Overview
- The Finance Ministry proposed raising VAT from 20% to 22% starting Jan. 1, 2026, and the government approved the draft 2026 budget for submission to the State Duma on Sept. 29.
- The ministry says the funds will equip the armed forces, pay military salaries, support families of service members, and modernize defense industry enterprises.
- A reduced 10% VAT rate for essential goods such as food, medicines, and children’s products will remain, while the package raises gambling taxes and tightens small‑business tax rules.
- Authorities estimate the VAT increase will bring in about 1.2 trillion rubles in 2026, and documents reviewed by Reuters indicate federal borrowing will rise sharply next year.
- The Central Bank and independent analysts warn the tax changes will push up prices, noting the 2019 two‑point VAT hike added about 0.6 percentage points to inflation and could complicate rate cuts.