Russian lawmakers on Tuesday backed new tax increases as the Russian government seeks new sources of revenue to boost economic growth for about four years. war with ukraine.
Lawmakers in the House of Representatives, the State Duma, have approved the crucial second reading of a bill to increase value-added tax from 20% to 22%. The changes are expected to add up to 1 trillion rubles (about $12.3 billion) to the state budget.
The new law also lowered the threshold at which companies must collect value-added tax from 60 million rubles (about $739,000) to 10 million rubles (about $123,000) of annual sales revenue. The changes are expected to be phased in by 2028 and are aimed at stopping companies from splitting up their businesses to avoid taxes. However, many small and medium-sized enterprises that were previously exempted are also expected to be hit hard.
This movement is only part of the a series of new taxes The Kremlin hopes to support Russia’s slowing economy. One new initiative would eliminate special preferential rates on the state’s “recycling fee” for cars, mainly for expensive imported cars.
Other proposals include increasing taxes on spirits, wine, beer, tobacco and e-cigarettes, and adding tariffs on technology products such as smartphones and laptops.
According to government estimates, Russia’s economy, which has continued to grow steadily for two years supported by military spending, is expected to contract by early 2025 and grow at just 1% this year. Economic growth has been hurt by high central bank interest rates, currently at 16.5%, aimed at curbing inflation, spurred by defense purchases, by 8%.
The Russian government’s 2026 budget, also approved by lawmakers on Tuesday, set Russia’s military spending at 12.93 trillion rubles ($159 billion), or 16.84 trillion rubles ($207 billion) including spending on security and law enforcement.
The bills now need to be approved again by the House of Representatives before moving to the Senate and being signed into law by President Vladimir Putin.
