Russian President Vladimir Putin has ordered a sharp increase in tax collection as Russia’s wartime economy shows clear signs of losing momentum, with slowing growth, weak oil prices and sustained sanctions putting pressure on state finances.
The Kremlin said the directive followed an early December meeting of the Council for Strategic Development and National Projects, where Putin called for stricter tax compliance and higher revenue mobilisation in 2026. The move signals growing fiscal strain nearly four years after Russia launched its full-scale invasion of Ukraine.
A significant portion of the additional revenue is expected to come from higher consumption taxes. From January 1, Russia raised its value-added tax from 20% to 22%, a measure authorities say could generate roughly 1 trillion rubles, or about US$12.3 billion, in additional income. The government is also preparing to introduce a new tax on electronics from September, widening the net to include consumers and technology-related businesses.
The push for higher taxes comes as Russia’s economic expansion has slowed to a near standstill. Official data shows that gross domestic product grew by just 0.1% year-on-year in November, while industrial output contracted by 0.7%. Quarterly figures also point to a steady loss of momentum, with GDP growth easing to 0.6% in the third quarter, down from 1.1% in the second quarter and 1.4% in the first.
For much of the war, Russia’s economy appeared more resilient than many analysts had predicted, supported by state spending, energy exports and the redirection of trade flows. However, that resilience is now being tested by a prolonged period of weak oil prices and the cumulative impact of Western sanctions.
Oil remains central to Russia’s fiscal position, and a roughly 20% drop in oil prices in 2025 has squeezed the Kremlin’s war chest. Lower energy revenues have reduced budget flexibility at a time when military spending remains elevated and social obligations are rising.
Compounding the pressure are shifts in the global energy landscape. Recent developments involving Venezuela have added to uncertainty for oil markets. Following the US raid and renewed focus on Venezuelan oil, some analysts argue that additional supply could further weaken prices over time, undermining Russia’s export earnings.
Investor Michael Burry, best known for his role in predicting the 2008 financial crisis, wrote this week that Russian oil had “just become less important” in the medium to long term. He suggested that expanded access to Venezuelan oil could reduce Russia’s income and geopolitical leverage. Similar views were expressed by John E. Herbst, a former US ambassador to Ukraine and senior figure at the Atlantic Council, who said President Donald Trump’s stated intention to bring Venezuelan oil back onto the market could deal another blow to Russia’s economy.
Despite the tax hikes, Putin has also instructed officials to revive economic growth and boost investment, while addressing structural weaknesses across key sectors. At the same time, the government is aiming to rein in inflation, with a target range of 4% to 5% by the end of 2026, in line with the central bank’s forecasts. Inflation is expected to ease from around 6% in 2025, after peaking near 9.5% in 2024.
Balancing these goals will be difficult. Higher taxes risk dampening consumer spending and business activity at a time when growth is already fragile. Yet without stronger revenues, the Kremlin faces limited options to sustain military expenditure and public spending without widening deficits.
Russia blocks Moroccan tomato shipment over alleged virus detection
