A significant increase in prices is expected in the Russian Federation in the coming years against the backdrop of a planned increase in the value-added tax (VAT) rate to 22%. Starting in 2026, the country will rank among the leaders in the world for this tax, surpassed only by a few European countries. Outside of Europe, Russia will share the top spot for VAT levels with Uruguay.
This is reported by Finway
Rising Inflation Expectations and Prices
Russian consumers are preparing for a new wave of inflation acceleration due to the upcoming tax increases. According to recent surveys, in October, the level of inflation expectations among the population rose from 12.6% to 13.3%. This is the largest jump in the indicator since October of last year.
“Inflation expectations have ‘entered a race,’ provoked by expectations of future inflationary shocks,” analysts from Gazprombank note.
Economist Dmitry Polyoviy explains that this rise in public expectations is linked to the announced increase in VAT, rising fuel prices, and an increase in the recycling fee.
Tax Innovations and Impact on Business
In addition to the VAT increase, the Russian government is launching a large-scale tax reform aimed at small businesses. In particular, it is planned to lower the annual income threshold that allows the application of a simplified tax system from 60 million to 20 million rubles. Starting in September next year, a “technology fee” will be implemented – an additional tax of up to 5,000 rubles, which will be included in the cost of technology and electronics, including smartphones and laptops.
Businesses and retail are already actively preparing for the new tax burden. Over the next three months, Russian companies intend to raise prices by an average of 6.3%, with the largest increases expected in the retail sector.