It said the current system has contributed to an an inefficient housing market, with taxes biased towards owner-occupier homes over rental properties.

In particular, it stated Stamp Duty must be abolished, saying it could find little to say in defence of a tax that prevents people moving home and distorts the market.

In addition, the IFS has proposed wholesale changes to Council Tax, land taxes, rental property taxes, as well as VAT, fuel duty and income tax among others.

The IFS’ conclusions form part of a five-year investigation into the UK tax system, which it has found to be “inefficient, overly complex and frequently unfair” and needs radical, long-term reform.

In an uncompromising report, the IFS said: “At some point, some government will have to grasp the challenge of making the case for intelligent reform.”

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The influential think tank said Stamp Duty “def[ies] the most basic of economic principles” and must go, with revenue replaced by its proposed new housing and land taxes.

It said Council Tax is “unnecessarily regressive” and should be replaced with a system that taxes people based upon the up-to-date value of their home, not bands set 20 years ago.

In addition, it proposed a “rate-of-return allowance” for rental properties, giving landlords a buffer before their rental income is taxed and bringing capital gains tax in line with income tax, to eliminate the tax bias towards owner-occupied homes.

The IFS said the government takes around £4 in every £10 earned in the economy through tax, but “there has rarely been any clear sense of direction from governments”.

It said the reforms could generate billions of pounds in extra revenue for the Treasury and create thousands of jobs.

Paul Johnson, director of the IFS, said: “There is little about the UK tax system which looks like it was deliberately designed.

“Successive governments have failed to set out a coherent strategy for tax. As a result the current set of taxes is complex and often incoherent and they impose a much greater cost on the economy than need be.”

The key proposals include:

• scrapping Stamp Duty

• replacing Council Tax in favour of taxing people a percentage of the actual value of their home, rather than the current system based on valuations from 1991, with revaluations every three to five years

• overhauling Inheritance Tax to tax the person who receives the inheritance rather than the deceased’s estate

• charging VAT on all products, including current exemptions such as food, books and children’s clothes, as well as financial services

• merging National Insurance and Income Tax to reduce complexity

• replacing fuel duty with congestion charging

A spokesperson for the Treasury said: “The government has embarked on a programme of ambitious reforms of the tax system to address the instability of recent years.

“These are based on clear principles to support growth, reward work, reduce complexity and increase fairness.”

To read the full IFS Mirrlees Review, click here