Russia prepares tax increases to support military spending

The Russian government estimates that the budget deficit will amount to 2% of Gross Domestic Product in each of the next three years and is proposing tax increases to support military spending, according to documents presented on Thursday by the Finance Ministry and cited by Reuters.

The ministry submitted the draft budget to the government, which will review it before October 1 and then send it to Parliament. Defense and security are described as a “strategic priority,” while the allocated funds are expected to cover the acquisition of weapons and equipment, the modernization of the defense industry, and the payment of allowances for military personnel.

The measures are being proposed as the war in Ukraine, now in its fourth and a half year, has increased costs for Moscow. The Russian economy has slowed significantly, and the authorities have already resorted to tax increases and additional borrowing.

The new proposals target what are considered excessive profits in metallurgy and fertilizer production, cross-border e-commerce, as well as passive personal income earned from investments, property sales, and bank interest. The ministry estimates that approximately four million people could be affected.