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Russia is considering raising its standard VAT from 20% to 22% to address a widening budget deficit driven by record military spending. Exemptions may apply to essential goods, with a decision expected alongside the 2026 draft budget.
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The proposed VAT hike could generate roughly 1 trillion rubles annually, about 0.5% of GDP, providing short-term fiscal relief. Economists warn exemptions for socially important goods may have limited impact on protecting households from higher prices.
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The 2025 proposal echoes the 2019 VAT increase from 18% to 20%, which initially sparked inflation but strengthened state revenues. VAT remains a reliable fiscal tool to sustain budget stability amid spiraling defense costs.
Source: vatcalc.com
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