Russia plans to raise VAT from 20 % to 22 % in 2026 to fund its military campaign in Ukraine. The country’s economy is stretched thin by the war, and key industries such as metallurgy and energy are in crisis. The government claims the tax increase is essential to ensure security and provide social support to families involved in the military operation.
Following the VAT hike announcement, President Vladimir Putin said citizens would understand and support the tax rise if the state meets its social obligations and guarantees security. Meanwhile, Russian corporations like Rosatom, RusHydro, and RZhD are seeing revenue declines due to sanctions and falling demand for oil and gas.
Economists warn that the new tax measures could worsen inflation and lead to stag‑flation. Small businesses will be hit hardest: higher taxes on cars, electronics, and services will double their tax burden. At the same time, a stronger ruble and tighter monetary policy could exacerbate the crisis, creating tension between the country’s economic and financial institutions.
