ABSTRACT
In Chapters 4 and 5 of our Report we have described two sectors of the economy in which, in our opinion, the present UK tax arrangements are causing confusion: namely, in the muddled choice between income and consumption as the base for direct taxation (Chapter 4), and in the interplay between the tax system and the social security system resulting in the poverty trap with its excessively high marginal rates of implied tax (Chapter 5). We believe that the changes which are desirable to remove the tax anomalies in the choice between income and consumption as the tax base are rather extensive but would not on balance involve any great loss of revenue. On the other hand, the changes which are necessary to remove the anomalies in social security and in the taxation of those with low incomes are inevitably costly if standards of living are to be maintained for all at acceptable levels.
