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This month, Vladimir Putin put forward the idea of introducing a "progressive tax" in the Russian Federation. As analyst Leon Aron writes in a column for The Wall Street Journal, this idea, which will probably cause widespread dissatisfaction among Russians, is one of the most striking signs of the harsh financial situation in which the war with Ukraine is pushing Moscow.
The Kremlin's coffers are being drained by the war, which costs an estimated $300 million a day, plus massive rearmament and Western sanctions. Putin boasts last year's economic growth of 3,6%, but this is mainly due to the trillions of rubles the Kremlin has invested in the military-industrial complex. This "boom" left behind the civilian economy, burdened by the 16% interest rate of the central bank and the outflow of young workers to military service, defense work and emigration.
“The treasury of last resort, the $135 billion National Welfare Fund, holds only $58 billion in liquid assets (dollars, stocks and bonds), with the rest mostly in Chinese currency and gold. Last year, Putin withdrew $38 billion from the fund. One more raid can devastate it," the article says.
It is noted that raising the income tax rate was a difficult decision.
“Since the beginning of his rule, almost a quarter of a century ago, Putin's version of taxation without representation has been light taxation in exchange for fictitious representation. A flat income tax rate of 13%, in place since 2001, brought in only 6% of the national budget last year. Most of the income tax revenue goes to regional governments, most of which are mired in debt and dependent on Moscow for day-to-day operations. Now the shortage of funds forces the Kremlin to reach for the bottom of the financial barrel, ruining the province," the analyst notes.
The new rates of 15% and 20% will affect about 20 million Russians with annual incomes slightly above the national average of 860 rubles, or $000. The highest earnings in Russia are concentrated in large cities, where political problems usually arise.
"Putin is preparing the public for what Russian experts call "tax mobilization." The fine line between maintaining social peace and paying for the war, which Putin has been following for two years, has become even narrower," the expert added.
The Kremlin intends to monitor the stay of its citizens abroad and block their accounts in Russian banks. This is reported by the Russian mass media with reference to sources.
It is claimed that the Ministry of Finance of Russia has prepared a draft resolution by which banks and other financial institutions will be obliged to monitor the stay of their individual clients abroad and demand from them information about their tax residency.
