Exception for soldiers

Russia raises taxes after two years of war

Russian President Vladimir Putin is spending a lot of money on the invasion war in Ukraine - a tax increase is intended to replenish the state coffers.

(Bild: APA/AFP/POOL/Mikhail METZEL)

After more than two years of war against Ukraine, Russia's government wants to raise taxes on higher incomes and corporate profits. Soldiers in the war zone are exempt from this measure. The additional revenue is to be used for social purposes, the Kremlin explained.

On Tuesday evening, the Ministry of Finance in Moscow published the key figures already announced by Kremlin leader Vladimir Putin. According to these, the current top income tax rate of 15 percent is to rise by seven points to 22 percent.

The lowest tax rate remains at 13 percent - for incomes of up to 2.4 million roubles a year (around 24,000 euros). Taxes on corporate profits will rise from 20 to 25 percent. This will also allow Russia to increase its reserves, which have dwindled as a result of the war against Ukraine, which has been going on for more than two years. Since the start of the war, the reserves in the National Wealth Fund (NWF) have shrunk by around half, with liquid assets recently amounting to the equivalent of around 50 billion euros. The money from the fund was repeatedly used to balance the budget deficit.

Russian soldiers in Ukraine are exempt from the tax increase.

(Bild: APA/AFP/Andrey BORODULIN)

Soldiers and the self-employed are not affected
According to the information, around three percent of employees or two and a half million people who earn more than the equivalent of 2,000 euros per month are affected by the staggered increases. The top tax rate only applies to annual incomes of more than half a million euros. Soldiers in the war zone, who earn comparatively high wages, are exempt from the changes, as are the self-employed.

In addition to the enormous expenses for the war economy, the Russian leadership must continue to fulfill many social tasks, which is why the state, which is dependent on oil and gas sales, is reliant on additional income. The highest tax increases to date under Putin have yet to be approved by parliament.

According to the Ministry of Finance, the state intends to spend the additional revenue on family, children and youth projects, as well as on the construction of housing and roads and the development of the IT sector. Some of the money will also be spent on other social purposes, including the renovation or expansion of medical facilities, schools, kindergartens and universities.

"The adoption of these proposed changes will ensure stable and predictable conditions for citizens, businesses and the regions over the next six years. And this will ensure the growth of the country's economic prosperity," Finance Minister Anton Siluanov was quoted as saying in a statement.