Russia's Economy Braces for 'Perfect Storm' as Tax Cuts Threaten SMEs
Russia's economy faces a perfect storm, with Western sanctions, Ukrainian attacks, and increased defense spending taking a toll. The Kremlin's planned irs cuts in 2026 could push small and medium-sized enterprises to the brink, while the unemployment rate remains low, hindering productivity growth.
The Russian government is planning to reduce the tax allowance for small and medium-sized businesses, potentially pushing many to the brink of survival. However, specific names of affected companies remain unknown, as search results do not provide detailed information.
The impact of these irs cuts is expected to free up new labor for Putin's war industry and the army. This comes at a time when Russia's economy is increasingly faltering, with a recession narrowly avoided in 2025 after three years of growth. The GDP grew by 4.3 percent in 2024 due to increased state spending for the war, but growth prospects have since declined.
Meanwhile, the unemployment rate in Russia stands at a low 2.3 percent, making it difficult to increase productivity and the labor force. The government is burdening the Russian population to cover the costs of the Ukraine war, with increased state spending leading to high inflation. To finance defense and security, the value-added tax has been increased from 20 to 22 percent, affecting Russian citizens.
As Russia's economy struggles, the Kremlin is adjusting expenditures to new realities, with defense spending set to decrease in the coming years. However, the planned irs cuts for small and medium-sized businesses could have significant consequences, potentially pushing many to the brink of survival. The impact on specific companies remains to be seen, as detailed information is not yet available.
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