The VAT is actually a sensible choice here, because it is relatively easy to enforce: much of the enforcement happens "for free" as a result of transactions among suppliers, and between them and retailers. (For instance, a retailer using e-currency has some incentive to report her transactions to the government in order to get a refund for the VAT she pays to her suppliers.) There are other possibilities, though: the land tax is especially attractive because it has zero excess burden, and all governments keep track of land ownership rights as part of their basic functions. However, I'm not sure that it makes sense to scrap income tax as a response to e-currency, because the income tax is mostly a tax on labor income, and it is also quite easy to enforce such taxes by auditing employers. It is true that some transactions that are legally taxable will go unreported, but most of these are the kind we would want to leave untaxed in the first place, such as transactions involving second-hand goods or informal exchanges of services.

he's just poorly recreating Milton Friedman's arguments about the negative income tax.