David Cameron, the Tory leader, and George Osborne, the Shadow Chancellor, warmly welcomed the report, saying that it offered a menu of options, but emphasised that it did not constitute party policy.

The pair have insisted that economic stability must come before tax cuts, but yesterday gave ground on the issue by promising for the first time to cut the rate of tax on company profits.

The commission, set up by Mr Osborne and chaired by Lord Forsyth of Drumlean, suggests 40 reforms to simplify and reduce the burden of taxation in Britain. It suggests scrapping Gordon Brown’s lower 10p rate so that people earning less than £7,185 pay no tax. That move would cost the Treasury nearly £6 billion a year.

The basic rate of tax should be cut from 22 to 20 per cent, with the higher rate reduced over the longer term. Employee tax benefits, such as on the use of office computers at home, should be slashed.

The group would abolish inheritance tax and replace it with a form of capital gains tax, exempting family homes. It would restrict the Chancellor’s child tax credits to basic rate taxpayers only, meaning that middle-income families would lose out.

The basic rate of company tax should be cut to 20 per cent, and tax relief on research and development, and film-making, should be abolished, it says.

It also recommends two tax cuts that the Tory leadership have already said they support: scrapping stamp duty on share dealing, and allowing married parents with young children to transfer their personal tax allowances to their spouses.

The report says that Labour has pushed up taxes so high and made them so complex that Britain’s economic growth is being harmed. “The complicated high-tax system is harming the economy, impairing its competitiveness. Without urgent reform, it will only get worse,” the commission says.

Mr Cameron said that it was “the most significant piece of work on reforming and improving the tax system ever undertaken by an opposition. Britain needs a comprehensive reform of the tax system.” Mr Osborne promised cuts in business taxes, saying they would be funded by ending tax exemptions.

However, Ed Balls, the Economic Secretary to the Treasury, said that the proposed cuts would not help ordinary families and were unfair: “These are tax cuts for the few. This is the same old Conservative Party.”

TORY TAX PLAN

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