Putin Endorses Progressive Tax Hike for the Rich Amid Ukraine Conflict

Russian President Vladimir Putin has signed into law a progressive tax bill increasing income taxes for the wealthy. This new legislation, aiming to raise government revenues amid the Ukraine conflict, shifts away from a flat tax system to a graduated model, impacting a small percentage of taxpayers.

Russian President Vladimir Putin has endorsed a bill that increases income taxes for the wealthy, part of an effort to bolster government revenues during the ongoing conflict in Ukraine.

The bill, signed into law two days after parliamentary approval, introduces a progressive tax system, replacing the flat-rate tax that helped improve revenue collections since its introduction in 2001.

The new law imposes a 13% tax on incomes up to 2.4 million rubles (USD 27,500) per year, with higher rates for greater incomes, maxing out at 22% for incomes above 50 million rubles (USD 573,000). Company income tax rates will also increase from 20% to 25%.

The tax reform is projected to add 2.6 trillion rubles (USD 29 billion) to federal revenues by 2025. Initially introduced to combat tax evasion, Russia's flat tax system saw a modification in 2021 for high earners.

Chris Weafer, CEO of Macro-Advisory, interprets the tax hike as a strategy to lessen Russia's dependence on oil revenues amid Western sanctions targeting Russian oil exports.

“The government is looking to broaden out the tax base, making it less dependent on external factors and more secure by shifting the orientation towards domestic sourcing,” Weafer commented.