Proposed tax increases in Russia are expected to significantly impact the profitability of the nation’s banking sector. Sberbank’s CEO, German Gref, stated on Wednesday that the proposed changes, including an increase in value-added tax (VAT) and the elimination of certain tax breaks in 2026, could lower bank profits by as much as 9 per cent. The draft budget, currently under review by the Russian parliament, includes a two-percentage-point VAT increase. It is a measure that is widely anticipated to fuel inflation as businesses pass the added costs on to consumers.
Gref noted that “next year these fiscal innovations will result in minus 277 billion roubles ($3.40 billion).” This comes as the central bank projects banking sector profits to be between 3.2 trillion and 3.8 trillion roubles next year. Sberbank’s Chief Financial Officer, Taras Skvortsov, further clarified that the elimination of tax breaks on specific banking services, such as card servicing and merchant payment processing, would also negatively affect profits. Sberbank is Russia’s largest lender and it pays half of its profit as a dividend to the state.
Russian banks have recently reported record profits, partially attributed to an overheated economy geared towards sustaining what Russia refers to as a “special military operation” in Ukraine. These profits have drawn public criticism amidst concerns that banks are excessively profiting during wartime, at the expense of industrial sectors, including military enterprises. Economic growth is expected to decelerate sharply this year, a consequence of the central bank’s decision to raise interest rates to 21 per cent to curb inflation and cool down the economy.
While the estimated decrease in bank profits is anticipated for 2025, Sberbank projects a 6 to 7 per cent increase. The planned dividend payout for 2026 from Sberbank amounts to about 1 per cent of the state budget’s revenues. Gref told reporters at a financial conference in Sochi that the banking sector would not earn last year’s profits this year, “not even close.”
