Russia Plans Increased Taxes for Military Funding

Russia is poised to increase taxes further to fund its escalating military expenditures due to the ongoing war in Ukraine, which is now in its third year. The draft budget for 2025 allocates approximately one-third of overall expenditure, or 6.3% of GDP, to military spending, marking the highest level since the Cold War and surpassing social spending for the first time. Economists warn that the anticipated tax reforms, expected to yield an additional 1.7% of GDP, will be insufficient to cover the rising costs, compounded by a projected decline in oil prices. Inflation is surging, with interest rates at their highest since 2003 and the ruble falling to a one-year low against the dollar, exacerbated by Western sanctions limiting borrowing options. Finance Minister Anton Siluanov has cautioned that unchecked military spending will ultimately burden Russian citizens and businesses through increased taxes or inflation. The situation indicates a significant financial strain as the government prioritizes military funding over social services.