ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is Lump Sum Tax? A lump sum tax is a tax imposed on an economy as a fixed amount. The degree of income of individuals has no impact on this sum. Also referred to as a poll tax, the tax rate has the same value for everyone who pays this tax.

Detailed explanation-2: -In economics, the lump sum principle states that a tax on a person’s general purchasing power is more efficient than a tax on specific goods.

Detailed explanation-3: -Lump-Sum Tax: A certain amount of money has to be paid by the firm over a period of time. This kind of tax represents an increase in fixed costs and they consequently treat it as one. It holds the entry of firms in the market as it acts as an entry barrier, and will force some inefficient firms out of the market.

Detailed explanation-4: -A fixed tax is a lump sum tax that is not measured as a percentage of the tax base (income, wealth, or consumption). Fixed taxes like a poll tax or sin tax are often considered regressive, but could have progressive effects if applied to luxury goods and services.