ABSTRACT
In any modern developed economy transactions take place through the medium of money, values are expressed in monetary terms, and — like all other transactions — tax bases are measured and taxes are levied in monetary forms and expressed in monetary values. No intolerable problems arise as a result provided that the general level of money prices — i.e. the real value of the monetary unit in terms of goods and services in general — is reasonably constant. But when the general level of prices is rapidly inflated (and in particular when the future rates of inflation are difficult to predict) very important inefficiencies and inequities can result. The resulting distortions to the tax system are only a part, though an important part, of this process. In the introduction to their Final Report in 1955, the Royal Commission on the Taxation of Profits and Income 1 emphasised this point in the following way:
