Russia’s finance ministry proposed raising the value-added tax (VAT) rate to 22% from 20% in 2026 to fund military spending and help curb a swelling budget deficit, in what would be the fifth year of the war in Ukraine, Reuters reported. The proposal comes as US President Trump called Russia a “paper tiger” for “fighting aimlessly for three and a half years” and said Russia was in “big economic trouble.” President Putin signaled last week that he was open to raising certain taxes during the war, noting that the US had raised taxes on wealthy people during the Vietnam and Korean wars. The government on Wednesday approved a new draft budget for 2026. National defense spending will fall to 12.6 trillion roubles in 2026 from a post-Soviet high of 13.5 trillion in 2025, finance ministry documents showed. In 2025, the deficit is seen at 2.6% of national output, the highest since the start of the war, according to the documents reviewed by Reuters, exceeding the previous target by 53%.

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