Russian Government Plans Tax Increases to Fund War

The Russian authorities plan to increase the tax burden on citizens and businesses to fill the federal budget, which is expected to reach a deficit of nearly 7 trillion rubles this year due to expenses related to the war against Ukraine. In the first half of the year, the budget spent 10.7 trillion rubles on the military, which is a third more than last year. Military expenditures account for 43.8% of all budget expenditures and 57.3% of collected taxes, and by the end of the year, they could reach 9% of GDP. The proposed package of amendments to the Tax Code includes an increase in the tax on passive income from 13-15% to 13-22%, which will affect about 4 million Russians. A 30% tax on excess profits is being introduced for producers of non-ferrous metals and fertilizers, and 20% for gold mining companies. It is proposed to set VAT on orders from foreign online stores at 22%. The head of the Russian Ministry of Finance, Anton Siluanov, stated that these measures should ensure the stability of public finances. The budget deficit this year will amount to 3% of GDP instead of 1.6%. In the first eight months of this year, government expenditures exceeded revenues by 5.8 trillion rubles, which is one and a half times more than in the same period last year.

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