To alleviate budget pressures, Russia plans to increase value-added tax and expand the tax base.

The Russian Ministry of Finance stated on Wednesday that the value-added tax rate will be increased from the current 20% to 22% starting early next year. The ministry also mentioned that the scope of value-added tax collection will be expanded. Previously, companies with annual incomes exceeding 6 million rubles were required to pay value-added tax to the government, but now this threshold will be lowered to 1 million rubles. The expenses related to the Russia-Ukraine conflict, coupled with the decrease in oil and gas revenues, have put more pressure on the budget. In addition to tax increases, two sources familiar with the matter stated that the government is also considering reallocating and reducing some civilian project expenditures, indicating that officials are facing difficult decisions in seeking to balance the budget. One source mentioned that raising the value-added tax rate and expanding the tax collection scope could generate approximately 1 trillion rubles in revenue annually. The Russian Ministry of Finance has submitted a three-year budget plan and amendments to tax laws to the government, which will be discussed by the cabinet today and reviewed by the State Duma on September 29th.