Due to large military spending and a weakening economy, the Russian Duma decided to increase VAT - from 20 to 22 percent.
In addition, in the future, the tax will be paid by a larger number of companies: the payment threshold was lowered from 60 million to ten million rubles. The changes are expected to bring in additional revenues of about one trillion rubles (about 10.1 billion euros), writes ARD.
They will be introduced gradually until 2028 and should prevent companies from fragmenting their activities to avoid paying taxes. However, the higher VAT is expected to affect many smaller companies that have been exempted from it until now. The draft laws must be formally approved by the Duma and in a third reading before being signed by President Putin and entering into force.
Many other tax increases are also planned
The law to increase VAT is only part of a whole package of new taxes. Other proposals include raising rates for concentrates, wine, beer, tobacco and e-cigarettes, as well as introducing duties on technological products such as smartphones and tablets.
At the same time, the Duma approved the budget for next year. It provides for military spending in the amount of 13 trillion rubles - about 138 billion euros, ARD reported. If you add in security and prosecution costs, the figure rises to 16.84 trillion.
After two years of sustained growth fueled by military spending, Russia’s economy began to decline in early 2025, and the government expects it to grow by only about 1 percent this year. Growth is suffering from the Central Bank’s high interest rates, which stand at 16.5 percent and are meant to curb inflation of 8 percent, fueled by government spending on arms.