The planned increase in the VAT rate in Russia from January 1, 2026, to 22% is unlikely to provide the expected growth in budget revenues. According to estimates, in 2026, VAT revenues will be $6.1 billion less than the Russian Ministry of Finance forecasts. This was reported by the Foreign Intelligence Service of Ukraine, writes UNN.
The tax increase will have a number of side effects. Domestic demand is expected to decrease, which will reduce excise and customs revenues. Higher prices will reduce corporate profits, the wage fund, and tax payments from personal income. Reduced dividends for private and state shareholders will lead to losses for individual companies, and regions will lose a significant portion of their revenues.
The increase in VAT will intensify inflationary pressure and force the Russian Central Bank to maintain a high key rate for at least two more quarters. This will increase the cost of government borrowing: the Ministry of Finance will have to place bonds at a higher yield, which will increase debt servicing costs and reduce the net fiscal effect of the reform.
It is noted that the 22% rate will make Russian VAT one of the highest in the world – only Hungary (27%) and several Northern European countries have higher rates. The decision indicates a shortage of budget resources caused by rising military spending and declining export revenues. As a result, Russia will face a further deepening of the economic crisis, an expansion of the shadow sector, and even more expensive loans for businesses and state-owned companies.