The Russian government has begun drawing up next year’s budget based on conservative revenue projections. Nominal revenues are expected to grow by just 7.4%, with annual inflation running above 6%. Raising more tax revenue from a stagnating economy is becoming increasingly difficult, prompting the Ministry of Finance to propose tax increases for individuals and certain Russian businesses
Russian economic authorities are pursuing conflicting objectives: the Bank of Russia is effectively suppressing economic activity through tight monetary policy, while the government is seeking to extract more tax revenue from a stagnating economy.
The conflict between ‘slowing down’ the economy and increasing budget revenues is evident even in official data. The share of loss-making companies has risen from 30.4% last year to 33.5% this year, while their combined losses grew by 7% YoY in 2026 H1. The authorities have managed to suppress overall economic growth in our country to near-zero levels, with the government forecasting GDP growth of just 0.6% this year. All else being equal, tax receipts cannot rise significantly when the economy is showing such a steep slow-down. The government is therefore looking to generate additional revenue through a range of tax ‘adjustments’.
For instance, from 2027, Russian consumers are set to pay VAT at a rate of 22% on purchases made through cross-border e-commerce. The government also plans to introduce a RUB 100 customs fee on shipments of goods for personal use worth up to EUR 200. Tax rates will also rise on income from dividends and other equity holdings, interest on bank deposits, transactions involving securities and digital rights, property sales and disposals of equity stakes, insurance contracts and gift deeds.
In the mining and metals sector, the government plans to impose a tax equivalent to 30% of additional income generated due to increases in global prices for solid minerals, measured in RUB against a 2025 baseline (the rate for gold would be set at 20%). The measures would cover certain products in resource-based industries, including precious and non-ferrous metals, fertilisers, etc. These tax-hike plans were submitted by the Ministry of Finance to the government on Thursday as part of drafting the 2027 budget
The measures suggest that officials recognise many broad-based taxes may already be approaching the point at which further increases risk reducing rather than raising overall government revenue. Corporate tax may be one such example: the rate was raised from 20% to 25% last year. Overall receipts are still rising, but many Russian regions are already reporting sharp declines in tax revenues.
In 2026 H1, corporate tax revenues dropped in 32 regions, with declines exceeding 20% in eight. Fifteen regions have recorded falling revenues for three consecutive years: Bashkortostan, Buryatia, Karelia, Krasnodar and Stavropol Territories, as well as the Astrakhan, Belgorod, Bryansk, Vologda, Kemerovo, Lipetsk, Nizhny Novgorod, Oryol, Samara and Sverdlovsk Regions (see Nezavisimaya Gazeta, September 23, 2026).
‘We will, of course, continue to support the regions, as many challenges are addressed at the local level. Federal support for the regions will be maintained at this year’s level,’ said Prime Minister Mikhail Mishustin at a government meeting on Thursday. Mishustin said the next budget would focus on three main priorities. ‘First and foremost, we must meet our social commitments, particularly support for families with children. We will continue to develop healthcare and education systems. Our second objective is national defence and security, and social support for participants in the special military operation and their families. The third is achieving the national goals set by the President, including technological leadership. In particular, we will continue to develop the machine-tool industry, microelectronics and radio electronics,’ he explained.
The federal budget drafted by the Ministry of Finance projects revenues at RUB 43.3 tn in 2027, up 7.4% from this year’s target. Spending is set at RUB 48.8 tn, an increase of 8.2% compared to 2026 target.
The 2027 draft budget is based on the Ministry of Economic Development three-year forecast for social and economic development. The day before the Russian government meeting, Reuters published detailed projections of the Ministry regarding the production and exports of energy resources, which continue to underpin the Russian economy and the execution of its state budget.
According to the Ministry of Economic Development, Russia is expected to produce and export less natural gas this year than previously projected. As reported by Reuters, the outlook for both production and exports has been downgraded amid severed economic and political ties with the West due to the war in Ukraine and the European Union’s plans to halt all purchases of Russian gas starting next year.
Under the latest forecast provided to Reuters by Russian officials, natural gas production is expected to reach 683.1 bln cubic metres this year, 5.3 bln cubic metres below the May projection but still above the 662.7 bln cubic metres produced in 2025
The Ministry of Economic Development had previously cut its forecast for oil production in 2026 to a 17-year low and revised its projections for exports of energy resources for this year and the next. According to government forecasts provided to Reuters, Russia’s total oil and gas export revenues could fall by 12% next year.
Reuters reported that under the Russian government’s baseline scenario, crude oil production is expected to drop by 17.2 mln tonnes this year to 494.2 mln tonnes, or 9.88 mln barrels per day, a record low since 2009. Russian crude oil exports could reach 244.7 mln tonnes this year, up from 230.8 mln tonnes in 2025. The government expects exports to fall to 232.5 mln tonnes in 2027, followed by a sharp drop to 216.6 mln tonnes in 2028–2029.
