Putin raises VAT to 22 percent, aims to plug hole left by war spending

Russian President Vladimir Putin has signed a tax reform that will increase VAT in Russia from 20 to 22 percent from next year. The measure is aimed at easing a budget deficit caused by rising military spending and a drop in oil and gas revenues, which are being slashed by Western sanctions.

The change will also hit small businesses, with the threshold for mandatory VAT registration dropping from 60 million to 10 million rubles, the Moscow Times reports.

Companies have already announced that they will pass on the increased costs to customers whose purchasing power is weakened by inflation and the effects of the war.

The Finance Ministry expects the change to bring only a slight increase in inflation. Some basic products such as medicines, baby goods and selected foodstuffs will remain taxed at a reduced rate of 10 per cent, but cheese with milk fat substitutes, for example, will now be taxed at the full 22 per cent rate.

VAT is a key part of the budget - in the first ten months of 2025 it generated more than a third of the state's revenue.

(mja)