The net effects of switching from consumption taxation to inflation taxation on resource allocation and welfare crucially depend on production externalities. With elastic labor supply, raising inflation taxation decreases leisure, but increases the levels of real consumption, capital, and output. Moreover, this tax switch has two opposing effects on the level of real money balances: A positive effect through the rise in output caused by the faster nominal money growth and a negative one through the fall in the ratio of real money balances to output. In the absence of any production, externality the negative effect dominates the positive effect. The real effect of this tax switching on resource allocation depends on the behavior of labor supply. If there is not a trade-off between leisure and labor supply, then the real effect of switching to inflaction taxation on real consumption, capital and output would disappear. With elasticity of labor supply, the welfare effect of this tax switch is conditional on the production externality. In the absence of production externality, inflation taxation always reduces welfare. With a strong enough production externality, switching from consumption taxation to inflation taxation may raise welfare by correcting the under-investment of capital and the under-supply of labor.

How inflation taxation affects resource allocation and welfare has received a great deal of attention. So far, this debate has been controversial. In this paper, we examine how nominal money growth as a means of public finance affects resource allocation and welfare in a neoclassical endogenous growth model with leisure and money in the utility function and production externality. The present study is different from other studies in two aspects: first, in a dynamic optimization model, equations related to consumption and real money balances relative to GDP, leisure, capital stock, production and welfare level in a steady state, extracted in form of the parameters have been derived; second, sensitivity analysis has been conducted for each of them regarding the rate of inflation tax. The results obtained from sensitivity analysis indicate that in a steady state without externality of production, by increasing inflation tax rate, the ratio of consumption to GDP remains constant, but labor, capital stock and production will increase. With a decrease in the ratio of real money balances to GDP and leisure, the level of social welfare in steady state decreases. Considering production externality, capital stock and production increase more rapidly; moreover, welfare level in steady state increases.

One of the newest business activities in recent years is related to the emergence and development of e-commerce. The extension of e-commerce increases the possibility of evading from the taxation of new income resources which have traditionally been taxed in other ways. Having in mind the importance of this matter, the present research is going to investigate e-tax systems throughout the world and to introduce a model for the establishment of an electronic taxation system in Iran. An infrastructure needed for e-commerce is to provide for security which is very important in the e-commerce environment and for which there is a large amount of demand. Lack of security in the virtual world can be a barrier to the development of e-commerce. Our proposed model for the taxation of ecommerce in Iran is based upon making use of a secure electronic exchange database whereby the government presents security to users and exchangers and, at the same time, taxes their e-commerce activities. In this paper, we have used Delphi method and Sign Non-Parametric / Freidman tests to assess our proposed model of e-taxation. The findings obtained are as follows: the best tax category to be applied to e-commerce is VAT but the Iranian VAT laws and regulations should be modified prior to being applied to e-commerce; the creation of an electronic database by the Iranian government is economically justified; real and legal entities in Iran are sufficiently willing to make use of this electronic database; a national TIN code is required for the identification and tracing of companies engaged in the electronic environment; the best way of providing security in an electronic database is to use digital signature and digital certificate; sellers are the best agents for the collection of taxes; moreover, there is a need for concluding agreements with other countries on such topics as the exchange of information and avoiding double taxation.