Інфляція має складну природу і говорити про неї  лише в юридичному або лише економічному  значенні означало б неточно відобразити її природу.  В основі інфляції лежать як юридичні так і економічні чинники.  Можливо цікавою для вашого дисертаційного дослідження буде стаття Олександра Єфімова:  Індекс інфляції і 3% річних: де знайти правду про оподаткування?

(Опубліковано в газеті “Бухгалтерія” № 21 (1060), 27 травня 2013 року, стор.79-80)

В даній статті  дається цікавий аналіз судової практики та податкових консультацій фіскальних органів з даного питання, зокрема розкривається природа інфляції з точки зору податкового права.

Дякую, Ігоре Івановичу!

Dear Pavlo, the term 'inflation-tax' be interpreted in two ways: (1) it is tax be imposed on beneficiaries of inflation situation and (2) it is tax be imposed to raise price of commodity/service in question whose excess demand must be controlled.

Dear Pavlo,

Can you explain what you mean by "lthe methodology of egal science"?

Generally, when "inflation tax" is mentioned, it refers to what happens when inflation drives up wages and pushes individuals into a higher marginal tax rate.  While their real wages may not have increased, they are being taxed more and thus the government's taxation revenues increase as a result of inflation.  Furthermore, where a sales tax or value added tax is imposed, a rise in prices results in a nominal increase in taxes even though the tax rate remains  constant.

Thank you Dr. Arjun Yallappa Pangannavar for your answer!

But, can you explain what do you mean by "inflation situation"? Is it just phenomenon determined by ecomonic development?

Thank you, Mr. Peter Eugene Fane.

While speaking about the mothodology of legal science, I have meant the set of methods that are used in legal research. These methods include the anthropological and sociocultural aproach, the method of legal sociology, the communicative legal method by the way.

I know that in Anglo-Saxon legal system the clear differentiation between finance law and economic science is absent. In Ukraine for example we investigate the huge scope of financial reality (e.g. taxes, budget, currency...), as a part of law (called finance law). So that we apply legal methods to explore such phenomena.

Have you any thoughts why inflation tax remains latent? Here I mean that no one state (maybe you know the exceptions) admits the inflation tax as the "tax" in the legislation, but at that time states receive inflation revenues.

The inflation tax is defined by macroeconomists as the revenue that accrues to the state which creates inflation by financing revenues through  printing new currency measured in real terms, that is, the nominal revenue deflated (divided by a price index). If the printing of new money is only used for, say, paying soldiers, the real gain may be measured as the number of soldiers financed by the new currency per month.

The term comes from Keynes's book "A tract on monteray reform" from 1923. This is the first clear expression in English of the inflation tax. According to the survey:

Kleiman, Ephraim. 2000. Early Inflation Tax Theory and Estimates. History of Political Economy

some early analyses were provided by Russian economists in connection with the Russian revolution.

In a steady state with constant real money balances (real value of the public's currency holdings) , the inflation tax is the inflation rate multiplied by real balances. Keynes pointed out that the inflation rate works as a tax rate on  real balances, the tax base. He made the point that inflation works as if it is tax, but without a decision by any parliament. This makes it attractive for rulers who wish to conceal that they are getting resources from the public.

The concept "inflation tax"  thus does not refer to a tax as such, it is only a metaphor. I do not see how legal reasoning should be useful, since it is not based on a law like actual taxes. I cannot imagine any state which has ever created a law determining the "inflation tax". The inflation tax applies everywher where there is inflation. 

I might have  a bit of a different viewpoint, so I'll attempt to describe the inflation tax from where I sit. The inflation tax is anything that is diminished as a result of a country running an inflation. The foremost example is that the purchasing power of money is diminished. The appreciation of assets may be taxed through a capital gains tax. To the extent that those gains are just nominal, then this is a type of inflation tax. In this connection, estate taxation may be largely an inflation tax. Some taxes may be levied but not collected. For example, an unanticipated inflation is a tax on creditors and wage earners. The tax proceeds in this case go to debtors and employers, respectively. The manipulation of interest rates by monetary authorities may be an inflation tax as it can be an attack on bondholder . . . especially the elderly. I'll bet that this does not exhaust all the examples that readers can come up with. For example, we can see from a previous answer that a income tax law that is specified in nominal terms can be used to drive people into higher brackets as the result of an inflation; this is just one more example.

Each and every one of these examples has a foundation in law. Let us take the foremost example: national currencies. Suppose someone were to propose a new currency that is designed specifically to eliminate inflation. It is actually not very difficult to produce such an instrument. My bet is that there are legal impediments to doing this everywhere. In the USA, for example, if you tried to produce such a competitive currency, it would be taxed out of existence, because the nominal gains that would be needed to protect against inflationary losses would be taxed as if this were an investment.

So one can address these issues from various perspectives. What are the sociological and/or psychological reasons for taxing nominal income? Moving to a real income tax requires some additional technology: a price index through which all nominal income streams are adjusted. But that can't be the whole reason. I suspect the taxation of nominal income benefits the legislating class. They get to erect barriers that create problems for their constituents on an ongoing basis, while it appears as if the legislators have done nothing harmful. This requires their constituents to constantly lobby the lawmakers for relief. Of course, relief requires donations to the lawmakers so that they can run for reelection. There are also speaking fees . . .

Dear Pavlo,

In Anglo Saxon law there is no need to differentiate between economic science and finance law because the law is, where relevant, usually based on the rational of economic science, but the law often allows flexibility for authorities to generate calculations demonstrating economc gains or losses fit for the legal purpose.

With respect to the "inflation tax", it is a matter of practicality and flexibility not to include legal constraints (although Milton Friedman would probably have advocated such restrictions-and we  know what happened when his experiments were implemented in South America). 

While everyone knows the inflatin tax exists, no-one (except perhaps the "purists") would want to see the law impose restrictions on future actions that may be necessary to dig their country out of a hole created by the government and/or economic circumstances.  Therefore, they do not incorporate into law measures that would eliminate "inflation taxing".  However, many countries (including Australia) allow for the effects of inflation on assets before taxing any capital gains.  This is one way in which recognition of the "inflation tax" has been incorporated into tax regulation.  Also, many countries have a policy imposed on their central banks to follow policies that maintain inflation within some band.  In Australia, there is a lower inflation limit of 2% and an upper limit of 3% which the central bank targets.  Why there is not a lower limit of 0% I do not know, but perhaps the higher lower limit relfects the fact that inflation is often a necessary adjustment tool in the face of downward inflexibility in the labour market, and is thus a reflection of the cost of instituional frictions in the economic adjustment process.

Thank you, Mr. Klas Fregert for your answer and precious opinion.

Thank you, Mr. Peter F. Colwell for your answer . Special thanks for your explanation of such multiple effect of inflation tax.

Thank you, Mr. Peter Eugene Fane.

As I correctly understand from your answer, inflation tax in some cases may be an instrument for countries to fight economic crisis.  You also appointed that such hole in economcs can be created by the governments. It might be interesting to know your position on the next questions:

1. Is there any legitimacy crisis, when the population of the country (those who use state currency) pay for the government mistakes in monetary policy?

2.  Does inflation tax nullify the principle: "No taxation without concern!"?