Russia weighs post-election tax rises to fund war in Ukraine

Russia’s Finance Ministry did not immediately respond to a request to comment.

Russian President Vladimir Putin. Photo: Kremlin / dpa

President Vladimir Putin said he intends to overhaul the tax system once he returns for a new six-year term in this week’s elections.

In a February 29 speech to lawmakers and officials at Russia’s Federal Assembly, he said he wanted “a more equitable distribution of the tax burden toward those with higher personal and corporate incomes”.

Individuals in Russia pay 13 per cent tax on annual incomes up to 5 million roubles, rising to 15 per cent for anything over that level. Changes under consideration would lower the 15 per cent threshold to 1 million roubles and increase the level to 20 per cent on incomes above 5 million roubles, shifting many more Russians out of the lowest tax bracket.

The average annual salary in Russia in 2023 was 884,508 roubles, according to Federal Statistic Service data.

The war is helping to fuel a wage spiral as recruitment into the military intensifies an acute shortage of workers in the economy. Compensation for specialists such as engineers, mechanics, machine operators, welders, drivers and couriers rose by 8 per cent-20 per cent last year, according to data from local recruitment service Superjob seen by Bloomberg.

Officials are likely to decide on the exact levels of the tax increase in the summer, the people said.

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The Kremlin said this weekend’s vote will show society is fully behind Putin’s assault on Ukraine.

In power as president or prime minister since the final day of 1999, Putin has quashed all forms of opposition and dissent, exerting a level of domestic control that ensures the result is in no doubt.

Victory in the March 15-17 contest will allow him to stay in the Kremlin until at least 2030, longer than any Russian leader since Catherine the Great in the eighteenth century.

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The poll comes at a time of high confidence for the former KGB agent.

Russia’s troops in Ukraine have chalked up their first battlefield gains in months and Putin’s most strident critic, Alexei Navalny, died in an Arctic prison colony last month.

Though Putin is blasted as a pariah in the West, the Kremlin says the vote will show that Russians at home are unified behind him and his offensive.

“He has no rivals at the moment and cannot have any,” Putin’s spokesman Dmitry Peskov said last year.

“Nobody can realistically compete with him,” he said.

Pollsters loyal to the Kremlin said on Monday Putin could receive 82 per cent of the vote.

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Despite the ceremonial undertones, the Kremlin takes the electoral process seriously.

Moscow has poured resources into a campaign designed to whip up enthusiasm for Putin.

The president has toured the country and was filmed flying in the cockpit of a supersonic nuclear bomber, burnishing his tough-guy credentials.

“These elections are very important for the Kremlin,” Chatham House fellow Nikolai Petrov told Agence France-Presse.

“It is needed to demonstrate that Russians overwhelmingly support Putin” during the military offensive, he said.

The Kremlin is aiming to secure a higher level of support for Putin than in his previous four election wins.

In 2018, official results showed he won 77.5 per cent of the vote.

The late Russian opposition leader Alexei Navalny and his wife Yulia in 2013. Navalny died in an Arctic prison colony last month. Photo: AP

Even with no real competition, that contest was marred by widespread accusations of ballot-stuffing, fraud and forced voting.

This year Putin will officially face three other contenders – Kremlin-approved candidates designed to give a facade of competition.

Anti-Putin politician Boris Nadezhdin was blocked from standing after tens of thousands of Russians backed his surprise bid to run on a pro-peace message.

The Kremlin had previously allowed a liberal candidate to run in what analysts once called Russia’s “managed democracy”.

Now the term they use is “autocracy” – or “totalitarian”.

Ballots will also be cast in the four Ukrainian regions Moscow claimed to have annexed in 2022, as well as the Crimean peninsula, seized in 2014.

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Moscow is no longer worried about trying to present the vote as a legitimate democratic exercise to the West, or even Russian society, Petrov said.

“The most important thing … is that political elites should not have any doubts that Putin is really supported by the vast majority of Russians,” he said.

Less than a year after an aborted mutiny by mercenary boss Yevgeny Prigozhin, the Kremlin will want to show possible rivals and successors that Putin is secure on his throne.

From exile and behind bars, Russia’s remaining opposition figures still hope they can spoil the procession.

They want anti-Putin Russians to form huge queues outside polling stations on the final day of voting.

A tourist takes a photo with a cardboard image depicting Russian President and presidential candidate Vladimir Putin in downtown Moscow on Monday. Photo: AFP

Navalny’s widow, Yulia Navalnaya, says the show of dissent could spook Putin.

The Kremlin appears unfazed.

“We will hold the kind of elections that our people need,” Peskov said earlier this month, dismissing those who describe the vote as neither free nor fair.

“We won’t tolerate any criticism of our democracy. Our democracy is the best.”

Additional reporting by Agence France-Presse, dpa

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