In Moscow, Russia, businesses are bracing themselves for another round of tax hikes as the government seeks to curb a growing budget deficit. However, they are calling for more predictable fiscal policies to be put in place.

The conflict in Ukraine has put a significant strain on the state finances of Russia. According to a government document seen by Reuters in August, Russia has doubled its 2023 defence spending target to over $100 billion, which is roughly a third of all public spending.

The Russian government has already introduced several measures to raise revenue, including a one-off windfall tax on big business and an increase in mineral extraction taxes on the energy sector. Additionally, export duties linked to the rouble-dollar exchange rate were imposed from October 1st.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), stated that his organization is ready to discuss increasing income tax with the government if there are intelligible, clear and fairly systematic investment tax deductions in place. He also emphasized that businesses need some formulas that will allow both the finance ministry and business to understand how the tax situation will change when certain conditions vary.

Last week, Russian businessmen meeting with President Vladimir Putin proposed that any increase in income tax be accompanied by greater long-term predictability in fiscal policy. A source familiar with the discussions told Reuters that this was an attempt to reach a gentleman’s agreement – businesses would pay more but there would be no unexpected changes in the near future.