MOSCOW, Russia: Four years into Russia's full-scale invasion of Ukraine, a new tax overhaul aimed at shoring up state finances is rippling through the country's small business sector, leaving bakery owners, beauty salons, and pastry shops scrambling to stay afloat.

Denis Maksimov's bakery in suburban Moscow shot to prominence in December after he appeared on President Vladimir Putin's annual call-in show. Standing outside Mashenka, named after his eldest daughter, Maksimov asked Putin to reconsider tax reforms that sharply increase the burden on small businesses.

"We understand very well that it's not an easy situation for the country. We understand that raising taxes is necessary," Maksimov said. "We're looking ahead without optimism, frankly speaking. Many businesses will close down."

As oil revenues fall, the budget deficit widens, and military spending levels off, the Kremlin has turned to consumers and small firms to boost revenues. The value-added tax has risen by 2 percent, and the revenue thresholds that determine who must pay it have been significantly lowered.

Business owners said they are seeing declining demand, higher supplier costs, and tax bills that are now many times larger than before. Some have downsized; others have closed entirely. A recent social media video showed empty storefronts lining St. Petersburg's Nevsky Prospekt, the city's main avenue.

"I've never felt so scared as this year, so unprotected, so anxious," said Darya Demchenko, who owns a chain of beauty salons in St. Petersburg.

Under the reforms, the VAT payment threshold dropped from 60 million rubles (US$783,000) in annual sales to 20 million rubles ($261,000) this year, and it will fall further to 10 million rubles ($130,500) by 2028. The threshold was also lowered for businesses using the "patent taxation system," which allowed small firms to make fixed annual payments rather than pay a percentage of revenue or profits. Those earning over 20 million rubles must now pay at least a 6 percent revenue tax and a minimum five percent VAT.

Putin acknowledged Maksimov's concerns on air, emphasizing the need for reform to combat "uncontrolled" illegal imports, but said he would examine possible adjustments. Maksimov's televised appeal briefly boosted sales at his three Moscow-region bakeries, and he said he no longer plans to close, though he is still awaiting official measures.

"I think we will grow, maybe slower than before, but no less confidently, I think," Maksimov told AP.

His case sparked the "We Are Mashenka" online campaign, in which entrepreneurs argued that most business owners lack access to the president.

Demchenko said she had to close one salon and sell another as taxes and operating costs rose roughly 30 percent, while demand for beauty services declined. She said the new system forced her to abandon the patent scheme and hire a full-time accountant.

"This year, we haven't felt any support at all. We feel like they want to shut us down," she said.

Lyalya Sadykova, president of the Association of Beauty Industry Enterprises, said about 10 percent of beauty businesses in St. Petersburg closed in December and January, with another 10 percent sold. She expects more closures once tax payments come due.

"People will do the math. The first deadline for taxes is in April, and people will see that they have nothing to pay with, and that's when the collapse will begin," she said. "I think there will be bankruptcies and mass exodus from the market, because now it seems to me that not everyone has done the math and understood it."

In Kazan, pastry shop owners Ilsiya Gizatullina and Railya Shayhieva shut down after calculating the impact of higher taxes, rising costs, and falling demand.

It was an incredibly hard decision, "like cutting off a body part. Because we lived there, it was our life, 24/7," Gizatullina said. "We understand very well that it won't be abolished the day after tomorrow, and there will likely be an even higher tax burden in the future."

Small and medium enterprises account for just over 20 percent of Russia's economy. Chris Weafer, CEO of Macro-Advisory Ltd., said expanding VAT coverage is "a deliberate strategy by the Finance Ministry to create more stable, predictable sources of income" as oil revenues decline.

While unlikely to destabilize the broader economy, he said the reforms will weigh on future growth.

"The one engine of expansion and growth and innovation that you need in an economy is the sector that has suffered most in the last four years and is continuing to suffer today," he said.