The Finance Ministry has submitted a draft budget for 2026 and the planning period for 2027–2028 that would raise VAT from 20% to 22%. The ministry says the reduced 10% rate for food, medicines, and children’s goods will remain in place. If the amendments to budget and tax legislation are adopted, they will take effect on January 1, 2026.
VAT is built into the price of goods and services and is formally collected at every stage of production and sale, but in practice it is paid by the final consumer. The Bell estimated that the higher rate could bring the budget about 1 trillion rubles a year. The ministry said the money would primarily fund “defense and security,” including weapons, payments to service members, and support for the defense industry.
Ruben Enikolopov, a professor at the Barcelona School of Economics, told Novaya-Europe that the previous ways of covering the deficit through reserves and public debt have become harder to use: reserves are shrinking and new borrowing has become too expensive.
According to the outlet, Russia’s preliminary federal budget deficit for the first eight months of 2025 reached 4.19 trillion rubles. An anonymous economist interviewed by the publication said higher taxes are the simplest way to plug the gap if military spending keeps rising. The Kremlin called the budget draft “absolutely balanced,” while Dmitry Peskov described such steps as normal for the current stage.
The experts cited by Novaya-Europe say VAT is easier to collect than income or profit tax and distorts economic behavior less. At the same time, they warn that the increase will fuel inflation: Enikolopov expects prices to rise by 1–2% or slightly more, while another economist says the effect could be stronger because markups spread through the entire supply chain. In their view, this will reduce purchasing power and slow economic growth.
The ministry also proposed tighter rules for companies using the simplified tax regime, cuts to some payroll tax benefits for small and medium-sized businesses, and additional taxes for bookmakers. Enikolopov said those measures are secondary compared with the VAT increase. He did not rule out that if the deficit remains, the authorities will keep looking for new domestic revenue sources, including revisions to benefits and other tax regimes.