Russia’s Finance Ministry announced on Wednesday, September 24, that it plans to raise the country’s value-added tax (VAT) to help finance the ongoing war in Ukraine, signalling another shift in economic policy as military spending continues to dominate the state budget.
According to the draft 2026 budget proposal, the VAT rate would rise to 22 percent from the current 20 percent. The ministry stressed that the government would still uphold its social policy commitments but identified defence, security, and support for soldiers and their families as “strategic priorities.”
Military and security expenditure already accounts for around 40 percent of total government spending in the 2025 budget, according to official estimates. Large state contracts for the defence industry, combined with substantial payments to troops and their families, have driven short-term growth in Russia’s war economy.
However, pressure is mounting on civilian sectors, where signs of strain are increasingly visible. Inflation has eroded household purchasing power, raising concerns about the sustainability of the Kremlin’s wartime economic strategy.
The Finance Ministry said the lower 10 percent VAT rate on essential goods, including food, medicines, and children’s products, would remain unchanged.
President Vladimir Putin’s government has been waging a full-scale war on Ukraine for more than three and a half years, with no clear end in sight. The proposed budget underscores the extent to which the conflict has reshaped Russia’s fiscal priorities, tilting resources heavily toward sustaining its military campaign.
The draft proposal still requires parliamentary approval, though in Russia the step is largely considered a formality. If passed, the increase would represent one of the clearest signs yet of how deeply the war is reshaping both the economy and everyday life in the country.
