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Signs of Russia’s so-called special military operation are everywhere in Moscow, from roadside recruitment adverts to Z-themed souvenirs.

Now there is another example – a proposed tax hike, that amounts to the biggest shake-up of the Russian tax system in a quarter of a century.

As the war in Ukraine continues to drain the Kremlin’s coffers, the government is scrambling to find new ways to finance it.

Read more: Ukraine-Russia war latest updates

Pro-Russian 'Z' patches on display at a store in Moscow
View of a store in Moscow selling pro-Russia and pro-war merchandise

Its answer is a new progressive income tax rate that will target the wealthy, as well as a rise in corporation tax.

The proposals were first mooted by Russian president Vladimir Putin on the campaign trail ahead of his re-election in March. Analysts say he was forced to act.

Defence spending has surpassed 8% of GDP, and is sucking up nearly a third of the state budget this year.

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“It seems like the tax reform is a tool to move the economy from butter toward guns,” said Alexander Kolyandr, a non-resident senior fellow at the Centre for European Policy Analysis.

“The government is no longer concerned about you eating well, but rather about you producing more guns.”

The reforms mark a dramatic departure from the Russian leader’s previous tax policies.

Pic: AP
Image:
Pic: AP

In 2001, shortly after assuming office, he introduced a flat rate of just 13% that was applied universally, and most Russians have been paying the same rate ever since.

The move simplified a previously complicated tax regime which few adhered to and it successfully boosted revenues – and his popularity – as a result.

A higher rate of 15% was established in 2021 for those earning more than five million roubles (around £43,500).

Now the finance ministry wants to lower the threshold for the 15% rate, so it applies to annual incomes from 2.4 (around £20,800) to five million roubles, and introduce more bands above.

Incomes between five and 20 million roubles (around £43,500 to £174,000) will be taxed at 18%, those between 20-50 million roubles (around £174,000 to £434,000) at 20%, and anything over 50 million roubles at 22%.

The proposals will also see corporation tax increase from 20% to 25%.

Pro-Russian artwork in Moscow, featuring the 'Z' icon used throughout the war in Ukraine

If adopted by the Russian parliament, the changes will come into force next year and generate 2.6 trillion roubles (£22.5bn) in budget revenues, the government said.

“For the past two years, the Russian economy has been running on state spending,” Mr Kolyandr said.

“It cannot last forever, because in effect, it’s mortgaging your future.

“To get this mortgage more appealing, you need more money.”

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According to the Kremlin, 3% of the workforce will be affected by the changes, which it insists are fair.

It says the reforms should solve national problems, reduce inequality and help develop Russia’s regions.

But the official line has been met with some scepticism on the streets of Moscow.

A woman takes photos of art about Russia's war in Ukraine in Moscow

“I think they don’t have enough money for the special military operation, that’s why they’re introducing it,” Sergei told Sky News in Moscow.

Ulyana agreed, adding: “I don’t think it’s fair to tax more from 200,000 [roubles a month].

“This will just affect people who work a lot.”

In reality, everyone here is affected by Russia’s current path. This is merely the latest impact, and it will be felt in people’s pockets.

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Bodies of two more Israeli hostages handed over by Hamas – but uncertainty over missing remains

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Bodies of two more Israeli hostages handed over by Hamas - but uncertainty over missing remains

The bodies of two more Israeli hostages have been handed over to the Red Cross by Hamas – but uncertainty still hangs over the fate of the missing remains of others.

Under the ceasefire agreement, all remaining 48 hostages, dead and alive, were supposed to be returned by this Monday.

So far, only the 20 living hostages have been returned, as well as seven dead hostages, according to Israel’s count, with two further bodies still being verified.

Just hours after today’s handover, the Israeli military said a tenth body previously turned over was not that of a hostage – and the confusion added to tensions over the fragile truce that has paused the two-year war.

What has Hamas said?

Hamas has previously said recovering the remaining bodies could take time, as not all burial sites are known.

Its armed wing put out a statement on Wednesday, saying it has returned all the bodies it could reasonably recover, but would require special equipment to hand over the remaining ones.

More on Gaza

Meanwhile, the Gaza Health Ministry said it received 45 more bodies of Palestinians from Israel, another step in the implementation of the ceasefire agreement.

Red Cross vehicles escort a truck transporting the bodies of Palestinian hostages. Pic: Reuters.
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Red Cross vehicles escort a truck transporting the bodies of Palestinian hostages. Pic: Reuters.

That brings to 90 the total number of bodies returned to Gaza for burial. The forensics team examining the remains claimed they showed signs of mistreatment.

Trump issues warning

The return of all the hostages is a key pillar of the deal agreed to by Israel and Hamas, heralded by US President Donald Trump as having brought “peace in the Middle East”.

Israel – which has freed around 2,000 Palestinian prisoners and detainees as part of the peace deal – had already threatened to keep the Rafah crossing between Gaza and Egypt closed on Wednesday, and limit aid entering Gaza, due to Hamas not returning all of the dead.

And in an interview with CNN on Wednesday, Mr Trump warned that Israel could resume the war if he feels Hamas is not upholding its end of the agreement.

“Israel will return to those streets as soon as I say the word,” he said.

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Trump: ‘If Hamas doesn’t disarm, we will disarm them’

From our experts:
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Since the October 7 Hamas attacks on Israel in 2023 – in which around 1,200 people were killed and 251 taken hostage – the two sides have been at war.

Nearly 68,000 Palestinians have been killed since Israel’s subsequent offensive, according to the Health Ministry, which is part of the Hamas-run government in Gaza.

The ministry maintains detailed casualty records that are seen as generally reliable by UN agencies and independent experts – though the ministry does not say how many of those killed are combatants.

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Middle East correspondent Adam Parsons explains why tensions may begin to bubble

Similar incident in previous ceasefire

This is not the first time Hamas has returned a wrong body to Israel.

During a previous ceasefire, the group said it handed over the bodies of Shiri Bibas and her two sons, but testing in February 2025 showed that one of the bodies returned was identified as a Palestinian woman. Ms Bibas’ body was returned a day later.

Meanwhile, Hamas spokesperson Hazem Kassem accused Israel of violating the deal with shootings on Tuesday in eastern Gaza City and the southern city of Rafah.

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Israel’s defence minister, Israel Katz, said the military is operating along the deployment lines troops withdrew to under the deal, and he warned that anyone approaching the lines will be targeted, as happened on Tuesday with several militants.

Aid trickling in

The World Food Programme said its trucks began arriving in Gaza after the entrance of humanitarian aid was paused for two days due to the exchange on Monday and a Jewish holiday on Tuesday.

The timing of the scaled-up deliveries – which are also part of the ceasefire deal – had been called into question after Israel said on Tuesday that it would cut the number of trucks allowed into Gaza, saying Hamas was too slow to return the hostages’ bodies.

Trucks carrying humanitarian aid and fuel enter Khan Yunis, a city in the southern Gaza Strip. Pic: AP
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Trucks carrying humanitarian aid and fuel enter Khan Yunis, a city in the southern Gaza Strip. Pic: AP

Abeer Etefa, spokesperson for the World Food Programme, lauded the trucks’ passage but said the situation remained unpredictable.

“We’re hopeful that access will improve in the coming days,” she said.

The Egyptian Red Crescent said 400 trucks carrying food, fuel and medical supplies were bound for Gaza on Wednesday.

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‘Your support can save lives’: Renewed appeal for donations as aid starts to enter Gaza

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'Your support can save lives': Renewed appeal for donations as aid starts to enter Gaza

Fifteen UK charities have launched a fresh appeal for donations to Gaza to address “catastrophic levels of need” in the devastated region.

The charities make up the Disasters Emergency Committee (DEC), which has been raising millions for Gaza – where tens of thousands have been killed over the past two years of war – and the wider Middle East.

After the initial stage of a much-sought ceasefire deal aimed at ending the conflict in Gaza was agreed on by Israel and Hamas, aid has begun to trickle into the devastated region again.

According to the DEC, its charities and local partners have been scaling up their work in the Gaza Strip since the agreement took effect last week.

Palestinians walk past the rubble of destroyed buildings in Gaza City. Pic: Reuters
Image:
Palestinians walk past the rubble of destroyed buildings in Gaza City. Pic: Reuters

It said lorries carrying food and other aid began to enter Gaza on Sunday, with the British Red Cross and Plan International UK among those confirming supplies had made it in.

After raising more than £50m since the Middle East Humanitarian Appeal was launched last October, the DEC is renewing calls for donations, saying £10 could provide blankets for two people, while £50 could provide emergency food for five families for one week.

Read more:
Trump warned plan for Gaza ‘doesn’t make sense’

Israel says no match for body handed over by Hamas

As goods are returning to Gaza’s markets, the DEC said, they are increasing cash assistance to help people buy essentials as they become more affordable.

They’re also distributing clean water, medicine, food, and nutrition support.

On its website, the DEC pointed to how famine was declared in Gaza City in August as it appealed for funds saying: “Your support can save lives.”

You can donate to the Middle East Humanitarian Appeal at dec.org.uk.

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Trump refuses to say if CIA has authority to assassinate Venezuela’s president

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Trump refuses to say if CIA has authority to assassinate Venezuela's president

Donald Trump has refused to say if the CIA has the authority to assassinate Venezuela’s president, after approving covert operations in the country to tackle alleged drug trafficking.

The classified decision, first revealed by The New York Times, marks a significant escalation in efforts to pressure President Nicolas Maduro‘s regime.

Mr Trump said large amounts of drugs were entering the US from Venezuela, much of it trafficked by sea.

“We are looking at land now, because we’ve got the sea very well under control,” he said.

When asked why the coastguard wasn’t asked to intercept suspected drug trafficking boats, which has been a longstanding US practice, Mr Trump said the approach had been ineffective.

“I think Venezuela is feeling heat,” he said.

He declined to answer whether the CIA has the authority to execute Mr Maduro.

The US has offered a $50m (£37m) reward for information leading to his arrest, accusing him of connections to drug trafficking and criminal organisations – claims he denies.

President Nicolas Maduro. Pic: Reuters
Image:
President Nicolas Maduro. Pic: Reuters

Donald Trump at the White House on Wednesday evening. Pic: Reuters
Image:
Donald Trump at the White House on Wednesday evening. Pic: Reuters

US targets ‘drug boats’

Mr Trump also alleged Venezuela had sent a significant number of prisoners, including individuals from mental health facilities, into the US, though he did not specify the border through which they reportedly entered.

On Tuesday, he announced America had targeted a small boat suspected of drug trafficking in waters off the Venezuelan coast, resulting in the deaths of six people.

According to the president’s post on social media, all those killed were aboard the vessel.

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Footage of the strike was released by Donald Trump on social media. Pic: Truth Social
Image:
Footage of the strike was released by Donald Trump on social media. Pic: Truth Social

The incident marked the fifth such fatal strike in the Caribbean, as the Trump administration continues to classify suspected drug traffickers as unlawful combatants to be confronted with military force.

War secretary Pete Hegseth authorised the strike, according to Mr Trump, who released a video of the operation.

The black-and-white footage showed a small boat seemingly stationary on the water. It is struck by a projectile from above and explodes, then drifts while burning for several seconds.

Mr Trump said the “lethal kinetic strike” was in international waters and targeted a boat travelling along a well-known smuggling route.

There has also been a significant increase in US military presence in the southern Caribbean, with at least eight warships, a submarine, and F-35 jets stationed in Puerto Rico.

‘Bomb the boats’: Bold move or dangerous overreach?

It’s a dramatic – and risky – escalation of US strategy for countering narcotics.

Having carried out strikes on Venezuelan “drug boats” at sea, Trump says he’s “looking a” targeting cartels on land.

He claims the attacks, which have claimed 27 lives, have saved up to 50,000 Americans.

By framing bombings as a blow against “narcoterrorists”, he’s attempting to justify them as self-defence – but the administration has veered into murky territory.

Under international law, such strikes require proof of imminent threat – something the White House has yet to substantiate.

Strategically, Trump’ss militarised approach could backfire, forcing traffickers to adapt, and inflaming tensions with Venezuela and allies wary of US intervention.

Without transparent evidence or congressional oversight, some will view the move less like counterterrorism and more like vigilantism on the seas.

The president’s “bomb the boats” rhetoric signals a shift back to shock and awe tactics in foreign policy, under the banner of fighting drugs.

Supporters will hail it as a bold, decisive move, but to critics it’s reckless posturing that undermines international law.

The strikes send a message of strength, but the legal, moral and geopolitical costs are still being calculated.

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