Putin wants to increase taxes on rich Russians and companies, writes The Moscow Times

Russian President Vladimir Putin has ordered officials and lawmakers to move quickly to raise taxes on wealthy citizens and prosperous businesses to fill a state budget that will spend one in three rubles this year on the military and arms production.

Putin instructed the government and parliament to make changes to tax laws by July 31 in order to achieve “a fair distribution of the tax burden, taking into account the amount of taxpayers’ income”, The Moscow Times website reported today, citing an overview of the head of state’s orders, published by the Kremlin.

Putin announced plans to raise taxes, including on personal income, in his message delivered at the end of February. In subsequent instructions, he did not give specific figures, but called for tax rates to be fixed until 2030 “in order to ensure stable and predictable conditions for the implementation of long-term investment projects”. He also ordered officials to prevent tax evasion or understatement of tax payments, the website said.

According to the portal, deputies of the State Duma, the lower house of the Russian parliament, have already discussed with government officials whether the tax increase should affect Russians with an annual income of at least five million rubles (about 1.27 million CZK), or a wider range of residents with an annual income of at least one million rubles (about 250,000 CZK).

If the increase in the personal income tax rate is from one million rubles, it will affect 15 percent of the population of Russia, and by the end of 2025 it could affect a fifth of the population, economists estimate.

Already in 2020, Putin increased the personal income tax to 15 percent for Russians with an annual income of more than five million rubles. According to the portal, this rate could now apply to everyone who earns more than a million rubles. And for those who earn more than five million, the rate is supposed to be 20 percent.

In addition to the personal income tax, there is also a special tax on the windfall of companies in Russia. This was introduced last year as a one-time event, but according to the portal’s source, the Kremlin liked the result so much that it may become a permanent tax. According to the Ministry of Finance, the state budget received more than 300 billion rubles (about 76.3 billion CZK) from the tax paid by companies whose average pre-tax profit in 2021-2022 exceeded one billion rubles.

Money is needed by the Russian budget, which, in addition to the war against Ukraine, also has to pay for Putin’s pre-election promises totaling 15 trillion rubles, in a situation where state reserves are falling sharply. The national welfare fund, where profits from oil and gas exports ended, was halved during the two years of the war against Ukraine: from $113.5 billion in liquid assets at the beginning of 2022, $55.9 billion remained as of April 1, 2024.

And this year, the Ministry of Finance intends to spend an additional 1.3 trillion rubles from the fund to finance the state budget deficit, and the Ministry of Economic Development plans to spend almost 900 billion rubles on investments of national importance.

The state news agency TASS, listing Putin’s instructions today, emphasized that the president ordered the government to reduce the poverty level in Russia to below seven percent of the population by 2030, i.e. the end of the new mandate of the head of state, ensure a stable increase in the birth rate and achieve inclusion of Russia among the four largest economies of the world according to purchasing power parity. The list of Putin’s orders goes even further – up to 100% sorting of municipal solid waste and a ban on discharging untreated sewage into Lake Baikal, also by 2030.

When Putin came to power at the beginning of the millennium, 29 percent of Russians lived below the poverty level, compared to 10.5 percent of the population, or 15.3 million Russians, the year before, a record low, although Russia came close once before in 2012 , when 15.4 million Russians lived below the poverty line, the RBK server reported, citing the statistical office. At the same time, the server recalled the previous development goal – to reduce the poverty rate to 6.5 percent of the population by 2030, i.e. by half compared to 2017.