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COMPANY CONTRIBUTION TO ECONOMICDEVELOPMENT OF THE RUSSIAN REGIONSmentary hearings, sit on expert committees created by public organisationsand government, act as consultants for draft laws on the activitiesof the fuel and energy complex and other industries.During the reporting period, the Company's experts worked on draftchanges to the law "On Mineral Resources" which was to constructa relationship suitable for current conditions between the state as theowner of resources and the organisations that use them. In the summerof 2004 some of the conceptual points repeatedly voiced byLUKOIL representatives were reflected in changes to the current law.Specifically, a resource user who has discovered a deposit automaticallyreceives the right to develop it following its exploration and evaluation.This will stimulate more activity in geological surveying by producingcompanies. Another amendment to the law stipulates thata period of resource use may be extended beyond the time specifiedin the license at the initiative of a resource user if there is a need to finishexploration and evaluation unless the user has breached conditionsof the license.The Company's experts participate in drafting improvements to tax legislation.The opinion of oil and gas business specialists based on precisefinancial and economic calculations is relevant when decisions aremade about the optimal level of taxation in the industry. Such decisionsshould consider not only the state's fiscal interests but also the industry'sdevelopment prospects.In recent years the tax system for the oil business has undergone majorchanges and has become simpler as well as more transparent. Theturnover tax, which had a depressing effect on economic activity, hasbeen abandoned. During the three years since the introduction of thenew system, its disadvantages have also become apparent: tax deductionsbecome too extreme when the world price of oil goes beyondUSD 25 per barrel; and there is no differentiation in the tax burden relatedto the geological, economic and geographic conditions at thedeposits under exploration. The Company's specialists together withrepresentatives of other oil companies and the federal government continuetheir work to improve the system of oil industry taxation.The new Customs Code of the Russian Federation came into effectin 2004. Even though not all proposals made by the working group(in which LUKOIL specialists participated) were taken into account27