Explanation: Inflation erodes the value of money and the people who hold currency suffer in this process.

• As the governments have authority of printing currency and circulating it into the economy (as they do in the case of deficit financing), this act functions as an income to the governments.
• This is a situation of sustaining government expenditure at the cost of people’s income.
• This looks as if inflation is working as a tax. That is how the term inflation tax is also known as seigniorage.

Source: Ramesh Singh