Russian President Vladimir Putin has signed a package of tax hikes worth nearly $30 billion that calls on workers and companies to provide funds for his offensive in Ukraine.
Since the February 2022 Moscow has ordered its troops into Ukraine since 2022, its spending has exceeded revenue by tens of billions of dollars, helping the economy defy expectations of a deep recession but also pushing it into rare budget deficits, AFP reported.
In 2023. Russia has a budget deficit of about 3.2 trillion rubles ($36 billion), equivalent to 2 percent of GDP.
Putin signed into law a set of amendments to Russia's tax code that includes an increase in income taxes paid by high-income earners and corporate taxes paid by businesses in an attempt to help fill the fiscal gap.
They were passed by the Russian parliament earlier this week.
"The changes are aimed at building a fair and balanced tax system," Finance Minister Anton Siluanov said when the proposed changes were outlined in May.
He said the additional funds would strengthen Russia's "economic well-being" and go towards a number of public investment projects.
According to the Ministry of Finance, the tax increase, which is being presented in the country as "systemic reforms", will bring in about 2.6 trillion rubles ($29 billion) in revenue in 2025 when it takes effect.
Russia has budgeted a deficit of 1.1% for this year - modest compared to many other countries.
But with Russia blocked by Western financial markets and some $300 billion of its foreign exchange reserves frozen by sanctions, Moscow's public finances are a key indicator of how long and how aggressively the Kremlin can finance its military campaign in Ukraine.
To cover its deficit over the past two years, Russia has turned to its sovereign wealth fund and borrowed from state-owned banks.
Defense and security spending has grown to more than 8 percent of Russia's GDP, Putin said in May.
He called the country's military budget a "great resource" that must be used "carefully and effectively."
Moscow is offering its soldiers fighting in Ukraine huge salaries and benefits and has also invested in local arms manufacturers as the offensive in Ukraine continues into its third year and appears to be in a state of exhaustion. | BGNES
