Why government revenue can RISE during high inflation

A recurring, slightly counter-intuitive Achieved/Merit angle: inflation is usually framed as harmful, but it can genuinely benefit ONE major economic actor — the government.

Two concrete mechanisms

GST REVENUE: GST is charged as a PERCENTAGE of the price paid — as prices rise with inflation, the DOLLAR AMOUNT of GST collected on the same real quantity of goods rises too, even with no change in tax rate or in how much people actually buy.
"BRACKET CREEP" IN INCOME TAX: if wages rise with inflation (nominal wages up) but income tax brackets are NOT adjusted for inflation, more of each worker's income gets taxed at a HIGHER rate than before — increasing the government's income tax take, even though the worker's REAL income may not have changed at all.

Worked example Explaining why GST revenue rises during high inflation Explain one reason why government revenue might increase during a period of high inflation. GST is levied as a fixed PERCENTAGE (15%) of the price of most goods and services. As inflation pushes UP the prices of goods and services, the DOLLAR amount of GST collected on each purchase rises too — even if people are buying the exact same real quantity of goods as before. Across the whole economy, this means total GST revenue collected by the government rises during a period of high inflation, purely from the higher price level, without any change in tax policy. ✓ The mechanism is that GST is a PERCENTAGE tax, so it automatically scales up in dollar terms with the price level — no policy change is needed for this revenue effect to occur. ✕

Assuming a rise in government revenue means inflation is therefore "good"

Government revenue rising during inflation is a genuine, specific mechanism worth explaining — but it does NOT mean inflation is beneficial overall. The question is asking you to identify ONE reason revenue rises, not to conclude inflation is a net positive for the economy as a whole.

Mechanism	How it raises revenue during inflation
GST	A fixed percentage of a rising price — dollar amount collected scales up automatically
Bracket creep	Unadjusted tax brackets push more nominal income into higher tax rates

Practice for this standard covers the whole topic — flashcards and quiz.