The Russian government implemented a new tax system with an increase in VAT to compensate for the decrease in oil revenues and the increase in military expenses.
In addition to human casualties, there has been speculation about the consequences of the war on Russia’s economy, particularly, the effectiveness of sanctions as a way of punishing the offender. Recent signs point to growing difficulties in the trade sector, which President Putin is trying to mitigate with a new tax system and some maneuvers to manage the internal narrative.
This was the case with the pastry episode. Mashenka, on the outskirts of Moscow, which became famous overnight after a conversation between the owner, Denis Maksimov, and the Russian president, was aired on national television. The two talk about taxes, which the owner recognizes as “necessary”, but which weaken traders’ optimism about the future.
“Many companies will close or move into the parallel economy. We ask you to advise us on how we should proceed in the face of drastic changes in tax legislation,” said Denis.
On the other side, we hear Vladimir Putin’s response. “Companies should not, in any way, suffer with the transition to the new tax system”, he says, without detailing solutions for businesspeople, wishing “all the best and much success” to Denis Maksimov.
“Maybe you can offer me something, send me something?” asked Putin, immediately receiving a positive response. “With pleasure”, said the owner of the Mashenka.
At stake is an increase in consumption taxes, that is, the Russian VAT. The case of the pastry Mashenka contrasts with data released in an Associated Press report, which reports an increase in closed businesses and stores for rent. Not everyone has the publicity brought by Putin.
Darya Demchenko, owner of a chain of beauty salons, was forced to close her doors.
“Before, we paid around 120,000 rubles ($1,566) a year in taxes. Now that we have switched to 5% VAT, our average tax bill is around 250,000 to 300,000 rubles (between 3,262 and 3,915 dollars) per month”, he explains.
A non-VAT increase vaims to mitigate the budget deficit, now that there is a growing decline in oil revenues, in parallel with the increase in military expenditure after
