The Russian economy is showing increasingly clear signs of exhaustion and Vladimir Putin's government is seeking to keep the war effort in Ukraine afloat at the expense of its population's pockets. According to the 2026 draft budget, the Kremlin intends to implement significant tax increases that will fall on both consumers and the business sector.
The government plans to raise VAT from 20% to 22% and drastically reduce the threshold from which small businesses must begin to pay it, which would drop from 60 million to 10 million rubles per year. In addition, a new 5% tax on gambling is expected. All this is happening in a context of economic slowdown and increasingly negative projections. Even with these increases, the fiscal deficit is expected to be around 1.6% of GDP next year.
The Ministry of Finance itself acknowledges that GDP growth will collapse to 1.3% in 2026, far from the 4.1% recorded in 2024 and even below its own previous estimates. Although defense spending will be slightly reduced—from a record 13.5 trillion rubles to 13 trillion—the tax burden falls on society. At the same time, resources allocated to "national security and law enforcement" will increase by 13%, which shows that the Russian administration prioritizes strengthening its defenses over relieving the population.
