Budget Under Pressure
The Russian government is turning to its long-term budget. Parliament will debate it this week. New tax hikes target specific groups. Mining firms and high-income earners face higher rates. This differs from last year's broad VAT increases. The focus is now on investment income and property sales.
Deficit Exceeds Projections
This year's budget deficit has blown past initial forecasts. Military spending is soaring. Economic growth is sluggish. Sanctions, high interest rates, and labor shortages are key factors. Ukrainian strikes on oil refineries worsen the situation. By late August, the deficit reached 5.8 trillion rubles. That is 50% higher than last year. It also exceeds the revised target of 4.8 trillion rubles.
New Tax Proposals
Proposed taxes include a 20-30% windfall levy on mining companies. This targets iron, nickel, and gold producers. Other measures raise rates on interest and dividends to 13-22%. Currently, income under 2.4 million rubles is taxed at 13%. Amounts above that face 15%. A 100-ruble parcel tax takes effect January 1. Foreign goods under 200 euros bought online now face 22% VAT. A 35% tax applies to dividends paid to foreign investors from unfriendlynations.
Public Reaction
Street interviews in Moscow reveal mixed feelings. Citizens complain about the burden. Denis Bystrov, 39, says the state needs money. Nelly Godunova, 92, questions what she can do. She notes her four free degrees. Sergei Sukachev, nearly 70, says the money goes to the military. He admits his business suffered but urges resilience.
Chris Weafer, executive director of Macro-Advisory Ltd., offers insight. He says Russia is not in an acute crisis. Instead, it faces long-term erosion of public welfare. Russia has enough funding for 2027 and likely 2028. But this comes at the cost of higher taxes. Less money remains for economic development or infrastructure. The budget now primarily funds the army. The economy is becoming unbalanced. Growth is driven by state-linked industries. The rest of the economy struggles or fails.
Expert Analysis
A branch of German firm Metro was seized under temporary administration laws. It was asked to contribute 1 billion rubles to the war effort. Metro AG in Germany stated it had no involvement. The donation goes to the National Frontfund. This fund buys vehicles, comms, and anti-drone gear for soldiers. Weafer suggests this move may be part of negotiations over frozen Russian assets abroad. However, forced donations increase the risk that the Finance Ministry treats foreign firms as revenue sources.
Foreign Firm Seizure
Russia's financing sources are under intense pressure. Surface figures look manageable. The government forecasts 0.6% GDP growth this year. Unemployment is at a record low. Government debt is very low. Oil export revenues have held firm due to high global prices. The revised deficit is around 3% of GDP. This is higher than last year's 1.6%. It is lower than the US's 5.8%. It is close to the EU average of 3.1%.
Resilient Yet Vulnerable
However, sanctions block access to international markets. The Kremlin cannot easily tap global capital. This limits its options. The situation is complex. While some metrics look stable, the underlying strain is real. The war continues to drain resources. The search for new revenue is urgent.