Russia Considers VAT Hike to Tackle Widening Budget Deficit

The Russian government is contemplating a rise in the value-added tax from 20% to 22% to address a growing budget deficit amidst ongoing economic challenges. This move, yet to be finalized, is part of efforts to meet fiscal needs without cutting crucial government spending on defense and social sectors.

The Russian government is weighing an increase in the value-added tax (VAT) rate to address the expanding budget deficit, Reuters reports. Despite President Putin's assurances of no tax hikes, this move is seen as necessary due to the ongoing economic strain from the war in Ukraine.

This potential VAT increase, reportedly under discussion for the 2026 budget, could raise the rate from 20% to 22%. Such a change aims to mitigate the deficit, which has ballooned due to increased spending on defense and other governmental needs.

Russia's economic growth remains hampered by Western sanctions, with growth slowing significantly. The government's fiscal strategy includes maintaining the budget rule, which diverts excess oil revenue into a reserve fund, as they explore options to bolster revenues without drastic spending cuts.