Importance The existing economic conditions in the world in general and in the Russian Federation in particular necessitate updating the tax system in the oil industry. There is a new initiative to introduce a profit-based tax on hydrocarbons producers. Export duties, the current instrument for skimming off excessive profits, should be eliminated, as they fall short of fully conforming to the principles of international trade. Objectives The study explores prospects for feasible transformation of tax on corporate profits of companies operating in the oil and gas industry. The purpose is to formulate an algorithm for phased transition to profit-based tax in Russia, using the experience of developed countries. Methods The study rests on the method of statistical grouping, benchmarking, and subject?object analysis. Results The findings show that the transition to the new taxation system will spur additional investment in challenging fields development. The tax reform will prop up the Federal budget revenues and contribute to increasing the volume of oil production. Conclusions The potential of the new profit taxation system is high. However, its testing in pilot regions may face some difficulties though overcomable on condition of high efficiency of tax administration and flexibility of legislative initiatives.