Kathrine Frich
Four years into the war in Ukraine, strains are becoming increasingly visible inside Russia’s economy.
Falling energy revenues and rising state spending have prompted fresh fiscal measures that are now being felt by small businesses across the country.
Oil income falls
According to reporting cited by Bloomberg and highlighted by the Institute for the Study of War (ISW), Russia’s oil and gas revenues fell sharply in 2025.
The Russian Finance Ministry said federal budget income from oil and gas taxes totalled 8.48 trillion rubles, about £80.5 billion, marking a 24% drop compared with 2024 and the lowest level in five years.
The decline has been linked to reduced gas exports under Western sanctions and weaker global crude prices, putting additional strain on Moscow’s finances as military spending remains high.
VAT overhaul
In response, the government has introduced tax changes that affect smaller enterprises.
Value-added tax has been increased by two percentage points, while the annual revenue threshold requiring businesses to pay VAT has been cut from 60 million rubles to 20 million rubles this year, with plans to lower it further to 10 million rubles by 2028.
Businesses using Russia’s patent taxation system, which previously allowed firms to pay a fixed annual fee instead of a percentage of turnover, are also facing tighter rules.
Those earning above 20 million rubles must now pay at least 6% on revenues and a minimum 5% VAT.
Despite concerns, President Vladimir Putin has said that “companies should not, in any way, suffer with the transition to the new tax system”.
Business owners speak out
Some entrepreneurs say the reforms are already taking a toll.
Darya Demchenko, who runs a chain of beauty salons in St Petersburg, told AP News she was forced to close one outlet and sell another because of higher taxes, rising costs and weak demand.
“I’ve never felt so scared as this year, so unprotected, so anxious… This year, we haven’t felt any support at all. We feel like they want to shut us down,” she said.
Bakery owner Denis Maksimov publicly appealed to Putin to review the tax changes, warning that “many” businesses risk shutting their doors.
“We understand very well that it’s not an easy situation for the country. We understand that raising taxes is necessary,” he said.
“We’re looking ahead without optimism, frankly speaking. Many [businesses] will close down… I think we will grow, maybe slower than before, but no less confidently, I think.”
Sources: Bloomberg, Institute for the Study of War, AP News, Express.
