Putin's new war tax: A heavy burden for Russian citizens and businesses

Putin has approved a sharp tax increase for Russians and Russian companies. This move is intended to provide additional funds for the war initiated by the Kremlin, writes the Polish newspaper "Rzeczpospolita." This will amount to 17 trillion rubles, approximately £165 billion over the next six years.

The document signed by Vladimir Putin introduces a progressive personal income tax (PIT) scale, and the corporate income tax (CIT) will also be increased. The new PIT tax rates are as follows:

• 22% for the highest earners, i.e., Russians with an income of more than £1.1 million annually
• 20% for those earning more than £440,000 annually,
• 18% for those earning more than £110,000 annually,
• 15% for Russians earning between £53,000 and £110,000 annually.

The Kremlin is introducing these changes for all Russians except for the "participants" of the Russian aggression in Ukraine. Families with more than two children and an income not exceeding the equivalent of £175 per month will pay a PIT rate of 7% instead of the standard 13% rate.

In 2025, due to the tax increases, an additional £13 billion is expected to flow into the Kremlin's budget. By 2030, this figure is expected to reach £76 billion. "The tax increases will hit Russian businesses even harder. Over the next six years, entrepreneurs will pay the state treasury an additional £271 billion. From 2025, the CIT rate in Russia will jump from 20% to 25%," it reads.

"Raising taxes will help Putin fund his war in Ukraine," notes Alexander Isakov, Chief Economist for Russia at Bloomberg Economics.

"Almost all of the extra money will go to the federal treasury, which is yet another confirmation that these are war levies," writes "Rz." This year, the Russian federal budget will allocate a record £112 billion to defence, with military spending accounting for 30% of the budget. "This is an amount unseen since Soviet times," emphasizes Isakov.

As the newspaper points out, the Kremlin assures Russians that these measures are for their benefit without mentioning the war. After the law was adopted, Vyacheslav Volodin, the head of the Russian Duma, stated that raising taxes was supposed to "develop the economy" and stabilize the tax system.