The beginning of 2026 brings in Russia the VAT increase from 20% to 22%, to help finance the war in Ukraine.
Russia increases VAT to 22% in the context of the war in Ukraine. Photo by Shutterstock
The increase in VAT would bring to the state budget 1,187 billion rubles, or approximately 15 billion dollars, this year.
The VAT increase, approved last year, attracted criticism from the business environment and consumers, already affected by high inflation, following Western sanctions, and higher spending on the defense sector. Income tax has also increased since the start of the war.
Last month, President Vladimir Putin declared that the VAT increase is necessary to balance the national budget, and promised that in the future the Government intends to reduce the tax burden on citizens.
Putin also asked companies to pay their taxes on time, warning that the VAT increase should not feed the underground economy but increase state revenues.
In a recent press release, the Ministry of Finance assured the public opinion that all commitments regarding social policy will be fulfilled, as well as those in the defense and security sector, and the provision of support for soldiers and their families are “strategic priorities”.
Defense and security sector spending was responsible for 40% of government spending in the 2025 budget.
Consumers expect the VAT increase to affect every purchase, although the Ministry of Finance intends to keep the tax rate on food, medicine and children's items at 10%.
In September, the Russian Ministry of Finance states that the new VAT has the priority objective of financing the defense and security of the country, but that it also considers the increase of other taxes, including those applied to gambling companies.
“The strategic priority is to ensure financial support for the defense and security needs of the country and for the social assistance of the families of those participating in the special military operation,” it is stated in the ministry's press release.
The institution explains that the additional budgetary resources would enable the equipping of the armed forces with weapons and military equipment, the payment of salaries of military personnel, support for their families and the modernization of enterprises in the defense industry.
According to the Ministry of Finance, the draft budget of Russia for 2026 will be “balanced and sustainable”, despite the considerable financial efforts imposed by the conflict in Ukraine.
