Russia's parliament approves 2027-29 budget with record defense spending and new tax hikes

Russia's State Duma passed the first reading of the draft 2027–2029 budget on October 29, 2026, approving a record 17.1 trillion rubles ($202.6 billion) for national defense. Security spending will total 21.3 trillion rubles, accounting for 44% of federal expenditures. To cover a $72 billion deficit, the plan cuts funding for healthcare, utilities, and social support while introducing a 30% windfall tax on mining and a 22% rate on personal investment income.

Parliamentary approval process for the draft budget

• ▪The approved draft 2027-2029 budget requires a second reading, approval by the Federation Council, and a final signature from President Vladimir Putin to become law.
• ▪Russia's State Duma passed the first reading of the draft 2027-2029 federal budget

Record defense and security spending allocations

• ▪Combined with a 7.6% increase in security and policing, Russia's total security spending will reach 21.3 trillion rubles ($262.1 billion), or 44% of total government spending.
• ▪Russia's proposed draft federal budget allocates 17.1 trillion rubles ($202.6 billion) to national defense, representing over one-third of total federal expenditures.

Reductions in social spending and priority trade-offs

• ▪Macro-Advisory CEO Chris Weafer stated that Russia's budget is moving into a phase that primarily funds military operations at the expense of household costs and broader economic development.
• ▪To offset rising military expenditures, the proposed 2027-2029 draft federal budget reduces spending on economic support and healthcare by 3%, social support by 6%, and housing and utilities by 8%.
• ▪Finance Minister Anton Siluanov stated that the draft budget fulfills social obligations while addressing tasks of the special military operation and achieving national development goals.

Proposed tax increases in the draft budget

• ▪Russia's draft budget imposes a 22% VAT on cross-border online retail, a 100-ruble charge per international parcel under 200 euros, and a 35% tax on dividend transfers to non-resident Type C accounts.
• ▪The proposed budget imposes a progressive tax scale reaching up to 22% on personal passive income, including interest from bank accounts, dividends, and proceeds from property sales.
• ▪The Russian government proposed a 20% to 30% tax on excess corporate profits for mining and metallurgy companies producing iron ore, nickel, and gold.

Russia's fiscal strain and dwindling reserves

• ▪The Kyiv School of Economics reported that Russia will exhaust its financial buffers by early 2028 unless it implements additional tax increases or social spending cuts.
• ▪Russia's budget deficit reached 5.8 trillion rubles ($72 billion) through August 2026, driven by high military spending, economic sanctions, and Ukrainian strikes on oil refineries, according to KSE.
• ▪Russia's liquid assets in the National Wealth Fund, including Chinese currency and gold, have dwindled to 1.7% of GDP.

Ukrainian estimates of Russian war costs

• ▪Ukraine's General Staff reported on October 28, 2026, that Russia has spent over $700 billion in total on its war against Ukraine.
• ▪Russia spent $190 billion on the war against Ukraine in 2025 and plans to allocate $186 billion in 2026, according to Ukraine's General Staff.