Small Business and VAT: Causes and Impact of Tax Legislation Changes

The subject of the study is a widely publicised changes of the tax system in 2026, which will introduce a value-added tax for entrepreneurs with revenue exceeding 20 million rubles per year. The relevance of this topic lies not so much in the technical aspects of the innovation (which are certainly significant), but rather in the principles of changing the tax system for small and medium-sized businesses (hereinafter referred to as SMEs) in the current economic, including budgetary environment. The objective is to evaluate from a scientific and practical perspective the financial risks and business implications of introducing the payment of VAT for SMEs which have not previously paid it. Findings: as it has been determined, the methodological rules for the studied entities involved in the VAT collection system are not fundamentally new or overly complex, except a few issues related to the transition period and pricing. Concurrently, the proposed innovation is presented in various ways as a component of federal tax policy and is becomes a significant phenomenon with potential implications for the development of the SME’s business sector. Hence, the authors advance a systemic examination of the change in tax legislation in order to (1) identify the sources and reasons to adopt the sought-after measure from a tax policy viewpoint, (2) analyse the established tax system regime, and (3) explore the potential effects of introducing this taxation procedure in the tax system. Conclusions. The growing tax burden on small businesses is generally assessed as a result of the general trend towards increasing tax liabilities due to increased budget expenditures on social needs, defensive potential, and the achievement of national goals. Small businesses still operate in the “comfortable taxation zone” in the continued environment of special tax regimes, including the experimental automated simplified tax system and the tax on professional income. However, the introduction of new tax legislation linked to additional fiscal burdens and tax risks will lead to longer transition periods and require informational and methodological support in the context of a client-oriented tax administration philosophy.

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