Inflation and Taxes

The world is currently witnessing a global inflation. The war between Russia and Ukraine has caused global supply chain disruptions, pushing up the prices of Crude oil and other items. This has caused leaders all around the world to take notice and come up with solutions to fight inflation.

While a lot is talked about how inflation affects finances, the standard of living and spending power not much is discussed how inflation affects taxes. That is mainly because there is no simple, straight answer to this. Inflation impacts taxes both from the perspective of the taxpayer as well as the government that is collecting and utilising the taxes. When it comes to income taxes, a high rate of inflation usually increases the tax burden on the taxpayers.

To deal with this governments opt for inflation indexing of taxes. Inflation indexing is cost-of-living adjustments built into tax provisions to keep pace with inflation.

Read more about the relationship between inflation and taxes here

Got more questions? Shoot’em