Moscow lawmakers pass tax hike bill as Ukraine war approaches four years

Dhaka
November 18, 2025, 08:52 PM
by AP/UNB

UNB News
Dhaka
Publish- November 18, 2025, 08:52 PM
AP/UNB

Moscow lawmakers pass tax hike bill as Ukraine war approaches four years

designed to stop firms from dividing their operations to avoid taxes. But they are also expected to hit many small businesses that were previously exempt. The move is just one part of a swathe of new taxes that the Kremlin hopes will aid Russia’s slowing economy. One new initiative will scrap the special, concessional rate on a state “recycling fee” for cars, largely targeting high-priced, imported vehicles. Other proposals have included increasing taxes on spirits, wine, beer, cigarettes and vapes, as well as adding duties on technology items such as smartphones and notebooks. After two years of robust growth fueled by military spending, Russia’s economy shrank at the start of 2025 and is on course for growth this year of only around 1%, according to government estimates. Growth has suffered from high central bank interest rates, currently at 16.5%, which have been aimed at controlling inflation of 8% fueled by state defense purchases. In the Russian government's draft budget for 2026, which was also approved by lawmakers Tuesday, Russia’s military spending was set at 12.93 trillion rubles ($159 billion) — or 16.84 trillion rubles (207 billion), including spending on security and law enforcement. The bills must now be approved once more by the lower house, before moving to the upper house and being signed by President Vladimir Putin to become law. Slide 1 of 1 Previous Next In this photo provided by The State Duma, Lower House of the Russian Parliament Press Service, deputies attend a session at the State Duma, the lower house of the Russian parliament in Moscow, Tuesday, Oct. 28, 2025. (The State Duma, Lower House of the Russian Parliament Press Service via AP)

Russian lawmakers on Tuesday approved a package of tax increases as Moscow seeks fresh revenue to support its wartime economy nearly four years into the conflict in Ukraine.

The State Duma endorsed the crucial second reading of a bill that would raise the value-added tax (VAT) rate from 20% to 22%, a change expected to bring an additional 1 trillion rubles (about $12.3 billion) into state coffers.

The legislation also lowers the annual sales threshold for mandatory VAT collection from 60 million rubles (about $739,000) to 10 million rubles (about $123,000). The phased changes, set to run until 2028, aim to curb businesses from splitting operations to avoid taxes, but will sweep many small firms into the VAT net for the first time.

The VAT move is part of a broader set of new taxes the Kremlin hopes will bolster a slowing economy. One measure eliminates a special concessional rate on the state “recycling fee” for cars, which will primarily hit high-end imported vehicles.

Other proposals target higher taxes on alcohol, cigarettes, vapes and beer, as well as new duties on technology products, including smartphones and laptops.

After two years of strong growth driven by military spending, Russia’s economy contracted early this year and is forecast to expand by only about 1% in 2025, according to government estimates. High interest rates — now at 16.5% — aimed at curbing inflation of around 8% have added further pressure.

Lawmakers on Tuesday also approved the draft budget for 2026, which sets military spending at 12.93 trillion rubles ($159 billion), or 16.84 trillion rubles ($207 billion) when security and law enforcement allocations are included.

The tax and budget bills require a final vote in the lower house before moving to the upper chamber and then to President Vladimir Putin for his signature.