Summary
Russians are using more cash because mobile internet shutdowns make card payments difficult, and many businesses want to avoid paying taxes amid growing financial pressure from the war in Ukraine. The increase in cash use makes it harder for the government to collect taxes while the economy slows and public finances are strained.Key Facts
- Since the start of 2024, Russia has put 1.56 trillion roubles (about $20 billion) more cash into circulation, a largest rise in recent years outside the pandemic.
- The government frequently shuts down mobile internet to counter Ukrainian drone attacks, which disrupts card payments and pushes people to use cash.
- Cash use surged earlier during events like partial military mobilization in 2022 and a mutiny by a mercenary group in 2023.
- The Russian government raised the VAT tax from 20% to 22% and lowered the threshold for small businesses to pay VAT, increasing financial pressure on many firms.
- To avoid taxes, some businesses prefer customers pay in cash and pay wages "under the table," which hides income from tax authorities.
- About 6% of small business owners reported using illegal methods to reduce tax burden, like skipping cash register receipts.
- Russia's economy is slowing, with GDP growth forecast at only 0.4% for 2026, the weakest since 2022.
- The government needs more tax revenue to fund the war in Ukraine but faces challenges due to widespread cash use and a growing informal economy.
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