russia Is Raising Taxes and Cutting Social Programs to Finance the War and the kremlin

russia’s draft federal budget for 2026–2028 provides for the redistribution of resources from social and regional programs to the military-industrial complex and law enforcement agencies.

The government plans to raise the VAT rate from 20 % to 22 %. Minister of Finance Anton Siluanov has acknowledged that this would lead to higher prices and pressure on businesses. Starting in 2026, a new taxation system will be introduced for small and medium-sized businesses: the annual income threshold for the simplified system will be reduced from about $723,000 to $120,000, while for IT companies, preferential insurance contributions will be abolished, and they will increase from 7.6 % to 15 %.

Funding for 18 out of 51 state programs will be cut. The largest cuts will be in spending on the “Chemical and Biological Safety” (–36 %), “Aviation Industry Development” (–30 %), and “Energy Development” (–29 %) programs. At the same time, appropriations for the “Development of the Electronic and Radio-Electronic Industry” in the interests of the military-industrial complex will increase 4.4 times, to $2.2 billion in 2026.

The increase in the tax burden and the reduction in social spending indicate the government’s attempts to keep military spending growth at the expense of the population. The Pension and Social Insurance Fund, which provides payments to 40 million russian pensioners, will have a deficit of about $8.3 billion this year.

At the same time, the cost of maintaining president of the rf putin and his administration will rise again to $354 million in 2026 (approximately $1 million per day), which exceeds the annual budgets of regions such as Kalmykia and the Jewish Autonomous Region.