Russian authorities will be forced to raise taxes, Reuters reported on Wednesday, citing an anonymous government source.
“Otherwise, we simply won’t be able to make ends meet, even with a reduction in defense spending. Oil and gas revenues are falling and the economy cannot fully compensate for this,” the source said, describing tax increases as “unavoidable.”
The source said the draft budget, due in September, will set aside just over eight percent of GDP for defense and security, a figure they described as a slight underestimation. Military spending will not be reduced in 2026, they added, and cuts in 2027 would only be possible if the fighting ends.
“Even with a ceasefire, shells and drones will still need to be made [by Russia], but on a slightly smaller scale,” the source said, stressing that Moscow must keep pace with the West’s higher defense expenditures.
“There will be no return to the level that existed before the ‘special military operation,’” they added.
Sergey Aleksashenko, an economist and former deputy chairman of Russia’s Central Bank who is now a senior fellow at the NEST Centre in London, also told Reuters he expects higher taxes. He said the government would likely curb spending by indexing pensions and other benefits below the inflation rate, which the Central Bank projects at six to seven percent in 2025.