Tax increases in Russia are inevitable, a source in the Russian government told Reuters.
“Otherwise we simply will not be able to make ends meet, even by cutting defense spending. Revenues from oil and gas are declining, and the economy cannot fully compensate for that,” the source said.
According to the source, next year’s draft state budget will allocate slightly more than 8% of GDP to defense and security. Military spending will not be reduced in 2026, but it may be lowered in 2027 if the war in Ukraine does not continue, the source added.
“Even in the event of a ceasefire, it will still be necessary to produce ammunition and drones,
albeit in smaller volumes,” the source noted, stressing that the West will have increased defense spending, meaning Russia cannot afford to fall behind.
“There will be no return to the levels that existed before the ‘special military operation’,” he said, using Russia’s official term for its invasion of Ukraine.
Economist Sergei Aleksashenko – who in the 1990s served as Russia’s Deputy Finance Minister and First Deputy Chairman of the Central Bank, and is now a researcher at the NEST Centre think tank in London – also told Reuters that he expects tax hikes. Aleksashenko suggested that budget expenditures would also be cut by indexing pensions and social benefits below the inflation rate, which the Central Bank of Russia forecasts at 6–7% in 2025.
In July, Russia’s budget revenues from oil sales fell to 710 billion rubles (€7.6 billion), a third less than in the same month of 2024, Bloomberg reported, citing data from the Russian Finance Ministry.
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