Russia weighs up its biggest tax shake-up in almost 25 years as Putin scrambles to finance Ukraine war
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
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.
“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
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%.
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.
“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.
New pictures show the moment of impact as an Israeli missile hit a Beirut apartment block and exploded.
The block was one of five buildings destroyed by airstrikes on Friday alone.
Israel launched airstrikes in the southern suburbs of Beirut in a fourth consecutive day of intense attacks.
There were no immediate reports of casualties.
An Associated Press photographer captured a sequence of images showing an Israeli bomb approaching and hitting a multi-storey apartment building in Beirut’s Tayouneh area.
Richard Weir, a senior crisis, conflict and arms researcher at Human Rights Watch, reviewed the close-up photos to determine what type of weapon was used.
“The bomb and components visible in the photographs, including the strake, wire harness cover, and tail fin section, are consistent with a Mk-84 series 2,000-pound class general purpose bomb equipped with Boeing’s joint directed attack munition tail kit,” he told AP.
Pics: AP
Smoke covers a building that collapses following the strike. Pic: AP
Deadly strikes as bombardment stepped up
Israel stepped up its bombardment this week – an escalation that has coincided with signs of movement in US-led diplomacy towards a ceasefire.
The Israeli military said its fighter jets attacked munitions warehouses, a headquarters and other Hezbollah infrastructure. It issued a warning on social media identifying buildings ahead of the strikes.
Meanwhile, an Israeli airstrike killed five members of the same family in a home in Ain Qana in the southern province of Nabatiyeh, Lebanon’s state media said.
The report said a mother, father and their three children were killed but didn’t provide their ages.
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Three other Israeli strikes killed six people and wounded 32 in different parts of Tyre province on Friday, also in south Lebanon, the report said.
Video footage also showed a building being struck and turning into a cloud of rubble and debris that billowed into Horsh Beirut, the city’s main park.
Residents check the site of the airstrike in Tayouneh, Beirut. Pic: AP
More than 3,200 people have been killed in Lebanon during 13 months of fighting between Israel and Hezbollah – most of them since mid-September.
About 27% of those killed were women and children, according to Lebanon’s health ministry.
Israel dramatically escalated its bombardment of Lebanon from September, vowing to cripple Hezbollah and end its barrages in Israel.
Friday’s strikes come as Lebanon’s caretaker prime minister has asked Iran to help secure a ceasefire in the war between Israel and Hezbollah.
The prime minister appeared to urge Ali Larijani, a top adviser to Iran’s supreme leader, Ali Khamenei, to convince the militant group to agree to a deal that could require it to pull back from the Israel-Lebanon border.
Iran is a main backer of Hezbollah and for decades has been funding and arming the Lebanese militant group.
On Thursday, Eli Cohen, Israel’s energy minister and a member of its security cabinet, said that prospects for a ceasefire with Lebanon were the most promising since the conflict began.
The Washington Post reported Israel’s Prime Minister Benjamin Netanyahu was rushing to advance a Lebanon ceasefire to deliver an early foreign policy win to his ally, US President-elect Donald Trump.
“Super high-IQ revolutionaries” who are willing to work 80+ hours a week are being urged to join Elon Musk’s new cost-cutting department in Donald Trump’s incoming US government.
The X and Tesla owner will co-lead the Department Of Government Efficiency (DOGE) with former Republican presidential candidate Vivek Ramaswamy.
And in a post on X, the official DOGE account put out a call to arms for people to sign up and help “dismantle government bureaucracy”.
The post said: “We are very grateful to the thousands of Americans who have expressed interest in helping us at DOGE.
“We don’t need more part-time idea generators.
“We need super high-IQ small-government revolutionaries willing to work 80+ hours per week on unglamorous cost-cutting.
“If that’s you, DM this account with your CV. Elon & Vivek will review the top 1% of applicants.”
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Elon Musk speaking at an event held at Donald Trump’s Mar-a-Lago estate. Pic: AP Photo/Alex Brandon
In a reply to an interested party, Mr Musk suggested the lucky applicants would be working for free.
“Indeed, this will be tedious work, make lost of enemies & compensation is zero,” the world’s richest man wrote.
“What a great deal!”
When announcing the new department, President-elect Donald Trump said Mr Musk and Mr Ramaswamy “will pave the way for my administration to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies”.
Mr Musk has previously made clear his desire to see cuts to “government waste” and in a post on his X platform suggested he could axe as many as three-quarters of the more than 400 federal departments in the US, writing: “99 is enough.”
At least 10 people have been killed after a fire broke out at a retirement home in northern Spain in the early hours of this morning, officials have said.
A further two people were seriously injured in the blaze at the residence in the town of Villafranca de Ebro in Zaragoza, according to the Spanish news website Diario Sur.
Two people remain in a critical condition following the blaze. Pic: AP
They remain in a critical condition, while several others received treatment for smoke inhalation.
Firefighters were alerted to the blaze at the residence – the Jardines de Villafranca – at 5am (4am UK time) on Friday.
Several residents were treated for smoke inhalation. Pic: AP
Those who were killed in the fire died from smoke inhalation, Spanish newspaper Heraldo reported.
The residence is home to 82 elderly residents.
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The blaze started in one of the rooms, Fernando Beltran, the national government’s top official in the region, told reporters.
All of the victims were elderly residents, he added.
Relatives wait for news outside the care home. Pic: AP
Fire crews, paramedics and police officers remain on site, said a spokesperson for the regional government of Aragon who confirmed the fatalities.
It took firefighters several hours to extinguish the blaze, they said.
The cause of the fire is unknown and is being investigated.
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