Kremlin prepares to raise taxation to increase war spending

Following the Russian elections, the Russian government intends to raise taxes on the general public and businesses, bringing in an additional US$27 billion for the state budget.

Source: Vazhnye Istorii, a Russian media outlet, with reference to unnamed sources who are "familiar" with the situation regarding tax reform.

Details: The legislative initiative could generate RUB 2.5 trillion (US$27.5 billion) annually to fund the Russian aggression.

It is planned to raise the tax rate for individuals earning more than 1 million roubles per year from 13 to 15%, and for citizens earning more than 5 million roubles per year from 15 to 20%. According to Russian journalists, approximately 14% of the Russian population, or roughly 20 million people, earns more than 1 million roubles per year (approx. US$11,000).

Furthermore, in both cases, an increased tax rate will be imposed on income exceeding the specified thresholds of 1 million and 5 million roubles, respectively. For example, if a person earns 7 million roubles per year, they must pay 13% for the first 1 million, which has not yet changed, and 15% for the next 4 million (because the amount exceeds the original 1 million roubles). Then, citizens are expected to pay 20% of the next two million roubles of income, because the total exceeds five million.

The government also wants to raise the income tax rate from 20% to 25%.

On 29 February 2024, Putin directed his government to develop proposals for "fairer distribution of the tax burden." Russian Finance Minister Anton Siluanov stated that proposals are already being prepared, but he later stated that he saw no reason to implement any changes.

As a result, there is a good chance that tax changes will be implemented this spring. At the same time, this could indicate Russia's desire to engage in a protracted conflict.

Background: Russia's military budget is more than twice the size of Ukraine's military budget in 2024.

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