ABSTRACT
For the purposes of assessing the possibility of introducing flexibility into the UK PA YE system, however, the most important feature of the system is that marginal tax rates in force apply retrospectively to total taxable income to date. Any change in the tax schedule would therefore give rise to an instantaneous, discrete change in tax liability for the year to date. While decreases in the rate of tax would give rise to rebates, which would have substantial consequences for the flow of government finance, increases in the tax rate would give rise to liabilities that do not relate to any current income receipts, and that are potentially large relative to income received in the subsequent tax period. For an individual whose income is spread evenly over the tax year, this can be seen in Figure X.I.
