UK Intelligence’s new update says Russia’s recently announced tax hikes will almost certainly be used to fund growing financial commitments, including the war in Ukraine.

The tax changes are projected to generate approximately $29 billion in additional revenues by 2025. The corporate tax rate will rise from 20% to 25%, and the new income tax system will introduce additional brackets. The highest income tax rate will also increase from 15% to 22%.

“The additional revenue raised, primarily through the corporate tax increase, will almost certainly be used to fund increasing government expenditures. Government spending in 2024 is forecast to increase by approximately 15% from 2023 but will highly likely increase further,” says the report. 

In 2025, the spending will almost certainly continue, as defense expenditures will likely increase alongside social and infrastructure spending. 

The UK Intelligence believes that the heightened tax burden on businesses will almost certainly hinder future investment and growth in non-military sectors.

Russia’s economic growth is likely driven by high state investment in the military sectors. However, according to its update, investment in non-military sectors is likely stagnating.

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