Russia proposes windfall tax on extractive companies — The Independent
In Russia, the aggressor state, the government has proposed new tax measures for extractive companies, as well as higher rates for income from bank interest, dividends and property sales. The initiatives accompany the draft state budget for 2027–2029, which parliament was due to consider on Thursday. As The Independent reports, the Kremlin is seeking additional revenue amid significant military spending and slowing economic growth.
Taxes for the extractive industry
The authorities propose introducing a windfall tax of between 20% and 30% for companies extracting iron ore, nickel and gold that have benefited from price increases since last year. They also plan to set rates of between 13% and 22% for income from bank interest, dividends and property sale transactions.
Such income is currently taxed at 13% if the amount does not exceed 2.4 million rubles, and at 15% for larger amounts. Other proposed changes, due to take effect from January 1, include a 100-ruble charge per parcel and 22% VAT on previously tax-exempt foreign goods worth up to 200 euros purchased online. Separately, a 35% tax is proposed on dividends credited to restricted accounts of investors from countries Russia calls “unfriendly”.
Deficit and reserves
According to the Kyiv School of Economics, Russia’s budget deficit reached 5.8 trillion rubles, or about $72 billion, during January–August. This is nearly 50% higher than last year and above the revised target of 4.8 trillion rubles.
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Chris Weafer, economist and head of Macro-Advisory Ltd, said Russia would likely have the resources to cover the deficit in 2027 and possibly in 2028. At the same time, this would come through an increased tax burden on households and businesses and reduced opportunities for the civilian economy and infrastructure.
Russia has no access to international bond markets because of sanctions that prohibit banks and investors from doing business with it. According to the Kyiv School of Economics, the authorities are also shifting part of the cost of the war against Ukraine onto banks that lend to defense enterprises. Liquid assets of the National Wealth Fund, including funds in Chinese currency and gold, have fallen to 1.7% of GDP.
The Kyiv School of Economics believes that Russia’s finances currently remain stable, but the room for maneuver is limited. In its view, a fall in global energy prices or a loss of confidence in the financial system could quickly upset this balance.
