The Enlightened Economist is just back from a short holiday, and a post about my holiday reading will follow in due course. But my attention this morning was caught by yesterday's publication of the Mirrlees Review by the Institute for Fiscal Studies. It's a worthy successor to the 1978 Meade Review of taxation, also available from the IFS.

The two volumes of the review will be published by OUP but are meanwhile downloadable from the website. The Review is a terrific achievement. Just looking through some of the chapters in the conclusions volume makes it clear that this is the most thorough and clear-sighted assessment of the UK tax system we have seen for decades.

That assessment is not favourable. This won't, perhaps, come as a surprise, but the tax system is byzantine, costly and counter-productive. The headline figure is that tax reform could liberate a deadweight loss equivalent to 1.4% of GDP.

The proposals focus on four areas of reform:
– combine income tax and national insurance, simplify allowances and bands, and structure personal taxation to encourage saving/investment rather than creative remuneration to avoid tax
– extend the coverage of VAT especially to financial services
– eliminate the tax bias in favour of debt financing of investment
– tax 'bads' – carbon and congestion – effectively

These are so clearly sensible ideas that a summary sounds banal, but of course tax reform is difficult. Some people will always object because either they will lose out or will have to restructure their affairs. More fundamentally, moving from complexity to simplicity is itself hugely complicated.

However, the importance of the Mirrlees Review will be in setting out the goals for tax reform. Let's hope that the next few governments will be able to use this magisterial work to move in the right direction.