Russian Federation Starts Discussing New Tax Hikes After Commodity Revenues Crash Budget
- 27.05.2025, 19:08
This year, the Russian Federation has experienced a double-digit drop in oil and gas revenues.
Russian State Duma deputies are again discussing scenarios for raising taxes to fill the federal treasury, which has faced a double-digit drop in oil and gas revenues this year.
At a May 26 meeting of the Duma's budget committee, there were proposals to raise taxes for banks as well as oil companies, committee chairman Andrey Makarov told Interfax.
Of both ideas, Makarov said, are not viable. Oil companies can no longer pay because they have been placed under sanctions, he explained, "We see now the problems that all our companies, the country, are facing in order to sell the oil we produce." As for the banks, they have also been targeted by Western restrictions, the deputy continued, and the security of the country's entire economy depends on their stability.
Nevertheless, Makarov admitted, even the updated budget forecasts, with a reduced revenue plan, now look "overly optimistic." The Finance Ministry expects the treasury to collect Br8.3 trillion in oil and gas taxes at the end of the year - Br2.6 trillion less than planned. Total revenues will fall 1.8 trillion rubles short of the original plan (38.5 trillion rubles instead of 40.3 trillion rubles), and the deficit will be the highest since the pandemic - 3.8 trillion rubles.
To fill the military budget, the size of which has broken records since the Soviet era, in 2022-2024, the Russian government has already increased MET on oil and gas, introduced a "tax on excess profits" for big business and exchange rate duties. In 2025, the largest tax reform in decades was launched: profit tax was raised, a differentiated personal income tax scale was introduced, and in addition, duties and excise taxes, including those on fuel, increased. According to the Ministry of Finance's calculations, this will bring Br3.6 trillion to the budget this year and almost Br15 trillion over 6 years.
Nevertheless, the likelihood of a new increase in non-oil taxes next year is growing, says Astra Asset Management Investment Director Dmitry Polevoy. Oil prices are becoming a headache for the budget: a barrel of Urals costs $52-54 instead of the $70 the government had hoped for, and the dollar exchange rate has fallen below 80 rubles, although the budget had budgeted for 96.5 rubles.
According to the Ministry of Finance, in January-April oil and gas revenues to the treasury fell by 10% year-on-year, and in May, according to Reuters calculations, the decline accelerated to 33%.
The most acute issue of finding money is likely to arise in 2026-2027, when the deadline comes to pay for the new "national projects" with which Vladimir Putin entered his fifth term. The point is that their financing has been largely shifted to 2028-2030, VEB's chief economist Andrey Klepach pointed out earlier: "We will have to look for opportunities, <�...> otherwise the target parameters will be at risk."