The Duma has passed in the first reading a bill that would increase some taxes, excise duties, administrative fees and insurance premiums. Some of the levies would see a multifold increase.

Meanwhile, the introduction of a tax on childlessness is being hotly debated – advocates want to make it rather painful. Small business, which feeds many Russian families, has not been forgotten either: the Ministry of Finance has proposed expanding nationwide the so-called “Automated Simplified Taxation System,” which would mean small-business owners could not challenge automated payments.

Where to source additional budget revenues?

The Russian budget now consistently runs a deficit, squeezed by a slowing civilian sector of the economy and burdened by a defense sector that has ballooned to account for more than 40% of all fiscal expenditures. Last year, the Ministry of Finance, in its draft budget for 2025-26, planned for a wind-down of military spending to previous levels. However, with the war dragging on and the postwar needs to replenish depleted arms stockpiles growing, it now envisages elevated spending on defense and national security until the end of the budget planning window in 2027.

The deficit is thus here to stay, and there is little doubt that its actual size will be bigger than planned: if we have to buy shells and even soldiers from North Korea, while the federal budget pays Russian citizens RUB 400,000 just for signing up for the army (with some regions already offering an additional RUB 3 million), then the 0.5% deficit planned for 2025 will hardly be the end of it.

This means additional revenues are needed. But where to source them? The obvious answer is big business. And that’s what happened at the beginning of the war. For example, since its introduction in 2023, the windfall tax has brought in RUB 318.8 billion. Yet nearly that entire amount – more than RUB 315.0 billion – was received in 2023, with only RUB 3.3 billion collected in the current year.

Because of the windfall tax, combined with the loss of the European gas market and a normalization in gas prices, Gazprom reported a colossal loss of RUB 629 billion for 2023, becoming the most unprofitable company in Russia. Now, the former “money bag” has to be helped, with measures including a break on the mineral extraction tax in 2025, assets of the oil giant Shell on Sakhalin and a hike of domestic gas prices by more than 10% (with another 20% raise scheduled for next year).

Oilmen are also feeling the pinch: the once-powerful Igor Sechin is speaking on their behalf, proposing tax relief as transactions costs have increased in the sector due to sanctions. Overall, though the government still has possibilities for shaking down big business – for example, to exit Russia now, foreign firms in effect have to pay 95% of their revenue – these possibilities are dwindling.

For instance, the Ministry of Finance and the Central Bank are against making banks pay the windfall tax, arguing that it reduces banks’ scope to lend to households and businesses. And whereas lending to the former has tapered off following the recent end of the government’s preferential mortgage program, loans to the latter are only growing, as evidenced by Central Bank data – here we see the growing costs that civilian-sector business faces, as well as the needs of firms that make the war machine go.

‘People are the new oil’

This formula, proposed by Putin confidant Sergei Ivanov in 2009, still rings true. In the current environment, the authorities are cautious about this, rightly reasoning that Russians, who live paycheck to paycheck and are accustomed to thinking little about taxes, will quickly connect state tax grabs with the war and may wonder: are these great-power ambitions costing them too much?

Importantly, the tax burden on individuals was never as low as it is commonly believed: in reality, the average Russian paid about 53% of his earnings to the state. But the trick was that he saw the flat 13% personal income tax, while propaganda convinced him that this was it.

Contributions to various funds – pension, social and medical insurance – are taken out of employees’ salaries by employers. Not to mention the 10-19% VAT that everyone pays when they make any purchase. But Russians for the most part do not think about or simply do not know about these charges, often believing that since employers make social payments, the money comes out of someone else’s pocket.

It is precisely this lack of understanding that the Russian authorities are seemingly trying to take advantage of.

Take the childlessness tax under discussion: even if it is really set, as proposed, at RUB 30,000-40,000 per month (which is still unlikely), it will be trumpeted as promoting fairness: after all, someone’s children will have to pay for the pensions of the childless.

Or, for example, the administrative fee for registering a real estate lease agreement is to be doubled: it is only RUB 4,000, they will say, and not everyone rents housing and even fewer officially register their agreements.

But now, following the cancellation of the preferential mortgage program, experts are increasingly discussing schemes to bail out developers by investing funds from regional and federal budgets to buy their properties and use them for social housing. This measure would also be advertised as concern for the people. Unlike a private arrangement between the owner and tenant, however, a social rent agreement will surely be registered officially. And there you go: pay RUB 4,000 each year.

No matter the tricks that the authorities resort to, people will inevitably begin to notice that they have less and less money, like when they go to a government agency and get slapped with a bill forregistering anything, from marriages to transactions. Or when their fines start to pile up.

The government’s appetite will only grow, meaning that levies will too – and with them public discontent.