Vladimir Putin could raise taxes after the presidential election this month to keep the money flowing to pay for the country’s war in Ukraine.
Bloomberg reported on Monday that the Kremlin is considering dipping into the pockets of high-earning Russians and corporations, as the government plans to hike taxes by as much as 4 trillion rubles ($44 billion). Sources said that the hikes could be finalized this summer.
Under the plan, the government would raise personal income tax from 15% to 20% for those earning over 5 million rubles (roughly $55k USD) and from 13% to 15% for those making over 1 million rubles (roughly $11k USD) annually. Officials are also considering bumping up the corporate tax rate to 25% from the current 20%, according to Russia’s “Important Stories” news site.
Putin delivered a message to Russian lawmakers on February 29 that he wanted a fairer tax distribution, targeting higher personal and corporate incomes. The Russian president is widely expected to win reelection easily when the country votes on March 15-17.
Economists with Bloomberg Economics said tax hikes would help generate public revenue to finance the war, reduce pressure on the ruble by stemming capital outflows, and fund child benefits the country hopes will stimulate its low birthrate.
Russia’s hefty spending on the Ukraine war since February 2022 is siphoning resources from the broader economy, with a 7.4% inflation rate and collapsing direct investment. Economists have warned that the country’s economy cannot sustain the costs of either winning or losing the war in Ukraine.
With the Kremlin now allocating one-third of the national budget to finance the military and the war in Ukraine, triple the amount in 2021, Finance Ministry data shows that nearly half of the national wealth fund’s reserves were tapped by the end of last year.
