Putin Approved VAT And Business Tax Hikes And Introduced A "tech Levy" On Smartphones And Laptops

Russians will pay more for the war.

Russian Ruler Vladimir Putin on Friday signed a package of laws to raise taxes for households and businesses in 2026.

According to the documents, which were previously approved by the State Duma and the Council of Federation, from January 1, 2026, the VAT rate will rise to 22% - a record for Russia since 1992. As a result, the Russian Federation will be among the world leaders in terms of VAT, leaving behind only a few European countries.

At the same time, Putin approved a radical tax reform for small businesses, which will affect hundreds of thousands of entrepreneurs. The simplified taxation system, under which 4.4 million small companies operate, will be cut from 60 million rubles of annual income to 20 million in 2026, 15 million in 2027 and 10 million from 2027. Those with higher revenues will start paying VAT.

In addition, Putin signed a law on a "technology levy" of up to 5,000 rubles, which will be levied on sales of machinery and electronics, including smartphones and laptops.

With the help of the VAT increase, the government expects to collect 4 trillion rubles in the budget over three years, including 1.2 trillion rubles next year. About 200 billion rubles more for 2026-28 should bring "tech fee". In total, the tax innovations will cost businesses and citizens 2.6 trillion rubles in additional taxes over the year, the head of the Ministry of Finance Anton Siluanov estimated earlier.

The new budget shows that Russians will pay for the war, says Alexandra Prokopenko, a researcher at the Carnegie Russia Eurasia Center. The total fiscal effect of the VAT increase will amount to 1.4 trillion rubles, of which 1.2 trillion "will have to be borne by the population," experts at the IPN RAS estimate. According to their calculations, the cost of current consumption of citizens will increase by 1-1.6%, and inflation will accelerate by 1.1-1.3 percentage points.

Because of the tax reform for small businesses, almost half of the companies may close, according to the survey of the bank "Tochka": 15% are already considering the possibility of closing the business, and 30% will consider such a scenario in early 2026. 49% of entrepreneurs are ready to continue working after the tax reform.

In 2025, the government has already raised taxes: the income tax rate was increased and a differentiated personal income tax scale was introduced. The Ministry of Finance expected to collect an additional 3.6 trillion rubles in the budget for the year. But the collection plan failed, and the budget deficit was five times higher than originally projected.

It is possible that next year the government will have to raise taxes again, says Sofya Donets, chief economist at T-Investments. Russia may fall "into a tax spiral, when you raise taxes, you want to raise a lot of money, but it doesn't work out," she explains.

"This is the story of this year, and it may happen again next year. The economy is already not in fantastic shape right now, and it will feel even worse when you raise taxes," Donets warns.

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