Tanzi effect

This is due to the time elapsed between the moment the taxable event occurs and the collection of the tax becomes effective.

[1] The effect has been known since the ending period after World War I. Italian economist Costantino Bresciani Turroni described a similar phenomenon for the German hyperinflation.

In Tanzi's words "Mr. Olivera had reported the fall but had not provided an explanation for it; instead he had focused on its implications for macroeconomic developments".

However, the higher the rate of inflation becomes, the lower the real value of the payment received by the government is compared with the value it would have if it had been made immediately after the taxable event; that is, without any delay.

Thus, the collection lag becomes a fundamental variable in the determination of real tax revenue in situations of high inflation.

For example, in 1991, Argentina introduced the convertibility plan that tied the peso to the dollar, abruptly reducing the rate of inflation.