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A bakery owner who pleaded with Putin to look into tax reforms warned that many businesses will be forced to close.
17:44, Wed, Feb 25, 2026 Updated: 17:55, Wed, Feb 25, 2026
Russia has implemented a new tax system. (Image: Getty)
Russian businesses face a punitive new tax measure as desperate Vladimir Putin scrambles to recoup money lost in oil revenues. As the full-scale invasion of Ukraine marks four years, the mounting pressure on Russia’s economy is starting to show. Oil revenues are dwindling, the budget deficit is up, and military spending that fuelled robust growth has levelled off.
Russian oil and gas revenues in 2025 dropped to a five-year low amid declining gas exports due to Western sanctions and falling crude oil prices, it has been reported. The Institute for the Study of War (ISW) highlighted that the Russian Ministry of Finance stated that the country's federal budget received a total of 8.48trillion rubles (around £80.5billion) in oil and gas taxes in 2025, which Bloomberg noted was a decrease of 24% compared to 2024. Consumers and businesses are now paying the price, as VAT has been raised by 2% and revenue thresholds for requiring businesses to pay it have been lowered drastically. The tax reform lowered the threshold for requiring businesses to pay VAT from 60 million rubles in annual sales revenue, to 20 million rubles (£191,000) this year and to 10 million rubles (£95,000) by 2028.
Russian businesses face a VAT increase. (Image: Getty)
The revenue threshold was similarly lowered for those using the "patent taxation system", in which small businesses made fixed annual payments - usually only tens of thousands of rubles - instead of a percentage of their revenues or profits.
This year, those whose revenues exceed 20 million rubles would need to pay at least a 6% tax on their revenues, and at least a 5% VAT.
Despite this, Putin maintains that "companies should not, in any way, suffer with the transition to the new tax system".
Darya Demchenko, who owns a chain of beauty salons in St Petersburg, said she had to close one and sell another to stay afloat due to the dramatically increased taxes and other costs, as well as lagging demand.
She told AP News: "I’ve never felt so scared as this year, so unprotected, so anxious... This year, we haven’t felt any support at all. We feel like they want to shut us down."
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Bakery owner Denis Maksimov, who pleaded with Putin via video to look into new tax reforms, also warned that "many" businesses will shut down.
In their televised exchange, Maksimov said he had been using the patent system for eight years, and Putin responded by underscoring the need for tax reform to tackle "uncontrolled" illegal imports, but promised to look at what can be done.
Russian media quoted Maksimov as saying sales rose for a while, but without a change in tax policy, he contemplated closing.
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He told the outlet: "We understand very well that it’s not an easy situation for the country. We understand that raising taxes is necessary.
"We’re looking ahead without optimism, frankly speaking. Many [businesses] will close down... I think we will grow, maybe slower than before, but no less confidently, I think."
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