Russia will raise taxes to pay the price of the Ukraine war

Russia is scheduled to raise taxes on companies and consumers, as the government is looking for ways to support military spending, while its economy, which focuses on the war in layers, screams.

The Kremlin’s commitment to the ongoing war with Ukraine to renew the audit on Monday when the Ministry of Finance issued a draft budget for 2026. Spending plans show that defensive spending next year will remain largely fixed, and will be funded by the tax increase amid increasingly growth expectations.

After providing the budget this week, the Russian Ministry of Finance said that for “defense and security financing”, he proposed a number of tax increases that it said was an alternative to increasing borrowing and reducing the budget deficit, which was expected by 1.6 % of GDP in 2026.

The most prominent, Ministry officials said they intend to increase value -added tax from 20 % to 22 %While the threshold where small companies begin to pay the value -added tax will be reduced from 60 million rubles (about 738,000 dollars) to 10 million rubles (about 123,000 dollars). The Ministry also proposed 5 % new gambling tax.

The proposed tax increases come as economic growth is expected to be affected 1.3 % in 2026The government said – far from The expansion was recorded 4.1 % in 2024 And a sharp decrease from the previous expectations for the growth of 2.5 % this year and 2.4 % next year.

The initial budget-which must be approved by the Russian Parliament, has always suggested that defensive spending will decrease slightly in 2026, to 13 trillion rubles, a decrease from the post-Soviet post record of 13.5 trillion rubles this year, According to Reuters initial finances obtained last week.

“With the decrease in the stalls and revenues in economic growth, Moscow is no longer able to pump the financial incentive that fueled the expansion of wartime early, and instead In the analysis this week.

“The financial strategy of Moscow for the fifth year of the war is unambiguous … the Kremlin will try to wander without a significant increase in spending, and instead pass the costs of the war to the entire society,” he said.

The new budget confirms that “the Russian public is paying for the war,” said Alexandra Procopino, a fellow of the Carnegie Carney Eurasia, said in the analysis on Wednesday.

She noted that the 2026 budget appears to be “more and more like a compromise between the war camp and the economists,” she said, “The situation of the bill will be the Russian people, which faces more tax increases.”

She warned that the nominal reduction in defensive spending in 2026 “is certainly not a sign that the Kremlin plans to end his war against Ukraine.”

“Budget spending in the national defense category may decrease from 13.4 trillion rubles this year to 12.6 trillion rubles in 2026 (a decrease of 4.2 %), but spending in a adjacent category – national security and law enforcement – increases from 3.46 trillion to 3.91 trillion rubles: 13 %,“ Prokopenko Noted.

Prices rise, Especially from basic commodities such as butter and meatIt was difficult for Russian consumers. The central bank of the country looked at the taming of inflation by high interest rates, and increasing borrowing costs for companies and representation, from paradoxes, as other brakes on economic growth. The latest data showed that inflation reached 8.1 % in August, while the standard interest rate of the central bank was 17 %.

The Russian Finance Minister, Anton Selwanov, was roasted by government media clothes Tass this week The logical basis behind the tax rises on consumers and businessmen. Tell the agency that they prefer to increase borrowing, which will lead to inflation.

“The unspecified increase in public debt may lead to the acceleration of inflation, and, accordingly, an increase in the main rate. On the contrary, the budget budget decision through tax increases gives the Central Bank Chamber to reduce monetary policy. The main rate is decisive for investment growth and economic growth.”

When asked whether the defense budget would increase, Siluanov suggested that national security would become more than the government’s focus with defense and security expenditures that are to take into account “additional tasks and challenges.”

He pointed out that these included “other functional areas fewer with military defense than ensuring the security of the country and its citizens as a whole.”

This included the development of anti -party systems, the protection of critical infrastructure and border areas, and the enhancement of cybersecurity and cybersecurity. “Public spending in 2026 is still at a similar level of 2025, but it is higher than the level of 2024,” he indicated.

Correction: Alexander Collener is an older colleague at the European Policy Analysis Center. A previous version made mistakes in his name errors.