moscow Has Come up with a 101st Way to Squeeze Money out of Businesses

The kremlin is launching a large-scale campaign to fight the “shadow economy”, but behind the facade of fiscal discipline there lies the need for funds to finance the war of aggression against Ukraine.

According to rosstat, in 2025 the share of loss-making companies rose from 25.5% to 27.1%, and total losses increased by 7.5%: the corporate sector is rapidly deteriorating, while the budget is falling short. This is precisely what gave the government a pretext to introduce a whole arsenal of “control measures”: a new system for verifying importers, advance VAT payments, criminal liability for cryptocurrency mining, and licensing of tobacco trade. Cash circulation, informal employment, and the gold market have also come under scrutiny.

The ministry of finance of the rf estimates the effect of all this at 0.3–0.4% of GDP, or $7.6–10 billion annually. However, these estimates appear to be grossly inflated.

The businesses’ reaction is predictable: price hikes, staff and investment cuts, or simply moving into the shadow. In the far east, 36% of entrepreneurs are already considering closing their businesses. Banking statistics shows stagnation in non-cash payments following the latest VAT increase – from 20% to 22%. In some regions, nearly half of respondents report that businesses are offering to pay them in cash.

The result is predictable: the more aggressively the state cracks down on businesses, the further they go into shadow, and the less in taxes the budget ultimately collects. The kremlin is destroying the very tax base it is trying to tax. A structural decline in revenue is becoming the new reality in russia.