Targeting the wealthy.. Moscow approves income tax increases | Economy

Russian President Vladimir Putin on Friday issued a package of tax increases for workers and businesses worth about $30 billion.

Moscow’s spending has exceeded its revenues by tens of billions of dollars since the outbreak of the war between Russia and Ukraine in February 2022, causing a large budget deficit.

Russia recorded a budget deficit of about 3.2 trillion rubles ($36 billion) in 2023, equivalent to 2% of GDP.

Putin on Friday issued a package of amendments to Russia’s tax code that includes increases in income taxes for high-income earners and corporate taxes, in an effort to help bridge the fiscal gap.

The Russian parliament had approved these amendments earlier this week.

“These changes are aimed at building a fair and balanced tax system,” Finance Minister Anton Siluanov said when the proposed amendments were prepared in May.

He noted that the additional funds would boost Russia’s “economic well-being” and would be used in a series of public investment projects.

The tax increases, which are being promoted domestically as “systematic reforms,” will raise about 2.6 trillion rubles ($29 billion) in 2025 when they come into effect, according to the Finance Ministry.

Russia has approved a budget that includes a deficit of 1.1% this year, a modest amount compared to many countries.

But with Russia shut out of Western financial markets and about $300 billion of its foreign exchange reserves frozen by sanctions, Moscow’s public finances are a key indicator of how well the Kremlin can sustain its war with Ukraine.

Russia has used money from its sovereign wealth fund and borrowed from state-owned banks to cover deficits in the past two years.

Military spending has risen to more than 8% of Russia’s GDP, Putin announced in May.

Putin described the country’s military budget as a “great resource” that must be used “carefully and effectively.”