After two years of robust growth spearheaded by military spending on the war in Ukraine, Russia's economy is showing more signs of slowing. Oil revenues are down, the budget deficit is up and defense spending has leveled off.
The Kremlin needs money to keep its finances steady, and it's clear where authorities intend to get it: at the cash register, from ordinary people and small businesses.
An increase in value-added tax (VAT) to 22% from 20% is expected to add as much as 1 trillion rubles, or about $12.3 billion, to the state budget. The increase is contained in legislation already making its way through Russiaβs compliant parliament and would take effect from Jan. 1.
On top of the rate increase, the legislation lowers the threshold for requiring businesses to collect VAT to a mere 10 million rubles (about $123,000) in annual sales revenue, in stages by 2028. That's down from 60 million rubles, or $739,000.
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