Russia sets defense financing as strategic priority in budget

The Russian Finance Ministry proposed various tax changes to boost budget revenues while designating defense and security financing as the "strategic priority" of the upcoming three-year budget.

The ministry submitted its draft for the 2027 budget and the 2028-2029 planning period to the government on Thursday.

The ministry expects the federal budget deficit to stand at around 2% of the annual gross domestic product (GDP) during these three years.

Defense and security financing takes place among the strategic priorities of the budget.

The government will use the allocated funds to equip the army with weapons and military equipment, modernize defense industry companies, pay military personnel, and support their families.

The ministry also proposed various changes to the tax system as part of the budget package.

It plans to include "passive incomes" such as dividends, bank deposit interests, securities transactions, and real estate sales in a progressive income tax system ranging from 13% to 22%.

The ministry also proposed applying a 22% value-added tax on cross-border e-commerce and taxing the additional income of certain mining, metallurgical, and fertilizer companies stemming from the increase in global prices.

The country's budget expenditures significantly increased in recent years, especially due to spending on the defense industry.