The Tax Burden On Russia's Non-resource Sector Has Reached A 15-year High
- 28.07.2026, 20:21
The Kremlin is running out of money.
Several rounds of tax hikes aimed at funding a military budget that has reached its highest level since the Soviet era have pushed the tax burden on businesses and the population in Russia to unprecedented levels.
In the first quarter of 2026, non-oil and gas revenues of the consolidated budget (federal, regional, and local budgets) reached 31.6% of GDP, according to calculations by economist Kirill Rodionov based on data from the Ministry of Finance and Rosstat, as reported by The Moscow Times.
Tax collections from economic sectors not related to the raw materials sector have reached a record high for at least the past 15 years, according to Rodionov’s calculations. In monetary terms, the government collected 15.8 trillion rubles from businesses and citizens—or one out of every three rubles of the quarterly GDP of 49.9 trillion rubles.
The main drivers of the increased tax burden are the corporate income tax (whose base rate was raised from 20% to 25% in 2025) and VAT, which was raised this year to 22%—the highest rate in Russia since the early 2000s. As a result, Russia has joined the ranks of the world’s top countries in terms of the size of this tax, trailing only a few EU member states. Revenue collected from the economy via VAT reached 8.1% of GDP (compared to 6.7% of GDP in 2024), while revenue from corporate income tax reached 4.8% (compared to 4%), according to Rodionov’s calculations.
The Kremlin is rapidly draining “every piggy bank it can get its hands on,” says Agathe Demarais , a senior fellow at the European Council on Foreign Relations : The money is needed to cover military spending, which has quadrupled compared to pre-war 2021 and is “devouring” every third ruble in the federal treasury. At first, the Russian authorities “bleed-dried” businesses, including through the direct seizure of $50 billion in assets, and have now turned their attention to the general population, notes Demarais: In addition to the VAT increase, which consumers are paying out of their own pockets, a differentiated personal income tax scale was introduced last year.
“In addition to raising taxes, there is also a plan to improve tax collection. The Federal Tax Service has actively targeted small and medium-sized businesses as well as private individuals. The digitization of the economy, which has been underway for years, has led to greater transparency—that is, more data for the government,” — notes Alexandra Prokopenko, a research fellow at the Carnegie Center for the Study of Russia and Eurasia .
However, tax hikes are stifling the economy. And an economy that is declining and contracting cannot pay more taxes, Prokopenko emphasizes. Last year, the Ministry of Finance expected to collect 3.6 trillion rubles from the tax reform, but ended up falling short by 3 trillion. This year, despite the VAT increase, the budget deficit had already reached nearly 6 trillion rubles by the end of June, doubling the annual target.
It is possible that the growing budget “hole” will force the government to raise the VAT again, Rodionov believes. It is difficult for the Ministry of Finance to borrow on the debt market due to high interest rates, but it will also be difficult to maintain the current level of budget spending without raising taxes, the expert notes.
According to Bloomberg, spending on the war this year could exceed initial plans by 4–5 trillion rubles. To fund the military budget, the Ministry of Finance is preparing cuts to civilian spending, the agency’s sources said.