How Putin plans to fund a forever war in Ukraine

Vladimir Putin’s costly war in Ukraine has transformed Russia as the president has forced the country to pivot onto a war footing to support it. Now, going a step further, Russia is embarking on a significant tax regime overhaul, a move that hasn’t been seen in almost a quarter of a century. The tax shake-up will allow the Kremlin to further prioritise military spending as it attempts to keep its invasion going.

In the early years of Putin’s rule, Russia sought to attract a lot of foreign investment, boost the number of small and medium-sized businesses, grow the middle class and encourage them to spend. As a result, in the 2000s, private investments poured into trade, services, and the production of consumer goods, not only into oil and metals. A simplified tax code with easier taxes for the self-employed and a flat income tax of 13 per cent helped Russians reach an unprecedented level of wealth and consumption.