Overview

• Four government sources told Reuters that lifting VAT to 22% from 20% is under discussion for the 2026 budget, with the draft plan due to reach parliament on Sept. 29 and key elements already pre-agreed with President Vladimir Putin.
• VAT supplied about 37% of federal revenue in 2024, and Reuters estimates a two-point increase could cut the projected 2026 deficit roughly in half.
• At a meeting with party leaders, Putin said higher levies on luxury goods or stock dividends could be reasonable during wartime, despite his 2024 pledge to avoid major tax changes before 2030.
• Finance Minister Anton Siluanov said the budget rule will remain and outlined a plan to lower the oil price cut-off by $1 a year to $55 by 2030 to bolster reserves, aiming to reduce the budget’s dependence on energy receipts to 22% from about 25%.
• Officials expect the 2025 deficit to exceed the 1.7% of GDP target as inflation stays above 8%, growth slows toward 1%, interest rates remain near 17%, government borrowing costs hover around 13%, and scope for spending cuts is limited.