Russia's finance ministry raises taxes to bolster Putin's military budget
More frequent long-range strikes by the Ukrainian armed forces on strategically important targets, as well as growing spending to counter these attacks, are further deepening Russia's budget deficit.
The Russian finance ministry has enacted new tax measures to fund President Putin's military operations in Ukraine. The federal budget deficit expanded to 5.8479 trillion roubles (€60.4 billion) during the first half of the year, representing 2.8% of annual GDP, more than double the initially anticipated amount. This deficit is a result of increased defense spending and decreased revenues due to sanctions and volatile commodity markets.
To tackle the deficit, the finance ministry has proposed a new three-year budget with an annual deficit of around 2% of GDP, as well as amendments to the Tax Code that would increase the resilience of the budget system. Key changes include taxing passive income, like interest on deposits and dividend income, at rates of 13%-22%, and implementing a value added tax (VAT) on purchases from foreign online shops at the maximum rate of 22%.
The proposed tax measures are expected to impact approximately 4 million Russians, or 2.74% of the population. However, the ministry emphasizes that these changes will not affect the income of participants in the war. Additionally, a windfall tax will be introduced for certain companies in the mining and metals sector, and gold producers will face a 20% tax rate.
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