Russia's Vladimir Putin Is Eyeing Big Tax Increases After Election to Fund the Country's War in Ukraine

By Trisha Andrada

Mar 12, 2024 05:55 AM EDT

Russia's President Vladimir Putin could decide to increase taxes on high earners and companies after this month's presidential election to fund the country's war in Ukraine.

Possible Tax Increase in Russia

According to Bloomberg, the government plans to increase by up to 4 trillion rubles ($44 billion), and two sources told the outlet that the hikes could be finalized this summer.

Under the plan, the government would increase personal income tax from 15% to 20% for those making over 5 million rubles (around $55,000) and from 13% to 15% for those earning over 1 million rubles (around $11,000) annually.

Russia's "Important Stories" news site reported that officials are also looking into raising the corporation tax rate from 20% to 25%.

According to Bloomberg Economics' economists, raising taxes would raise more money to finance the war, stabilize the ruble by regulating capital outflows, and pay for child benefits, which the government hopes will increase the country's low birthrate.

Read Also: North Korea's Kim Jong Un Receives Car From Russia's Vladimir Putin in Another Sign of Warming Ties Between the 2 Countries

Russian President Vladimir Putin joins his hands as he holds a meeting of the Russia
(Photo : MIKHAIL TERESHCHENKO / Sputnik / AFP via Getty Images)

Ukraine War's Influence on the Economy of Russia

Since February 2022, Russia has spent a considerable amount on the Ukraine war, which is draining resources from the broader economy. 

As a result, direct investment collapsed, and the inflation rate reached 7.4% in January. Economists have expressed concern that Russia's economy cannot sustain the costs of winning or losing the war in Ukraine.

Business Insider reported that Russia's Finance Ministry data showed that almost 50% of the national wealth fund's reserves had already been tapped as of late last year. The Kremlin is now allocating one-third of the national budget to finance the military and the war in Ukraine, which is three times the amount in 2021.

Last month, Vladimir Putin, who is widely expected to win reelection when the country votes from March 15 to 17, told Russian lawmakers he wanted a fairer tax distribution that targeted higher personal and corporate incomes. 

Read More: Russia-North Korea Partnership: What Kind of Weapons Technology Is Moscow Sending to Pyongyang

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