Putin humiliation as Kremlin forced to raise taxes to fund war in Ukraine

Vladimir Putin plans to slap higher taxes on rich Russians as he desperately searches for more money to fund his war in Ukraine. The Kremlin boss said the government was considering increasing levies on dividends or raising tax rates on luxury goods - both of which measures would hit wealthy citizens.

He noted that the US had done something similar during two previous wars the country was involved in. "In the United States during the Vietnam War and the Korean War, that's exactly what they did," he said. "They raised taxes specifically on people with high incomes."

Russia is rapidly running out of money to fund its war in Ukraine, and needs to find new revenue streams.

The government has been steadily draining money from the country's national wealth fund to help cover the massive military costs.

In June the fund stood at just US$36.4bn (£26.9bn), down from a peak of more than US$140 billion ((£104bn) at the start of the full-scale invasion in 2022.

The Kremlin is set to unveil its new tax plans in a budget to parliament on September 29, with Putin urging his ministers not to "overdo" any tax increases.

Putin's government has poured billions of pounds into the defence sector, as the government placed the country's economy on a war footing.

The Kremlin is spending 6.3% of Russia's gross domestic product on national defence, the highest level since the Cold War. Defence spending accounts for 32% of total 2025 federal budget expenditure.

Military-industrial plants have been working 24/7 for the past few years, in bid to increase weapons supplies to the army.

The state has also spent heavily on bonuses to attract soldiers to sign up and on compensation for the families of those who are killed.

Russia's budget deficit is climbing, with spending surging and revenues decreasing as oil and gas sales plummet.

The finance ministry originally expected the shortfall would equal 0.5% of GDP this year, but has since raised its estimate to 1.7%. Private-sector forecasters suggest it could head towards 3%.