Russia to raise its Valued Added Tax

The Russian government’s World Cup news dump didn’t end with pension reform: Medvedev also announced that Russia will raise the Value Added Tax from 18 percent to 20 percent, though existing VAT benefits on foods, children’s goods, and medical supplies will remain untouched, to ensure that “the burden doesn’t fall on [ordinary] people,” the prime minister said.

The higher VAT is expected to raise roughly 2 trillion rubles ($32.2 billion) over the next six years. In May, Finance Minister Anton Siluanov said Russia wouldn’t raise taxes in the next six years, but he did promise a “tax adjustment.”

Medvedev also announced a transition to “the final stage” of Russia’s tax reforms in the oil and gas industry, saying that the government will abandon export duties in favor of higher taxes on mining operations. The process is expected to take six years, beginning next year, and the government reportedly plans to raise 1.6 trillion rubles ($25.7 billion) in this policy shift.

What will Moscow do with all this cash? In Vladimir Putin’s May 2018 executive orders, he instructed the Russian government to take steps to increase the country’s life expectancy and reduce poverty. Federal officials reportedly plan to spend at least 8 trillion rubles ($128.7 billion) on these policy goals.