🇺🇦🇷🇺Ukraine vs Russia

Russia’s tax hikes were meant to shore up the federal budget. They may be pushing the economy underground.

Russia’s central bank disputes these figures: according to the regulator’s own data, the share of cashless payments in retail turnover grew by 0.9 percentage points in the first quarter of 2026, reaching a record 88.9 percent. The share of cash withdrawal transactions fell 4 percent in both number a

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28 مايو 2026

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Amid higher taxes, tighter scrutiny of bank accounts, and internet outages, many Russians are turning to cash

• Check Index, the analytics unit of Platform OFD — Russia’s largest fiscal data operator — reported that the share of cash payments in total transactions rose to 30 percent in April, up 5 percentage points from the same period in 2025, when it stood at 25 percent. The figure is especially high — above 35 percent — in sectors including grocery retail, furniture, construction, hospitality, and auto parts.
• SberIndex, a service run by Sber — Russia’s largest bank — recorded a broadly similar trend: cash accounted for about 29 percent of payments in March, up from about 26 percent in December 2025. In late April, Sber’s deputy chief, Taras Skvortsov, also said that the share of cashless transactions in the country had begun to fall. The bank was seeing the shift toward cash “not just as signals but in the numbers,” the executive said.

Russia’s central bank disputes these figures: according to the regulator’s own data, the share of cashless payments in retail turnover grew by 0.9 percentage points in the first quarter of 2026, reaching a record 88.9 percent. The share of cash withdrawal transactions fell 4 percent in both number and total volume.

Even so, the central bank acknowledges that the volume of cash in the monetary base grew 3.5 percent in April, to 20.2 trillion rubles, and by 14 percent over the year. Alla Bakina, the head of the central bank’s national payment system department, said the regulator’s own figures show no shift toward cash. In her view, demand for cash has grown because people want a reserve on hand in case they run into payment problems.

The trend was sharpest in early May: in the first half of the month alone, 330 billion rubles in cash flowed into the economy through bank branches and ATMs. The central bank attributed the surge to widespread mobile internet outages, which are prompting households and businesses to build up cash reserves for everyday use.

The regulator also tied the March–April rise in cash demand to a possible “adaptation to tax changes”: starting in 2026, card processing services became subject to a 22 percent value-added tax, making cashless payments more expensive for businesses to accept. Card processing fees in Russia average 1 to 3 percent of the transaction total, so for businesses with thin margins — including food services, building materials, and auto parts — those percentage points can eat into a significant share of profit. Accepting cash avoids that fee entirely.

So, are Russians paying more in cash or not?

Most likely, yes. And the central bank’s reluctance to acknowledge it may be a sign that part of the Russian economy is migrating into the shadows.

• First, the regulator “can only analyze what falls within the banking system, but it cannot see what portion of trade is conducted in cash” — which is why Platform OFD’s data may be a more reliable gauge, independent analyst Maxim Mitusov told the business daily Kommersant.
• Second, amid rising taxes, entrepreneurs are increasingly conducting transactions entirely off the books. Independent analyst Yevgeny Nadorshin told Kommersant that cash effectively goes “underground,” its observable circulation falls, and regulators are left with the impression that the share of cashless payments is still rising. “This is also suggested by the growing share of cash alongside lower withdrawal volumes and fewer withdrawal transactions: the cash being withdrawn is apparently returning to banks less often and in smaller amounts — it is servicing the shadow economy,” Kommersant’s source said. In April, Sber’s Taras Skvortsov also raised the risk of the economy reversing its push toward formalization.

Small businesses and ordinary citizens are especially worried about government plans to tighten oversight of cashless payments between individuals. In March, the government submitted a bill to the State Duma that would require banks to report to the Federal Tax Service account holders suspected of tax evasion. “Money received by individuals free of charge (as gifts) is fully exempt from taxation, and payments to other individuals for paid services are being ‘disguised’ as falling under this exemption,” the bill’s authors wrote in an explanatory note.

The Federal Tax Service clarified that the key trigger for monitoring individual transfers would be exceeding 2.4 million rubles in undeclared annual income — a threshold that could affect 3 percent of the country’s working population. Among those affected, there will be no shortage of entrepreneurs and landlords who would prefer to move some of their transactions off the books. For now, though, the law has not been passed, and the current rise in cash payments likely owes more to Russia’s frequent internet outages and rising taxes.

As a reminder: starting January 1, 2026, the base VAT rate rose from 20 to 22 percent. Authorities are also gradually reducing the revenue threshold that triggers VAT obligations for businesses enrolled in the simplified tax system:

• This year, the cutoff fell from 60 million rubles to 20 million.
• In 2027, it will drop to 15 million.
• In 2028, to 10 million.