Russia Proposes VAT Hike to 22% for Military Funding Amid Economic Concerns
Russia's finance ministry has proposed raising the VAT to 22% by 2026 to fund the Ukraine war's defence and security needs. The increase aims to generate additional revenue despite the potential for higher inflation. The proposal highlights Russia's economic challenges amid plummeting growth expectations.
Russia's finance ministry has unveiled a proposal to increase the value-added tax (VAT) from 20% to 22% starting in 2026. The proposal seeks to generate additional revenue primarily for military spending amid the ongoing war in Ukraine.
This tax hike is anticipated to produce around 1 trillion roubles ($11.9 billion) in revenue, despite the risks of exacerbating inflation, which the central bank is working to control. This increase follows the historical precedent of tax hikes during wartime.
President Vladimir Putin emphasized the importance of financial support for defense and security, signaling its priority amidst dwindling economic growth, expected to drop from 4.3% to around 1% this year. Critics argue the measure could burden businesses and citizens alike.
(With inputs from agencies.)
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