You're reading: Cabinet submits bill on cutting gas production royalty for private companies to parliament

The Cabinet of Ministers of Ukraine has registered in the parliament a draft law on cutting gas production royalties collected from private companies from Oct. 1, 2015.

Draft law No. 2352a on amending the Tax Code of Ukraine regarding taxation of economic entities that produce natural gas was registered on July 14, 2015.

Finance Minister Natalie Jaresko wrote on her Facebook page that the draft law drawn up by her ministry was approved at a cabinet meeting on July 14.

She said that the draft law foresees the reduction of the royalty from 55 percent to 29 percent for up to five kilometers of depth, and from 29 percent to 14 percent for over five kilometers of depth.

The document also foresees the encouragement of drilling of new wells via the introduction of the three-tier taxation system for new wells from Jan. 1, 2016.

Royalties for new wells will be 20 percent and 10 percent depending on the depth of extraction, profit tax will remain at 18 percent, and profit surtaxes – 30 percent of profit.

The finance minister said that if the royalties are decreased Ukraine would see a fall in revenue this year, but “we’re ready to have these losses today to increase own gas production in Ukraine tomorrow.”

“This will increase not only our energy independence, but our financial soundness, cutting the need of Ukraine in foreign currency in the future which today we spent to buy imported energy,” Jaresko wrote.

She said that authorities expect that these steps will boost gas production by private companies in the country from 3.3 billion cubic meters in 2014 to 8.5 billion cubic meters by 2025.