By John Q. Hosedrinker 
Russian government plans to raise value-added tax (VAT) to 22% in 2026, alongside other tax reforms, are expected to accelerate inflation. Deputy Governor of the Russian Central Bank, Aleksei Zabotkin, anticipates the VAT increase will add 0.6-0.7 percentage points to the consumer price index, as it is Russia’s main turnover tax. The government also plans to lower the threshold for the simplified taxation system (STS) and abolish tax breaks for IT companies. These measures, coupled with existing tax hikes and declining oil and gas revenues, are intended to fund the war against Ukraine and address a soaring budget deficit.
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Russia’s Central Bank warns people of faster price rises due to new taxes, and this immediately sets a worrying tone. It’s a clear signal that everyday life is about to become even more expensive. When the central bank issues a warning like this, it means the experts are seeing trouble ahead. The situation is already tight, and this is a clear indication that things will get worse. The sentiment seems to be that the warning isn’t just an observation, but a premonition of harder times.
This warning isn’t happening in a vacuum. We’re hearing reports of fuel shortages, with gasoline and diesel exports being restricted while Ukrainian forces are targeting Russian refineries. This puts pressure on the price of fuel, potentially driving it through the roof. If fuel prices spike, it impacts everything – from getting to work to transporting food and goods. It directly affects the cost of living. This is a scenario where the cost of filling a car could potentially eat up a significant portion of a Russian citizen’s monthly income, to the point where it seems like an entire month’s salary.
The situation seems to be moving from bad to worse. With fuel shortages and price hikes, coupled with new taxes, people might find themselves with less money and higher costs. The economic strain is likely to increase as winter approaches. This is a well-known factor with the brutal Russian winters and could add to the hardships. It is a combination that could make life unbearable for many people.
Considering the economic climate, we’re hearing echoes of past hardships, with possible echoes of rationing. The idea of going hungry is a very real threat for a number of people. In a challenging economy, there seems to be an expectation that people will need to tighten their belts.
This is not just about a few rising prices; it touches on some deeper anxieties. The underlying feeling is that the government might not be acknowledging the difficulties. There’s the impression of a widening gap between the rulers and the people. It’s natural to question whether those in power are prepared to make sacrifices themselves.
The reports of economic pressure and potential unrest are quite serious. If essential resources like fuel are scarce, people might find it harder to get to work or transport goods, resulting in more economic difficulties. If those in the military are not being paid, it could spell doom for those at the top.
The central bank’s warning about rising prices and new taxes isn’t just an economic observation; it reflects a more profound unease. There’s the sense that the future is uncertain, with the potential for social unrest growing. There is definitely an indication of a very real challenge for Russia’s economy. The feeling here is that Russia may have entered into a downward spiral, from which it will be difficult to recover.