This paper examines the idea that the rate of inflation tends to increase nominal government expenditures faster than government revenues. it concludes that while government expenditures rise concurrently with inflation, real government revenues tend to fall based on collection tags. Empirical results using time series data for Iran support our expectations in which the longer is the delay in government domestic revenues, the higher will he the inflation, in addition, the fiscal deficit should increase money supply, resulting in more inflation. The implication of the study conducted here is that a passive fiscal policy based upon inflation is dangerous. To control inflation, budgetary authorities should reduce substantially the government budget deficit. Furthermore, the tax administration is apparently responsible to give priority to reforming the tax revenue system.