On September 23, it officially became known that the Russian Ministry of Finance had proposed a bill to increase the value-added tax (VAT) rate from 20% to 22% starting in 2026. As it turned out, Russian dictator Vladimir Putin believes that this will provide additional resources to continue the war against Ukraine.
Points of attention
- Analysts highlight the challenges faced by Russia, including the need to revise budget parameters and the risk of exceeding deficit forecasts.
- The link between tax hikes and military spending underlines the complex economic implications of geopolitical conflicts on national budgets.
The situation in Russia continues to deteriorate
According to a statement from the Russian Ministry of Finance, the tax rate is intended to be raised from January 1, 2026.
The Russian department does not even hide that "the funds that the VAT increase will bring are primarily intended to ensure the financing of defense and security."
In addition, it is reported that the draft budget of the Russian Federation is planned to be submitted to parliament on September 29.
Its key parameters are agreed with Putin in advance and are unlikely to be significantly changed during formal consideration in the State Duma.
Analysts draw attention to the fact that in 2025 the aggressor country increased personal income taxes and corporate taxes.
Despite this, the Kremlin was still forced to triple the federal budget deficit forecast to 1.7% of gross domestic product (GDP) in May.
One of the insiders in the Russian government claims that this figure will be exceeded.
Moreover, the planned deficit of 0.9% of GDP for 2026, set in last year's budget law, is also at risk.
