The Kremlin is raising taxes while shielding the groups on which its war effort depends. Part of the country’s income now hinges on the war continuing.
The Kremlin is increasing tax levies while protecting the categories on which its military effort relies. A portion of the country’s revenue now depends on the continuation of the war.
Russians had barely finished voting on September 20, 2026, when their Ministry of Finance announced new tax proposals just four days later. The bill is presented after the polls close, targeting capital income, purchases on foreign platforms, and additional revenues from mining groups.
These announcements—deserving better than yet another prediction of Russian bankruptcy—show how a power can prolong a war while placing greater demands on its civilian economy, all without systematically creating losers. Indeed, a war generates orders as well as targeted increases in wages and bonuses.
At the same time as it destroys lives, a war redistributes income. Understanding its duration requires analyzing the resources it absorbs, as well as the dependencies it creates.
In this respect, the choice of levies is revealing, as the Kremlin does not draw indiscriminately from all sources of income. The authorities favor savings, cross-border consumption, and windfall profits from raw material producers. Because categories directly tied to the military effort are spared, taxation effectively becomes a tool for prioritizing activities, distinguishing those that finance the war from those that—inevitably—endure it.
In absolute terms, the increased tax burden is substantial as successive reforms accumulate. In 2025, the standard corporate income tax rate rose from 20% to 25%. In January 2026, VAT increased from 20% to 22%. And for 2027, the ministry proposes subjecting capital income—dividends, interest, capital gains—hitherto taxed at 13–15%, to the progressive tax scale, with the top marginal rate rising to 22%. Unearned income is thus treated under the same progressive scale as labor. Four million taxpayers are preparing to face a change in their taxation.
Conversely, the tax system distinguishes between the categories from which it asks more and those it intends to spare, as the income of war participants will be shielded from this extension. Such tax preference already drives a profound redistribution because (according to the Atlantic Council) 65% of Russian regions offered enlistment bonuses exceeding one million rubles in 2025—sums that are truly decisive for low-income households.
Furthermore, military orders are also altering local prospects. Manufacturing wages grew by 78% between February 2022 and February 2025 in the Sverdlovsk region—home to tank manufacturer Uralvagonzavod—according to that same study. While this nominal increase before inflation adjustment does not reflect an equivalent gain in purchasing power, it reveals how the effects of war differ from one profession to another, and from one territory to another.
This redistribution naturally benefits defense workers, but also the regions hosting factories, subcontractors, and the families of recruits. Military bonuses and public procurement circulate income that, in turn, supports local commerce and real estate in a mechanism contributing to a divergence in how the war is perceived: constraint and impoverishment for one segment of the population, economic opportunity for another.
Away from these channels, pressure is gradually building due to the growing divide between military industries on the one hand, and a depressed civilian economy on the other. Because households allocating most of their budget to essential expenses have little leeway to absorb the shock, a genuine wage surge in the defense sector coexists alongside a decline in daily living conditions for those excluded (for one reason or another) from this sector.
In total, while Russian public finances are certainly under pressure, it clearly remains under control. The deficit will reach 3% of GDP in 2026, compared to the 1.6% initially projected. For 2027, the government forecasts 43.3 trillion rubles in revenue and 48.8 trillion rubles in expenditure, leaving a deficit of 5.5 trillion rubles (€57 billion). In other words, the additional tax levies will still leave a significant financing gap.
The issue is therefore not so much an immediate exhaustion of Russia as a gradual reallocation of its resources. Workers, capital, and industrial capacity directed toward defense cannot simultaneously be employed to modernize infrastructure, develop public services, and prepare for future growth. Ultimately, this war—like all others in human history—supports certain incomes at the expense of lower investment in tomorrow’s economy.
The Kremlin’s fiscal endurance—and undeniable capacity for adaptation—lies in organizing jobs and income around the war. Russia is therefore still largely able to pay for its war. The question is what Russians will have to give up producing, consuming, or investing in for it to continue.
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