I'm not sure if the government is afraid that bitcoin will take over fiat. You will still need to pay taxes in fiat, which will be a portion of every transaction - sale/income/expense. Fiat will have a place in the economy because it's what people trust, regardless of its fundamental flaws.
Yes, as long as you need to pay taxes in fiat, there will always be a need for fiat. But think of a country with a huge trade deficit. If Bitcoin becomes an established international currency, they will be happy to accept bitcoins which can then be used to bridge this deficit. If dollars are welcome in places like Argentina, bitcoin will also find a place.
If the bitcoin takes over the fiat money theres no taxes to be pay with the government they would not give to us what they want. Theres a thing that you can't replace in this world. But using bitcoin in a country like philippines its a great help because bitcoin is the largest exchange rate here at the Philippines.