The Russian authorities are raising taxes, although they had promised not to do so until at least 2030. Starting next year, VAT will be 22%. Other rates are also increasing. How much money will this bring to Russia? And what will be the effect on the economy and people?
Taxes in Russia are increasing again - from 2026, VAT will rise from 20% to 22%. At the same time, the circle of those who will have to pay it is growing.
Although the authorities denied this possibility in early September, the increase in the tax burden was expected. In the context of falling oil prices and a slowdown in the economy, the state is forced to look for new sources of revenue to cover increased military spending.
A common practice in Russia
Increasing taxes in Russia is already a common practice. Starting in 2025, the corporate income tax rate was increased from 20 to 25 percent. Some organizations that previously used a simplified taxation system were required to pay VAT. And a multi-level progressive personal income tax scale was introduced for citizens.
When introducing these changes, the authorities promised not to carry out new tax reforms for some time - at least until 2030. But concerns remained, which is why officials had to remind them of their promise from time to time.
For example, in June, Finance Minister Anton Siluanov said that the government had agreed "not to touch the main taxes." In early September, President Vladimir Putin emphasized that budget revenues should grow without "increasing the tax burden."
The problem is that even without increasing the tax burden, revenues, although growing, are not growing fast enough to cover rising expenses. According to Prime Minister Mikhail Mishustin, in 2026, budget revenues should be 40.3 trillion rubles, and expenses - 44.9 trillion. In this situation, a budget deficit of almost 4.6 trillion rubles is expected.
How much will the state receive from the VAT increase
According to estimates by Reuters, in 2024 VAT in Russia provided 37 percent of budget revenues. Companies pay it on production and sales, but ultimately the additional burden is at the expense of consumers - producers and sellers pass on the additional costs in prices.
Along with the VAT increase, the authorities are sharply lowering the income threshold above which representatives of small businesses will have to pay this tax - from the current 60 million rubles per year, the threshold has been reduced to 10 million. In addition, it is planned to cancel the relief on social security contributions that applied to small and medium-sized businesses in a number of areas. This means an increase in the rate from 15 to 30 percent.
The authorities also made another decision - to increase the tax burden on bookmakers. There, the increase is from 5 to 25 percent on turnover.
The additional revenue to the budget from all these innovations will be between 2.4 and 2.9 trillion rubles, investment expert Dmitry Polevoy has calculated. Of this, up to 2 trillion will come from VAT, 500-600 billion - from the cancellation of social security contributions, and another 100-300 billion - from bookmakers.
What will be the side effects?
The increase in VAT is a pro-inflationary measure. With the previous increase of this tax in 2019 by two percent - from 18% to 20%, this has added between 0.55 and 0.7 percent to annual inflation. This time, according to Dmitry Polevoy's forecasts, the effect may be between 0.6 and 0.7 percent in the last quarter of 2025 (business will start raising prices in advance) and by 0.1 to 0.2 percent in the first quarter of 2026.
The growth in inflation may prevent the Central Bank from continuing to reduce the key interest rate. From which it follows that citizens will face not only price growth, but also a longer period of relatively high loan rates. However, this time at least the authorities are speaking more frankly about the goals of the tax reform.
The previous increase in VAT was explained by the need to finance Vladimir Putin's decrees, which provided for increased spending on education, healthcare and infrastructure. But in reality, education spending has only increased nominally, and an increase in healthcare spending was observed only during the pandemic.
Now Finance Minister Anton Siluanov is speaking directly: the money is needed for defense and security, i.e. for the continuation of the war against Ukraine.