Russia raises taxes for the first time in decades to fund the war effort
For the first time in 26 years, Russia is raising taxes. In this way, dictator Vladimir Putin wants to bolster the country's budget, which is burdened by a special military operation – as the Kremlin describes the invasion of Ukraine. The wealthiest will pay higher taxes.
According to "Kommersant", Vladimir Putin signed the tax amendment bill, which will come into effect in 2025. The bill introduces a progressive tax for individuals with incomes exceeding 44,000 Canadian dollars. Russians who earn less will continue to pay a flat tax of 13%.
What taxes will citizens of the Russian Federation pay starting next year? For incomes from 44,000 to 92,000 Canadian dollars annually, it will be 15%. From 92,000 to 368,000 Canadian dollars (18%) and for incomes between 368,000-920,000 Canadian dollars (20%). The highest tax will be paid by the wealthiest – 22% for incomes exceeding 920,000 Canadian dollars.
"Corporate income tax was also raised from 20% to 25%. The value-added tax (VAT) will remain unchanged," reads "Kommersant".
Bolstering the budget
It was also noted that soldiers fighting in Ukraine will pay taxes under the old rules. In this way, the Kremlin wants to attract volunteers to the front. In the first quarter of this year, Bloomberg reported that Russia wants to raise taxes to collect 74 billion Canadian dollars, which converts to 53 billion US dollars.
In a comment for the American agency, Russian economist Alexander Isakov explained that higher taxes would help Putin solve three problems.
Firstly, they would generate from 0.5 to 1% of GDP in public revenues, which would help finance the war in Ukraine. Secondly, they would limit capital outflow, thus reducing pressure on the Russian currency. Thirdly, a more progressive tax schedule would finance growing child allowance programs in Russia, which attempt to reverse the demographic decline in Russia – according to economists several months ago.
