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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
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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.”

Read more:
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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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Iran’s response to Israeli strikes a ‘matter of principle’, ambassador to UK says

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Iran's response to Israeli strikes a 'matter of principle', ambassador to UK says

Iran’s response to Israeli attacks on its nuclear facilities is “self-defence” and a “matter of principle”, the Iranian ambassador to the UK has told Sky News.

Speaking exclusively to The World With Yalda Hakim, Seyed Ali Mousavi said the “barbaric Israeli regime” is “violating international law” – describing Israel’s actions in recent days as “an act of aggression against the Iranian people”.

The conflict between Israel and Iran – once played out in a series of proxy wars – has escalated in the past three days.

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Sky's Yalda Hakim spoke to Iran's ambassador to the UK, Seyed Ali Mousavi.
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Sky’s Yalda Hakim spoke to Iran’s ambassador to the UK, Seyed Ali Mousavi

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Israel-Iran: How the conflict escalated

On Friday morning, explosions hit Tehran as Israel carried out a major attack on its top army leaders, nuclear sites, and nuclear scientists.

Iran threatened “severe punishment” and quickly retaliated with a wave of missiles.

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Missile aftermath in Israel

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Israeli missile hits warehouse in Iranian city

When questioned about whether Iran could continue fighting Israel, the Iranian ambassador told Yalda Hakim that “it is a matter of principle”.

He said: “This is about self-defence, there is no doubt about it.

“We are a responsible member state of the UN and we do all activities according to our international obligations.

“Any activities are only in the framework of self-defence.”

Damage from an Iranian missile attack to a building in Bat Yam, Israel. Pic: Reuters
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Damage from an Iranian missile attack to a building in Bat Yam, Israel. Pic: Reuters

Explosions over Jerusalem
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Explosions over Jerusalem on Sunday

He added that his country would “do our best to preserve our territorial integrity”, and that “with the help of God”, Iran will “materialise endeavours concretely against our enemy – the Israeli regime”.

Mr Mousavi also told Hakim that Iran’s nuclear activities are “monitored”, and that recent comments by the International Atomic Energy Agency (IAEA) were “politically motivated”.

Read more here:
How conflict between Israel and Iran unfolded
UK advises against all travel to Israel
Explosions over Jerusalem as missiles ‘detected’ by IDF

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Missiles have also been seen over Tel Aviv

The UN nuclear watchdog’s board of governors found Iran was not complying with its nuclear obligations for the first time in 20 years.

Iran said it has “always adhered” to the safeguarding obligations laid down by the watchdog.

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Iranian ambassador reacts to strikes – full interview

Announcing Operation Rising Lion on Friday, Israeli Prime Minister Benjamin Netanyahu claimed Iran had recently taken steps to weaponise enriched uranium, which could be used to make nuclear weapons.

But Mr Mousavi stressed that Iran’s “peaceful activities” at its “nuclear fields” were only for the “generation of electricity, and other peaceful” things.

Iran was due to continue its round of negotiations with the US in Muscat – however, this was cancelled, given recent tensions.

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UK government advises against all travel to Israel

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UK government advises against all travel to Israel

The government is warning people not to travel to Israel under any circumstances, as the country’s missile exchange with Iran shows no sign of abating.

On Friday, the Foreign Office warned against “all but essential travel” to most of Israel.

The areas around Gaza, the West Bank and the Golan Heights were already classed as red zones, with warnings to avoid travel to these areas.

But the government has now updated the warning for the remainder of the country to red.

Follow live: Tehran and Israel exchange strikes

This puts Israel on the same level as Iran, and the change of advice is also likely to impact travel insurance.

However, with Israel’s airspace closed, it is unlikely many people will be attempting the journey, and Israel’s national airline El Al has announced it is cancelling flights to and from many European cities, as well as Tokyo and Moscow, until 23 June.

The change in travel advice comes after a second night of ballistic missile barrages from Iran following Israel’s attack in the early hours of Friday morning.

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An eight-storey residential building in Tel Aviv was hit by a missile last night.

On Sunday morning, Israel’s health ministry said 12 people had been killed over the past day, taking the total since Friday to 15. It also said 385 people had arrived at hospital with injuries overnight.

Iran has not provided a total number of deaths or overall casualties, but has claimed dozens have been killed.

Iran’s health minister has said most of those injured and killed in Israeli strikes were civilians. According to comments carried by news agency IRNA, he said the majority were women and children.

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The chancellor said UK forces could “potentially” be used to help defend Israel.

Read more:
UK military could ‘potentially’ be used to defend Israel
Nuclear threat wasn’t the only reason Israel attacked Iran
What are Iran’s military capabilities

What is the UK doing?

The UK government is sending military assets, including fighter jets, to the Middle East.

While the prime minister would not confirm to reporters that UK forces could be used to defend Israel from future Iranian attacks, the chancellor told Sky News earlier that the government is “not ruling anything out”.

Speaking to Sky’s Sunday Morning With Trevor Phillips, Rachel Reeves said sending military assets to the Middle East “does not mean that we are at war”, and emphasised that “we have not been involved in these strikes or this conflict”.

“But we do have important assets in the region,” she continued. “And it is right that we send jets to protect them. And that’s what we’ve done. It’s a precautionary move, and at the same time, we are urging de-escalation.”

Pushed on the question of what the UK would do if Israel asked for support with its operations, the chancellor replied: “I’m not going to rule anything out at this stage. It’s a fast-moving situation, a very volatile situation. But we don’t want to see escalation.”

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Helicopter carrying Hindu pilgrims crashes in India, killing seven people

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Helicopter carrying Hindu pilgrims crashes in India, killing seven people

A helicopter carrying Hindu pilgrims has crashed in India, killing seven people on board.

The accident happened within minutes of the helicopter taking off, officials said, on what should have been a 10-minute flight.

The helicopter was flying to Guptkashi, a prominent Hindu pilgrimage site in the Himalayas, from Kedarnath temple town in the northern Indian state of Uttarakhand.

It comes three days after an Air India flight crashed less than a minute after taking off from Ahmedabad airport in northwestern India, killing at least 270 people.

The helicopter, which was operated by private helicopter service Aryan Aviation, went down in a forested area several miles from the Kedarnath pilgrimage route at around 5.30am local time.

Officials said the crash was believed to have been caused by poor weather conditions.

Authorities say they have launched a search and rescue operation and are expected to review operational protocols for flights in the region.

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The dead include the pilot and pilgrims from the neighbouring state of Uttar Pradesh and western states of Maharashtra and Gujarat, according to officials. The bodies were badly burned in a fire that followed the crash, they said.

Smoke and debris at the crash site. Pic: Reuters
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Smoke and debris at the site. Pic: Reuters

Tens of thousands of pilgrims visit Kedarnath, which is home to one of the four most sacred Hindu temple shrines, each summer. Many use helicopter services due to the difficult mountainous terrain.

Helicopter mishaps are not uncommon in the region, where sudden weather changes and high-altitude flying conditions can pose risks.

Earlier this month, a helicopter operating in the Kedarnath Valley made an emergency landing shortly after taking off on a highway due to a technical fault. The pilot was injured but all five passengers on board were unharmed.

In May, a helicopter crashed in Uttarkashi district, killing six people, including the pilot. One person survived.

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