Should Russians Brace for a Tax Hike?

According to, the Russian Ministry of Finance believes that balancing the federal budget in the short term will require the Government to sell assets, drain the reserve funds and rise taxes. In order to cut the deficit from the projected 3.2% of GDP in 2017 to 1.2% of GDP in 2019, the Ministry of Finance needs to collect additional 2.5 trillion rubles (USD 38 billion) in the period 2017-2019. Revenues will be sourced from oil and gas companies, tobacco and soft drinks sales, e-commerce and state-owned companies.
The Ministry of Finance is not considering spending cuts, as the Government fixed the planned annual expenditures for the period at 15.79 trillion rubles (USD 242 billion). Therefore, the only option is to look for other sources of revenue, such as the increase of corporate tax, VAT, personal income tax and social security contributions. For example, the Ministry of Finance is considering increasing the personal income tax from the current 13% to 15-16%. The Ministry warns against rising the corporate tax rate, as it would negatively affect the investment climate. It advocates for the reduction of a unified social insurance rate to 20% and the VAT rate increase from 18% to 24%.
While Russian government officials are uncertain what measures will be undertaken to tackle the budget deficit, a source with the Federal Government stated that changes will have to take place by July 2018 or January 2019.

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