Russia’s Audit Chamber has reviewed the impact of the first corporate tax increase in the country’s modern history. The regional rate was left unchanged at 17 %, while the federal share rose from 3 % to 8 %. The increase did not translate into a proportional rise in federal revenues, with corporate tax receipts up 72 %. Even so, higher tax intake helped keep the federal budget deficit below the widely accepted 3 % of GDP threshold. In January–February 2026, the deficit narrowed further to 1.5 % of GDP, the Federal Treasury said on Tuesday.
The Audit Chamber’s latest report on the execution of the 2025 federal budget runs to nearly 60 pages of figures and tables, dense enough to challenge even specialists.
For most readers, however, two key trends stand out. First, public debt is rising at an unusually fast pace, along with the cost of servicing it. Second, higher tax rates are no longer translating into proportional gains in budget revenues.
Last year, the authorities raised the corporate profit tax rate from 20 % to 25 %, the first across-the-board increase in corporate taxation in the post-Soviet period. The additional revenues were meant to flow entirely to the federal budget, where the rate rose from 3% to 8% of corporate profits, while the regional rate was left unchanged at 17 %.
In the initial draft of the 2025 budget, the Ministry of Finance projected that federal corporate tax revenues would almost double, rising by a factor of 1.92. That assumption proved overly optimistic.
Instead of nearly doubling, federal corporate tax revenues increased by just 72%. At the same time, receipts from the tax declined at the regional level (see NG dated December 26, 2025).
The shortfall in corporate tax revenues reflects a policy-driven slowdown in economic activity, which has eroded companies’ financial positions as profits decline and losses rise.
Nominal profits at medium and large enterprises in Russia fell by 1.3 % last year, while losses increased by 7.5 % compared with 2024, according to data published by Rosstat in March.
Even so, the near tripling of the federal share of the corporate profit tax had a positive fiscal impact. Revenues from corporate profits rose from RUB 2.3 trillion in 2024 to nearly RUB 3.9 trillion in 2025. That increase, alongside other measures, helped keep the federal budget deficit at a relatively manageable 2.6 %.
Total federal budget revenues reached RUB 37.3 trillion in 2025. Non-oil and gas revenues exceeded expectations, reaching 103.2 % of the target, while oil and gas revenues fell short at 98 %. Expenditure exceeded RUB 42.9 trillion, resulting in a budget deficit of RUB 5.6 trillion, the Audit Chamber reported on Tuesday.
Russia’s public debt rose to RUB 35.1 trillion over the year, with debt servicing costs reaching RUB 3.2 trillion. Domestic debt increased to RUB 30.7 trillion.
Russia’s public debt rose by 21 % in 2025 from a year earlier, with domestic debt expanding even faster, up 29.1 %, according to the Audit Chamber. Such rapid growth points to a widening gap between current revenues and spending needs. It also reflects a controversial strategy by the finance ministry, which is accumulating reserves despite revenue shortfalls, placing them at relatively low yields. To sustain this approach, the ministry has been borrowing on the market in volumes exceeding immediate financing requirements. ‘Despite the freezing of our assets and sharply rising debt servicing costs, the finance ministry continues to channel oil and gas revenues into the National Wealth Fund, while financing budget spending through borrowing,’ said State Duma deputy Oksana Dmitrieva. She noted that the share of debt servicing costs in total expenditure has risen from 1.8 % in 2008 to 8.8 % in the 2026 budget, now exceeding combined spending on education and healthcare.
‘Returns on National Wealth Fund investments are 6.5 times lower than total debt servicing costs. The finance ministry continues to propose using declining oil and gas revenues not for investment, defence or social spending, but for foreign currency purchases, effectively creating a circular flow of funds through the Moscow Exchange,’ Dmitrieva said.
The sharp rise in debt servicing costs is largely driven by the central bank’s high key rate. In March last year, the State Duma recommended that the Audit Chamber review the rationale for the increase (see
NG dated March 20, 2025 ).
Simultaneous borrowing and transfers to the National Wealth Fund have become a key driver of excess debt issuance. This approach, which effectively inflates public debt, results in persistent losses as returns on NWF assets lag behind debt servicing costs. ‘In effect, this channels budget funds into the financial sector while leaving social spending underfunded,’ said State Duma deputy Oksana Dmitrieva, describing the finance ministry’s policy.
Despite weak oil and gas revenues early in 2026, the federal budget deficit remains significantly lower than a year earlier.
The Federal Treasury put the January–February deficit at RUB 5.57 trillion. The finance ministry’s preliminary estimate is lower, at RUB 3.45 trillion, or 1.5 % of GDP.
Under the 2026 budget law, the deficit is projected at RUB 3.79 trillion, or 1.6 % of GDP.
The Treasury reported revenues of RUB 2.5 trillion for the first two months of the year, well below the finance ministry’s estimate of RUB 4.77 trillion. Analysts cited by Interfax said the gap may reflect timing effects, as February 28 fell on a Saturday, with some tax payments likely booked on the next working day, March 2.
ORIGINAL: NG/ Losses of Large and Medium-Sized Companies Up 7.5%
