Due to the need to raise revenue to pay back the forthcoming International Monetary Fund’s $17.5 billion loan, the government of Ukraine has imposed exorbitant taxes on local oil and gas producers. The companies are forced by law to sell their output to the government-owned monopoly. Kiev’s new tax is a royalty, which taxes output sales, not just profits. The rates are 70% for state-owned companies; 55% on wells under 5,000 meters depth, and 35% on wells over 5,000 meters. This is hare-brained: The local production of oil and gas will be increasingly depressed, billions of dollars a year will continue flowing to Gazprom, and Ukraine will borrow from the IMF to pay Russia. Read more at http://blogs.wsj.com
