24 November 2025

The Russian government has made “difficult decisions” to raise taxes because all public finance reserves that allowed it to balance the budget have been exhausted. Deputy Finance Minister Vladimir Kolychev announced this at the “Priorities of Russia’s Socioeconomic Development” conference on Monday, RIA Novosti reported

. He stated that over the past six years, budget expenditures have increased from 16.6% of GDP to 19.7% of GDP, including due to defense spending, which has reached 30% of the budget—a record since Soviet times.

Meanwhile, revenues relative to the size of the economy have declined—from 18.4% of GDP to 17.1%. “This is primarily oil and gas revenues, while non-oil and gas revenues were more or less stable at the same level. And this gap has widened over these six years,” Kolychev stated.

“All public finance reserves were tapped: oil and gas revenues, the National Welfare Fund, and available balances. Public borrowing was increased, along with revenue mobilization measures that did not affect the basic tax conditions,” the deputy minister listed.

However, by this year, “public finance reserves were largely exhausted,” Kolychev stated. Therefore, he said, long-term decisions were made to “somewhat adjust the basic tax conditions.”

Starting next year, the VAT rate in Russia will increase to 22%, resulting in an additional 1.2 trillion rubles for the budget. At the same time, a radical tax reform for small businesses will be launched, lowering the simplified tax threshold from 60 to 20 million rubles, and then to 10 million. Furthermore, fines and duties will be significantly increased, and a “technology levy” will be introduced—a tax on smartphones, laptops, and other electronics, from which the authorities expect to generate approximately 200 billion rubles over the next three years.

“Of course, none of these fiscal policy decisions of recent years have been simple. But they help strengthen the sustainability of public finances, and that’s what a responsible government approach is,” Kolychev said.

In 2025, the government already raised the corporate income tax, the vehicle recycling fee, and introduced a differentiated personal income tax scale, hoping to collect 3.6 trillion rubles for the year and balance the budget with a minimal deficit of 1.2 trillion rubles (0.5%).

In reality, according to the Finance Ministry’s latest estimates, the “hole” in the treasury will reach 5.7 trillion rubles by the end of the year. Oil and gas revenues have plummeted by 20%, and the plan for key non-resource taxes has been thwarted. According to the adopted budget amendments, VAT collection will be 1.3 trillion rubles lower than expected, import duties and excise taxes will be 328 billion rubles lower, corporate income tax will be 160 billion rubles lower, personal income tax will be 36 billion rubles lower, and recycling fees will be 888 billion rubles lower.

Russia is now facing the full threat of falling into a tax spiral. “When you raise taxes, you want to collect a lot of money, but it doesn’t work out,” says Sofia Donetsk, chief economist at T-Investments.

This story could repeat itself next year, she doesn’t rule out: “The economy isn’t in fantastic shape right now, and with higher taxes it will feel even worse,” narrowing the tax base and forcing the authorities to raise taxes again.

https://www.moscowtimes.ru/2025/11/24/rezervi-gosudarstvennih-finansov-ischerpani-minfin-zayavil-onevozmozhnosti-svesti-byudzhet-bez-povisheniya-nalogov-a180861