Putin Lacks Money: Will Introduce Biggest Tax Reform in 25 Years

Written by Camilla Jessen

Jun.03 - 2024 8:35 AM CET

Photo: Shutterstock.com
Photo: Shutterstock.com
It hasn't happened in almost a quarter of a century.

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For the first time in nearly a quarter-century, Russian President Vladimir Putin is considering a major overhaul of the nation's tax system, primarily to fund the ongoing war in Ukraine.

Alexander Kolyandr from the Center for European Policy Analysis commented on the economic strains to Sky News: "For the past two years, the Russian economy has been financed by the treasury. It can't go on forever."

If the new tax proposal is approved by parliament—a process expected to be a formality—the changes are set to be implemented next year.

The Kremlin anticipates that the reform will inject an additional $30 million into the state budget. Putin's last major tax reform was in 2000-01, shortly after his initial presidential inauguration, which established a uniform tax rate of 13% for all Russians.

In 2021, a higher tax bracket of 15% was introduced for citizens earning at least five million rubles (approximately $57,000). The new proposal will further adjust tax brackets for higher earners:

  • The 15% rate will now apply to incomes from 2.4 million rubles (approximately $34,500).

  • Earnings between five million and 20 million rubles (approximately $287,000) will be taxed at 18%.

  • Incomes between 20 million and 50 million rubles (approximately $720,000) will incur a 20% tax.

  • Incomes above 50 million rubles will face a 22% tax rate.

Additionally, corporate tax will rise from 20% to 25%.

The Kremlin reports that these changes will impact three percent of the Russian workforce. Despite this, there is noticeable public dissatisfaction in Moscow regarding the upcoming reforms.

Sergej, a Moscow resident who chose not to disclose his last name, shared his perspective: "I don't think they have enough money for the 'special military operation', and that's why they're doing it."

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