Impact of Financial Derivatives on Calculation and Payment of Mineral Extraction Tax

Abstract

Financial derivatives (FD) provide an opportunity of hedging aimed at avoiding financial risk. However, FD offer a number of ways of decreasing tax payments. The main price risk management strategies include establishing a stabilization fund and risk hedging using future contracts and options. In the current practice, the process of hedging is tightly interconnected with the general management of a company’s assets and liabilities and comprises a whole lot of actions aimed at eliminating external risks. A profit tax can be decreased by using financial derivatives, and this issue is relevant for both Russia and other countries. Tax base for MET for multicomponent complex raw materials containing precious metals is proposed to calculate using a weighted average exchange price and quantity of chemically pure metal in the end product. Average exchange price is a product of arithmetic average value of daily average price quotations over a tax period by market exchange rate for the ruble to a relevant foreign currency over a relevant tax period.

DOI: 10.5901/mjss.2015.v6n5s4p320