Russia’s economy slows after military growth, with lower oil revenues and defense spending. Putin plans to raise VAT to 22%, expecting $12.3 billion in state revenue. More tax increases are coming, affecting small businesses and consumers, amid an economic slowdown and budget deficit increase.

Higher taxes on spirits, wine, beer, cigarettes, and more are proposed. The VAT threshold for businesses is lowered, and fees on renewing driver’s licenses increase. Import car tax breaks are cut, and a tech tax on digital devices may be implemented. Russians face tough choices between military spending and consumer welfare.

Muscovites express dismay over tax increases. Small businesses fear closure due to VAT collection, impacting the budget negatively. Car registration fees increase, mostly affecting high-priced imports. Sales may decline initially but are expected to recover within six months as consumers demand higher wages.

Russia’s economy is expected to grow only 1% this year, down from over 4% in previous years. High interest rates and lower oil revenues contribute to the slowdown. The budget deficit is revised upward to 2.6%, as Russia cannot borrow internationally. Raising revenue is preferred over borrowing to avoid inflation and interest rate hikes.

Putin has enough money to maintain the war effort for the next year, but tough choices lie ahead. Taxes and fees are a shift from the wartime economy of the past two years. Maintaining military effort or consumer abundance will be a challenge in the long term. Putin faces trade-offs between military spending and consumer welfare.

Read more at Yahoo Finance: A slowing wartime economy pushes the Kremlin to tap consumers for revenue