Reforming the Tax System for the 21st Century
The Mirrlees Review

About the Mirrlees Review

This Review brings together a high-profile group of international experts and younger researchers to identify the characteristics of a good tax system for any open developed economy in the 21st century, to assess the extent to which the UK tax system conforms to these ideals, and to recommend how it might realistically be reformed in that direction.

The project has been inspired by the approaching 30th anniversary of the 1978 Meade Report, a landmark in the study of tax design and perhaps the most influential output of the IFS to date. The aim is to publish a new report, reflecting the changing environment in which tax policy in the UK is conducted, in 2008 to coincide with the Meade anniversary.

The Review is chaired by Nobel Laureate Professor Sir James Mirrlees of the University of Cambridge. A core editorial team which also includes Tim Besley (LSE, IFS and Bank of England), Richard Blundell (IFS and UCL), Malcolm Gammie QC (One Essex Court and IFS Tax Law Review Committee) and James Poterba (MIT) will prepare a final report of long-term interest and relevance to policymakers, academics and civil society, aimed primarily at the UK but also of lasting interest and relevance to other countries facing similar policy challenges. A wider group of more than 50 IFS researchers and leading experts from around the world (see people) will contribute chapters, commentaries and special studies on key themes of the research.

Since the Meade Report, tax theory and empirical research have advanced significantly. Even more importantly, the UK tax system itself and the economic and institutional context in which it operates have evolved, setting policy-makers new challenges. International pressures have become much more significant, partly as a result of the growth of globalised markets and multinational corporations, and partly as a result of developments within the European Union - membership of which is a key influence on UK tax policy. Thirty years after the Meade Report, the time is ripe to take a serious holistic look at the tax system again:

• Our theoretical and empirical understanding of the way individuals and firms respond to the incentives created by the tax system has advanced significantly.
• The increased mobility of capital across national borders has made it more difficult to tax income from capital at either the firm or the individual level.
• EU legislation imposes clear constraints on current UK tax policy in certain areas.
• Taxes on general consumption - notably VAT - have spread, but new technologies (e.g. the internet) and the growth in the service sector have created new challenges.
• Policymakers have broadened the objectives of the tax system, for example by using it to try to achieve environmental objectives and to influence behaviour in other ways.
• Advances in IT and genetics allow a more personalised interaction between taxpayers and the revenue authorities, with profound implications for privacy and fairness.
• Institutional players - such as the European Court of Justice - are having a greater influence on the relationship between the taxpayer and tax collector.
• Tax systems in the UK and elsewhere have evolved significantly in recent years - including the introduction of 'flat taxes' in the new market economies.

A new report will allow us to assess the policy relevance of some important themes that have emerged in academic research in the past 30 years, distilling lessons from political economy, behavioural economics, dynamic optimal taxation, and the wide array of micro-data now available to study the impact of tax incentives. The aim is to produce a report that will influence the thinking of both academics and policy-makers, in the UK and elsewhere, over the long term.