Small businesses cry foul over war economy tax hikes

Russia's new wave of tax hikes, designed to mobilise state finances as the war in Ukraine grinds on, is set to hit one in |O small business owners, many of whom say they will have no choice but to shut down or move into the shadow economy.

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Russia has been gradually raising domestic taxes since 2023, the second year of the war, including personal income and corporate profit taxes, to keep up with military spending, now at its highest level since the Cold War. The new tax regime, including a measure to cut the annual revenue threshold for VAT tax breaks for small businesses to IO million roubles (123,000) from 60 million roubles, is set to take effect in 2026, pending approval by parliament.

“This is a shock for all small businesses,” said Sergei Borisoy, head of the Opora small businesses lobby, one of several groups that wrote a letter last week to speakers of both parliamentary chambers in an attempt to stop the initiative. Under the tax proposals, businesses with annual revenues of between IO and 250 million roubles, currently exempt from paying VAT, will have to pay VAT of up to 58 and will need to hire accountants to handle their tax affairs.