With Russia’s invasion of Ukraine intensifying the strain on state finances, President Vladimir Putin is reaching for cash to fund his government and the war, squeezing tax revenue from an economy that’s increasingly skewed toward the military — while civilian needs take a back seat.
asserted
needs → intensify → seat
The country's 2027-2029 state budget, which will be taken up Thursday in the rubber-stamp parliament, is accompanied by a string of tax hikes announced after the September parliamentary elections.
asserted
which → take → elections
While last year the Kremlin went for a broad tax increase, raising value-added taxes at the cash register and making more small businesses pay VAT, this cash grab hits a narrower segment: mining companies and better-off citizens with investment income, property sales and bank accounts.
asserted
grab → go → income
The budget deficit this year has swelled beyond forecast s due to lavish military spending and tepid economic growth amid sanctions, high interest rates for non-military companies, labor shortages and Ukrainian strikes on oil refineries and export terminals.
asserted
deficit → swell → refineries
The deficit hit 5.8 trillion rubles ($72 billion) through August, almost 50% higher than last year's figure and above the already revised target of 4.8 trillion rubles, according to the Kyiv School of Economics.
uncertain
deficit → hit → Economics
New taxes will hit mining companies and bank interest
asserted
taxes → hit → companies
The government proposes a 20%-30% windfall profits tax on mining companies that have benefited from prices that have risen since last year.
asserted
that → propose → year
That will hit companies producing iron ore, nickel and gold.
asserted
That → hit → ore
Another measure imposes higher rates of 13% to 22% on income from interest, dividends and proceeds from selling property.
asserted
measure → impose → property
Such income is currently taxed at 13% for amounts under 2.4 million rubles ($29,800) and 15% above that.
asserted
income → tax → that
Other proposals to take effect Jan. 1 include a 100-ruble per parcel charge and 22% VAT on formerly tax-free foreign goods worth less than 200 euros that are bought online.
asserted
that → take → goods
People asked about taxes and finances on the street in Moscow responded with a mix of complaints and resignation.
asserted
People → ask → complaints
"They need money for state coffers, they need to collect more from people, from ordinary people,” said Denis Bystrov, 39.
asserted
Bystrov → need → people
“What can you do?” said Nelly Godunova, 92.
asserted
Godunova → do → What
“I've got four university degrees, they were all free, you know?
asserted
you → get → degrees
True, I've given plenty to this country.
asserted
I → give → country
If you earned something, you've got to give back.”
asserted
you → earn → something
“Everyone knows perfectly well that the money's going for the military operation, right?” said Sergei Sukachev, who gave his age as “almost 70.”
asserted
who → know → 70
“I've suffered a little as a businessman, to be honest, but I clearly understand, it's best to hang on and to get our way.”
asserted
it → suffer → way
Russia is not facing a financial crisis, but a long-term erosion of public welfare
Russia has enough financing available to cover the deficit in 2027 and probably 2028, says Chris Weafer, CEO of consultancy Macro-Advisory Ltd. “But that is at the expense of raising taxes, of increasing costs for households as well as business,” he said.
asserted
he → face → households
“And it means that there is much less money available for normal economic development or infrastructure.
asserted
it → mean → development
Basically, the budget is now moving to a phase where it is primarily funding the military and the military operation.”
asserted
it → move → military
“So the economy is now becoming very skewed,” he said.
asserted
he → become → ?
"While there’s still modest positive growth, it is coming from the state spending into these ... state-linked industries, whereas the rest of the economy is struggling badly or even failing.”
asserted
rest → ’ → economy
German company Russian subsidiary looted for a billion rubles
A subsidiary of German retailer Metro was seized under a law permitting the temporary administration of firms from “unfriendly countries” and tapped for a billion-ruble ($12 million) contribution to the war effort.
asserted
subsidiary → loot → effort
Metro AG headquarters in Germany said it had no role in the donation, which “does not reflect our position or the way we run our business.”
asserted
we → say → business
Metro Russia, no longer under the control of headquarters, said the contribution to the “National Front - Everything for Victory” fund would buy vehicles, communications devices and anti-drone equipment for soldiers in what Russia calls its “special military operation” in Ukraine.
asserted
Russia → say → Ukraine
Weafer said Russia may be seizing control of foreign companies in anticipation of a deal to secure Russian assets frozen abroad.
uncertain
Russia → say → assets
But the forced donation also raises the risk that the Finance Ministry may see foreign companies as sources of windfall revenue.
uncertain
Ministry → force → revenue
Russia's limited sources of financing are being squeezed
asserted
sources → squeeze → financing
Russia's economic numbers don't look that bad — on the surface.
asserted
numbers → look → surface
The government predicts growth this year of 0.6% of GDP, not great but not a recession either.
asserted
government → predict → GDP
Unemployment is at a record low, and the government carries very little debt.
asserted
government → carry → debt
Earnings from oil exports have held up thanks to higher global prices caused by the war in Iran.
asserted
Earnings → hold → Iran
The revised deficit for this year will come in around 3% of GDP, according to Finance Minister Anton Siluanov.
uncertain
deficit → come → Siluanov
That is more than the 1.6% achieved last year, but smaller than in many other countries.
asserted
That → achieve → countries
For instance, the US booked 5.8% of GDP last year.
asserted
US → book → GDP
Due to sanctions that forbid banks and investors from dealing with Russia, the Kremlin can’t tap international bond markets.
asserted
Kremlin → forbid → markets
And Russia's domestic financial resources have already been extensively drawn down.
asserted
resources → draw → ?
One way is to borrow from Russian banks through bond sales.
asserted
way → borrow → sales
…and 7 more, not listed.
The Aporia
