Russia's Finance Ministry proposes value-added tax hike to boost war-strained budget
Russia's Finance Ministry on Sept. 24 proposed raising the value-added tax (VAT) rate from 20% to 22%, as the war in Ukraine continues to put pressure on the state budget.
The tax increase, part of the draft budget submitted to the Russian government, is aimed "primarily at funding defense and security needs," the ministry said.
The news comes amid Moscow's mounting economic woes, driven by record wartime spending and dropping oil prices.
The VAT rate for "socially significant goods," including food, medicines, or children's products, will remain at 10%.
The proposed changes also introduce new taxes on bookmakers, including 25% corporate income tax and 5% of the accepted bets, among other measures aimed at boosting the war-strained budget. If adopted, the changes will come into effect on Jan. 1, 2026.
Reuters reported earlier this month that the Russian government is planning to increase the VAT rate as part of the draft budget to keep the budget deficit under control.
According to the news agency, Russian President Vladimir Putin has pre-approved key elements of the draft, which is unlikely to face resistance in the parliament.
Ivan Us, chief consultant of the Center for Foreign Policy Studies of the Kyiv-based National Institute for Strategic Studies, said the Russian authorities are forced to make sacrifices — like increasing taxes — due to the country's budget deficit.
"Russia should make unpopular steps in the economy; either pay no pensions, or decrease salaries — which starts to happen now — or freeze people's bank accounts, or print more money," but that brings problems of its own, Us told the Kyiv Independent on Sept. 18.
VAT is a key source of revenue for the Russian budget. The last time the government raised the rate was in 2019, increasing it from 18% to 20%.
In 2024, VAT accounted for nearly 37% of all federal budget revenues, around 13.5 trillion rubles (now over $160 billion).
VAT generated 37% of Russia’s 2024 budget revenue, and raising it could halve the 2026 deficit, Reuters previously reported.
In June, Russian Finance Minister Anton Siluanov said the government had no plans to revise taxes again, despite ongoing challenges in meeting budget targets.
