Abstract

The application of lump-sum taxes and lump-sum subsidies is a subject of the second fundamental theorem of welfare economics. Welfare economics scientifically argues that the implementation of lump-sum taxes and lump-sum subsidies can provide equity without distorting efficiency. Lump-sum taxes and subsidies do not create substitution effect. However, particularly in the context of taxation, a differentiated lump-sum tax system can provide income distribution function without distorting efficiency. In this context, public finance is in search of a differentiated lump-sum tax system among taxpayers. If a lump-sum tax can be differentiated among taxpayers, it can be incorporated into the tax system and become operational. In the application of lump-sum subsidies, it is anticipated that poverty programs to be applied to lower-income groups will create correct price signals that do not distort efficiency of resource allocation in a freely operating market. The aim of this study is to examine the concepts of lump-sum taxes and lump-sum subsidies from the perspective of public economics; to investigate practical examples, and to identify what efforts are being made for the use of lump-sum taxes and lump-sum subsidies in contemporary fiscal systems, as well as what is required for their widespread adoption globally.