Vladimir Putin is being forced to increase some taxes to fund "defence and security" as Russia reportedly plans to allocate less funds to the sector next year. The country's finance ministry announced an increase in value-added tax (VAT) from 20% to 22% starting January 2026, as well as a decrease in the annual revenue threshold for businesses that must pay VAT from 60million rubles (around £537,000) to 10million (around £89,000).

Officials noted the fiscal changes are primarily meant to fund defence and security, the Institute for the Study of War (ISW) wrote in its daily report on Moscow's full-scale invasion of Ukraine. Experts added that Putin's finance minister Anton Siluanov claimed on September 18 that the Kremlin expects the share of Russia’s revenues from oil and gas sales funding its federal budget to be about 20% to 22% in 2026 - a decrease from about 50% previously.

The ISW wrote: "The Kremlin is likely seeking other revenue streams as oil and gas revenues, on which Russia has relied to fund its war in Ukraine, are decreasing in the face of impending Western sanctions and Ukrainian strikes against Russian oil infrastructure."

Reuters reported that unpublished documents from the finance ministry estimated that the VAT increase would generate about 1.2trillion rubles (around £10.7billion) in additional revenue next year.

Specialists believe that Moscow is likely looking for different ways to raise funding for defence and national security, without "aggravating existing socio-economic tensions".

State media coverage and social media campaigns "suggest that the Kremlin is aware of the possibility of social discontent due to the resulting increase in prices of everyday goods", experts noted.

In addition, Russia’s main state television channels mentioned the VAT increase "discreetly", only mentioning the policy at the end of broadcasts after reports about the war in Ukraine, US President Donald Trump’s speech at the United Nations, and the upcoming parliamentary elections in Moldova, Russian opposition outlet Meduza reported.

The Financial Times reported that the VAT move goes against Putin’s pledge last year not to raise taxes again before 2030.

"The Kremlin’s priority remains military expenditure, and it’s now the main problem for everyone,” Alexandra Prokopenko, a former central bank official, who is now at the Carnegie Russia Eurasia Center in Berlin, told the newspaper.

She added: "At the start of the war, the spending on the army came from reserves and surplus oil and gas revenue.

"Then they raised corporate taxes. Now all businesses and Russian citizens are going to finance the war directly, because there aren’t any other sources left."