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Putin eyes first tax hike in a decade to fund war
Insights from Bloomberg, Financial Times, and The Wilson Center
The News
Russian President Vladimir Putin is mulling the country’s first significant tax hike in more than ten years, a sign of the rising strain that the war in Ukraine has had on the economy and government coffers.
The Kremlin is leaning towards imposing tax increases on corporate profits and high-earning individuals that would net the Russian government tens of billions of dollars, Bloomberg and Important Stories, a Russian independent outlet, reported, although a final announcement is not expected until the summer.
Putin has floated the idea repeatedly in public over the last few months, as the government braces for an expected deficit of 1.6 trillion rubles ($17 billion).
SIGNALS
Russia pushes to boost revenue wherever it can
Russian defense spending has tripled since the war in Ukraine began, to hit 8% of GDP, leading the Kremlin to look for ways to eke out additional funds wherever it can. Since 2022, Russia has reformed oil taxes in a way that has added billions in additional revenue, imposed heavy exit taxes on Western companies hoping to leave Russia, and implemented a windfall profit tax. “They need to do what’s called income mobilization,” a former official at the Russian Central Bank told The New York Times. “And increasing taxation is part of this.”
Russian oil price cap has become ‘unenforceable’
A price cap on Russian oil that was meant to deprive the Kremlin of key revenue has become “increasingly unenforceable,” a group of leading maritime insurers warned the UK, according to Bloomberg. Companies based in G7 countries are only allowed to assist with transporting Russian oil if the price of Russian crude remains under $60 a barrel. But with Russia’s shadow oil fleet steadily growing, Western countries are losing their ability to implement the price cap, Bloomberg reported. By the end of last year, nearly all of Russia’s crude was being sold above the price cap, Oilprice reported. Russia’s oil and gas revenue has surged over the past months, with April’s revenues set to be almost double what they were a year ago, Reuters reported.
