The enormous costs of the offensive war against Ukraine have pushed Russia's inflation to 8 percent. This in turn has led to a key interest rate of 16.5 percent, which puts a lid on Russian spending.
At the same time, oil revenues have decreased by 20 percent.
In order to afford to continue the war, Putin is therefore proposing an increase in VAT from 20 to 22 percent, reports the AP news agency . And the number of businesses covered will gradually become much larger – from all companies with a turnover of at least 60 million rubles, to all those with a turnover of 10 million rubles (1.2 million SEK) and above.
Muscovites spoken to by AP believe that such a measure could fail.
"I think small and medium-sized businesses will go under," says pensioner Svetlana Martynova.
The budget receives less, not more.
Could be tech tax
For consumers, the government wants to raise taxes on alcohol and tobacco. Liquor prices have already risen sharply in recent years, so the image of almost free Russian vodka is a thing of the past. But now the tax is to be raised even further, which means, for example, that the minimum price for a half-liter of vodka will be raised to 366 rubles (43 kronor).
There are also reports of consideration of a “tech tax,” which would add up to 5,000 rubles to every mobile phone and computer sold.
The measures come as the state budget deficit is forecast to grow from 1.7 percent last year to 2.6 percent this year. That's not high by international standards. But unlike most others, Russia does not have access to the global bond market, and must borrow domestically.
12 to 14 months
That makes the economy extremely sensitive. But Putin can handle it for a while longer, believes Alexandra Prokopenko at the Carnegie Russia Eurasia Center think tank in Berlin.
Growth is slowing, but companies are paying their taxes, people are consuming and getting paid, she tells AP.
For the next 12 or 14 months, Putin has enough to sustain the war effort like this, and at current spending levels.
But if the war continues into 2027, “he will have to make difficult choices,” according to Prokopenko.
