Advance Tax Hike in Bangladesh Risks Fueling Inflation

Experts in Bangladesh have warned that the government's increase in advance tax rates for commercial importers, aimed at recovering lost VAT revenue, may lead to higher consumer prices and intensify inflationary pressures. While the VAT rate for commercial importers rose from 5% to 7.5%, the rate for industrial importers of raw materials was reduced from 3% to 2%, with inflation persisting above 9% for over two years. Authorities emphasized the need for Bangladesh to improve competitiveness and productivity to achieve economic diversification and growth, recommending tariff rationalization along with enhanced income tax and VAT revenue mobilization. Concerns were raised about the expanding budget deficits financed by bank borrowing and money printing, which have contributed to inflation and currency depreciation; experts urged limiting bank financing to 1% of GDP and increasing foreign funding. In Australia, inflation expectations have edged higher due to rising petrol prices linked to Middle East tensions, though official inflation remains within the Reserve Bank's target, and an interest rate cut is anticipated. Meanwhile, the UK faces potential tax rises as Prime Minister Keir Starmer commits billions to defense and the NHS without clear funding sources, amid internal party opposition to welfare cuts needed to balance the budget. Additionally, U.S. economic activity shows signs of slowing amid inflation risks from tariffs under President Trump and growing geopolitical uncertainties, including Middle East tensions.