Russia to raise taxes to offset budget pressures from invasion of Ukraine
Date
5/30/2024 8:27:04 AM
(MENAFN) In response to mounting financial strains stemming from the conflict in Ukraine, Russia has announced a comprehensive tax overhaul, aiming to bolster government revenues. The proposed measures, outlined by the Russian Ministry of Finance, entail significant increases in taxes targeting both corporations and high-income individuals. Notably, the corporate profits tax is set to rise from the current 20 percent to 25 percent starting in 2025, alongside the introduction of a new progressive income tax structure.
Interfax reports that these adjustments are anticipated to generate an additional 2.6 trillion rubles (approximately USD29.4 billion) in revenue for the year 2025. More than half of this revenue surge is projected to come from the augmented corporate tax rate. The Ministry of Finance has formally presented these proposals to the Council of Ministers, with expectations of approval from the House of Representatives prior to the summer recess.
According to Finance Minister Anton Siluanov, the proposed progressive income tax will impact around two million individuals, constituting roughly 3.2 percent of the total workforce. The new tax brackets will vary, with rates ranging from 13 percent for earners up to 2.4 million rubles annually to 22 percent for those with incomes surpassing 50 million rubles annually.
The decision to enact these tax adjustments follows Russia's persistent budget deficit since late 2022, attributed largely to the substantial costs incurred from President Putin's military intervention in Ukraine. Kremlin spokesperson Dmitry Peskov recently disclosed that expenditures on Russia's defense ministry and security sector have surged to nearly 6.7 percent of GDP. This figure is reminiscent of the heightened levels observed during the Cold War era in the 1980s, underscoring the magnitude of Russia's current defense-related expenditures, as reported by Interfax.
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