Russian President Vladimir Putin signed several decrees on Friday, July 12, aimed at raising taxes on high incomes and businesses. The move is aimed at financing the explosion of spending linked to the conflict in Ukraine, while Russia’s federal deficit reaches 0.5% of GDP in the first six months of 2024.
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The presidential decrees were published on the official portal of the Russian government, after the Duma and the Federation Council, the two chambers of parliament, voted in favor of the bill.
In Russiapublic spending has exceeded revenue by several tens of billions of euros since the start of the offensive in Ukraine in February 2022. In the first half of 2024, the federal deficit reached 0.5% of GDP, according to the Ministry of Finance. It projects a deficit of 1.1% this year, a level that is still well below most major global economies.
In an attempt to compensate for this imbalance, the Russian state will introduce new tax thresholds for the highest incomes (at 18%, 20% and 22%) and increase corporate income tax (from 20% to 25%). In total, this increase in taxation represents approximately 27 billion euros additional budgeted for 2025.
” These changes aim to establish a fair and equitable tax system. “balanced,” Finance Minister Anton Silouanov recently justified. Only ” 3 % to 4% “Russians and businesses are affected by these tax increases,” he also said. For the rest of the population, the tax rate will remain at 13%, as it has been since 2001. The authorities are indeed trying to be cautious so as not to affect the standard of living of the majority of the population, already affected by inflation which currently stands at 8.6%.
An economy damaged by war
Officially, the revenue from these tax increases is to be used to finance a series of ” national projects “, these multi-year programs announced at the beginning of the year by Vladimir Poutine. They mainly concern social spending. In reality, it is mainly about financing the war effort in Ukraine, after more than two years of a conflict that is costly economically and humanly.
The Russian military budget has exploded by almost 70% in 2024 and will represent 6.7% of GDP this year, Vladimir Putin revealed in mid-May.
In order to ” streamline ” spending and further increase production for the army, Vladimir Putin said ousted a historic member of his government, Sergei Shoigu, in mid-May. and appointed in his place an interventionist economist with no military experience, Andrei Belousov.
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