Russia's Tax Shift: A Breather for Small Businesses

Russia's government has decided to ease up on a planned tax increase for small businesses. This change comes after a lot of pushback from business owners who were worried about the impact. Initially, the plan was to make businesses with revenues between 10 million and 250 million roubles pay a 5% value-added tax (VAT) starting in 2026. But now, the government has adjusted the tax-free revenue threshold. It will drop gradually from 60 million roubles to 20 million in 2026, then to 15 million in 2027, and finally to 10 million in 2028. This gives businesses more time to adapt. Small businesses were not happy with the original plan. They argued that the tax hike would hurt a lot of them, possibly forcing many to close down. The government's new plan is better but still not as good as what the businesses wanted. They had hoped for a threshold of 30 million roubles instead of 10 million. The tax hike is part of a bigger plan to raise funds for military spending and to address the budget deficit. The general VAT rate is also set to increase from 20% to 22%, which is expected to generate about 1 trillion roubles. Small and medium-sized businesses are a big deal in Russia. They make up more than a fifth of the country's gross domestic product (GDP) and employ about 31 million people, which is around 40% of the total workforce. The government defines these businesses as those with up to 250 employees and annual revenues of up to 2 billion roubles. The expected revenue from these tax measures is around 200 billion roubles, or about 2. 5 billion dollars. The government's decision to ease the tax hike shows that they are listening to the concerns of small business owners. However, it is still a significant change that will affect many businesses. It remains to be seen how this will play out in the coming years and whether the government will make further adjustments based on feedback from the business community.