Putin asks the rich to pay up
Since the march of Russian troops into Ukraine, state expenditures have significantly exceeded revenues. However, Putin needs money for the war. To fill the state coffers, he is now reaching deep into the pockets of the wealthy. Tax increases are planned to bring in billions.
In an effort to secure additional revenues for the financing of the war in Ukraine, Russian President Vladimir Putin signed legislation that includes tax increases in the billions. Putin signed a series of amendments to the Tax Code, which among other things, provide for an increase in income tax rates for high earners and an increase in the corporate tax rate for companies.
The increases are estimated by the Finance Ministry to bring in approximately €27 billion euros per year. The plans were presented by the Finance Ministry in May. The legislation was passed by parliament at the beginning of the week.
Finance Minister Anton Siluanov had stated in May that the changes, referred to in the country as "systemic reforms," aimed for a "fair and balanced tax system." The additional funds would promote "economic well-being" in Russia and flow into a series of public investment projects.
Since the march of Russian troops into Ukraine in February 2022, state expenditures have significantly exceeded revenues. Russia recorded a budget deficit of approximately €33 billion euros in 2023, which is roughly two percent of the Russian Gross Domestic Product. For the current year, a deficit of approximately 1.1 percent is expected.
The significant increase in Russian state expenditures for defense is expected to significantly burden the Russian economy, according to British assessment. "Continuously increasing military expenditures are likely to contribute to inflationary pressure in Russia," the British Defense Ministry stated. The increase in military expenditures is expected to force the government to make difficult decisions for war financing - increasing the pressure on businesses.
The budget plan for 2024 shows an increase of 68 percent in comparison to the previous year for defense. Defense spending therefore rose to six percent of the Gross Domestic Product, according to London. "On the other hand, spending for education and healthcare will be frozen at the 2023 level, which in real terms represents a spending cut due to inflation."
In light of Russia's ongoing military actions in Ukraine, President Vladimir Putin enacted tax increases to generate billions, primarily affecting wealthy individuals and corporations. To meet the budget deficit resulting from increased military expenditures, Putin signed a Tax Code amendment, raising income taxes for high earners and corporate taxes for companies.
