. Risk management: Coordinating corporate investment and financing policies. The Journal of Finance. 1993; 48:1629-58.
  • Zhang H. Effect of derivative accounting rules on corporate risk-management behavior. Journal of Accounting and Economics. 2009; 47(3):244-64.
  • Ponkratov VV. Tax maneuver in Russian oil production industry. Oil Industry. 2014; 9:58-61.
  • Pittel K, Bretschger L. Sectoral heterogeneity, resource depletion and directed technical change: Theory and policy. CER-ETH Working Paper No. 08/96 and Canadian Journal of Economics. 2010.
  • Bloshenko T. Taxation of mineral products in Russian Federation. Review of European Studies. 2014; 6(4).
  • Fersman A. Complex use of fossil raw materials. Leningrad: AN SSSR. 1932.
  • Heaviside function. 2016. Available from: https://ru.wikipedia.org/wiki/Функция_Хевисайда
  • Severance tax. Tax Code of the Russian Federation. 2002. Available from: http://base.garant.ru/10900200/41/#block_20026
  • Bloomberg official website. 2015. Available from: http://www.bloomberg.com/markets
  • Article 26. Procedure for valuation of extracted minerals when determining the tax base. Tax Code of the Russian Federation. 2016. Available from: http://stnkrf.ru/340
  • Section 3.3. Peculiarities of taxation when implementing regional investment projects. Tax Code of the Russian Federation. 2016. Available from: http://base.garant.ru/10900200/6/#block_3300

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.