Russia raises taxes on the rich for the first time in history to fund the war effort in Ukraine

According to "Kommersant," Vladimir Putin signed the tax amendment bill, which will come into effect in 2025. The bill introduces a progressive tax for individuals with incomes exceeding 2.4 million rubles. Russians who earn less will continue to pay a flat tax of 13%.

What taxes will citizens of the Russian Federation pay starting next year? For incomes ranging from 2.4 to 5 million rubles annually, the rate will be 15%. For incomes from 5 to 20 million rubles, the rate will be 18%. For incomes between 20 and 50 million rubles, the rate is set at 20%. The highest tax will be charged to the wealthiest—22% for incomes exceeding 50 million rubles.

"Corporate income tax was also raised from 20% to 25%. The value-added tax (VAT) will remain unchanged," reports "Kommersant."

It was also noted that soldiers fighting in Ukraine will pay taxes under the old rules. This is the Kremlin's strategy to attract volunteers to the front. In the first quarter of this year, Bloomberg reported that Russia aims to raise taxes to collect 4 trillion rubles, equivalent to 44 billion US dollars.

In a comment to the American agency, Russian economist Alexander Isakov explained that higher taxes would help Putin solve three problems.

Firstly, they would generate from 0.5 to 1% of GDP in public revenue, which would help finance the war in Ukraine. Secondly, they would limit capital outflow, thus reducing pressure on the Russian currency. Thirdly, a more progressive tax schedule would finance growing child allowance programs in Russia, which attempt to reverse the country's demographic decline, noted the economist several months ago.