Russian finance ministry proposes raising VAT to help finance war in Ukraine

President Putin signalled last week that he was open to raising certain taxes to make financial ends meet during the war, noting that the U.S. had raised taxes on wealthy people during the Vietnam and Korean wars.

The Russian finance ministry said on Wednesday it was proposing to raise the rate of value-added tax (VAT) to 22% from 20% from 2026 in order to fund military expenditure in what would be the fourth year of the war in Ukraine.

Russian President Vladimir Putin signalled last week that he was open to raising certain taxes to make financial ends meet during the war, noting that the United States had raised taxes on wealthy people during the Vietnam and Korean wars.

The finance ministry, which said the tax hikes would be "aimed primarily at financing defence and security," said in a statement that it was also proposing other tax increases, including on gambling businesses.

"The strategic priority is to provide financial support for the country's defence and security needs and social support for families of participants in the special military operation," it said in a statement.

"The resources planned in the budget will make it possible to equip the armed forces with the necessary weapons and military equipment, pay salaries to military personnel and support their families, and modernise defence industry enterprises."

The ministry said the draft 2026 budget was "balanced and sustainable".