Tax Overhaul Pushes Russian SMEs to the Brink as Revenue Collections Collapse

By Kekeletso Nkele, small.news Assistant

(small.news) — Russia’s small business sector faces severe strain after sweeping tax changes took effect in early 2026, with survey data showing sharp declines in profitability, reports The Moscow Times.

Research by the Center for Strategic Research found that about half of the surveyed small businesses are now unprofitable. A separate poll by the Russian Chamber of Commerce and Industry found that 65% of enterprises made no profit in the first quarter of the year.

Chamber Vice President Elena Dybova said many companies reported losses due to difficulty adapting to the new tax framework. The Chamber formally asked the Federal Tax Service to let businesses change their tax structures before year-end.

What Changed and What It Cost Businesses

The problem stems from amendments to the Tax Code that took effect on 1 January 2026. Under the new rules, businesses on simplified or patent taxation with annual revenues above 20 million rubles ($266,000) are now subject to value-added tax. Previously, those earning up to 60 million rubles ($798,000) were exempt.

The government also raised the standard VAT rate from 20 to 22 %and eliminated discounted social insurance contributions for some businesses. These moves sharply increased costs for small enterprises with thin margins.

The Fiscal Gamble That Backfired

The Finance Ministry expected the overhaul to generate 200 billion rubles ($2.66 billion) in extra revenue. Instead, tax receipts from special regimes fell 16 percent year on year in the first quarter to 537.2 billion rubles ($7.14 billion). So far, the reform has reduced revenue.

A Wider Web of Pressures

The tax changes are not the only pressure on small businesses. Economic Development Minister Maxim Reshetnikov noted conditions are tougher than in recent years, with companies now facing high borrowing costs and labor shortages alongside new tax burdens.

Survey data from the Center for Strategic Research show weak consumer demand is the main obstacle, cited by over a third of respondents. About a quarter flagged rising operating costs and high interest rates. Over half reported no access to credit.

Confidence Collapses, Planning Horizons Shrink

The psychological impact is as severe as the financial. Planning cycles have contracted sharply, with 70% of business owners setting plans for only one year. Nearly two-thirds expect worsening economic conditions over the next year; another quarter expects no change. Only about one in ten is hopeful for improvement.

These findings show mounting pressures on an economy already strained by high borrowing costs, weak consumer spending, and ongoing war costs in Ukraine.