Finance Choices
Tax Freedom Day
Don't let the post-Bank Holiday return to work get you down. Today, after 150 days of working for the Government, your time is at last your own as Britain celebrates "tax freedom day".
What is Tax Freedom Day?
When you fill out your self-assessment tax form - or collect your weekly pay packet and see all the deductions for tax and national insurance - it might seem that you spend more time working for the government than for yourself.
But just how much time do you spend working for the government? How long does it take to work off the burden of taxation?
In fact, the average taxpayer works for the government from New Year's Day until sometime in late May - a date which the Adam Smith Institute calculates each year as TAX FREEDOM DAY.
How bad can it get?
Back in 1963, our tax freedom came at the end of April. But the burden of taxation was higher throughout the 1980s than it is today, following Mrs Thatcher's early and sharp tax increases to pay for large-scale economic restructuring.
From its 1982 peak, Tax Freedom Day started to arrive ever earlier, making the UK an attractive low-tax economy for both foreign and domestic investors. This trend has not lasted, however: the tax burden rose again under Tory Chancellor Kenneth Clarke, and the present government has steadily - and stealthily - raised the tax burden. The Labour government remains committed to increasing the tax burden further. Table C9 (p. 261) in Budget 2004 shows the tax burden rising from an estimated 38.7% of GDP in 2004-05 to 40.5% by 2008-09. Assuming that the forecasts in Budget 2004 are entirely correct, Tax Freedom Day will advance by three days in 2004, to 30 May. Comparing the last ten years (1995-2004) with the previous ten-year period is rather depressing. Then, the tax burden was clearly trending down. Since 1994, it has been clearly trending up.
That is the day when economists reckon that Britons finally pay off their annual tax bill. Based on the net national income of taxpayers, the Adam Smith Institute (ASI) calculates that tax freedom day falls on May 31 this year, a little later than last year's May 27. Taking account of the leap-year day last year, that means we are all working three days more to fill the Exchequerâ??s coffers than we were a year ago.
Gabriel Stein, chief international economist at Lombard Street Research, who compiled the figures, said that the day was poised to move forward to June 2 next year and was likely to reach June 7 by 2009.
He said: "The low and simple tax systems have been a major competitive advantage for Britain, and that advantage is being eroded."
The latest tax freedom day in Britain was June 15 in 1982, still a fortnight earlier than last year's day for the eurozone. By contrast, in the United States tax freedom day has never fallen later than May 3.
John Whiting, tax partner at PricewaterhouseCoopers, said that taxpayers could start earning for themselves earlier in the year with good planning.
He said: "It is possible to reduce your tax burden by taking advantage of the tax breaks available to you, such as effectively using the allowances for capital gains tax, inheritance tax and Isas."
Michael Howard, in his first party political broadcast as Conservative leader in November 2003, called for tax freedom day to be made a bank holiday. A Conservative spokesman said yesterday that after the election the pledge was no longer party policy. Asked how Mr Howard would mark the day, he said: "I don't think there will be a specific celebration, but I am sure he will be bearing it in mind as he enjoys his recess."
What is Tax Freedom Day?
When you fill out your self-assessment tax form - or collect your weekly pay packet and see all the deductions for tax and national insurance - it might seem that you spend more time working for the government than for yourself.
But just how much time do you spend working for the government? How long does it take to work off the burden of taxation?
In fact, the average taxpayer works for the government from New Year's Day until sometime in late May - a date which the Adam Smith Institute calculates each year as TAX FREEDOM DAY.
How bad can it get?
Back in 1963, our tax freedom came at the end of April. But the burden of taxation was higher throughout the 1980s than it is today, following Mrs Thatcher's early and sharp tax increases to pay for large-scale economic restructuring.
From its 1982 peak, Tax Freedom Day started to arrive ever earlier, making the UK an attractive low-tax economy for both foreign and domestic investors. This trend has not lasted, however: the tax burden rose again under Tory Chancellor Kenneth Clarke, and the present government has steadily - and stealthily - raised the tax burden. The Labour government remains committed to increasing the tax burden further. Table C9 (p. 261) in Budget 2004 shows the tax burden rising from an estimated 38.7% of GDP in 2004-05 to 40.5% by 2008-09. Assuming that the forecasts in Budget 2004 are entirely correct, Tax Freedom Day will advance by three days in 2004, to 30 May. Comparing the last ten years (1995-2004) with the previous ten-year period is rather depressing. Then, the tax burden was clearly trending down. Since 1994, it has been clearly trending up.
That is the day when economists reckon that Britons finally pay off their annual tax bill. Based on the net national income of taxpayers, the Adam Smith Institute (ASI) calculates that tax freedom day falls on May 31 this year, a little later than last year's May 27. Taking account of the leap-year day last year, that means we are all working three days more to fill the Exchequerâ??s coffers than we were a year ago.
Gabriel Stein, chief international economist at Lombard Street Research, who compiled the figures, said that the day was poised to move forward to June 2 next year and was likely to reach June 7 by 2009.
He said: "The low and simple tax systems have been a major competitive advantage for Britain, and that advantage is being eroded."
The latest tax freedom day in Britain was June 15 in 1982, still a fortnight earlier than last year's day for the eurozone. By contrast, in the United States tax freedom day has never fallen later than May 3.
John Whiting, tax partner at PricewaterhouseCoopers, said that taxpayers could start earning for themselves earlier in the year with good planning.
He said: "It is possible to reduce your tax burden by taking advantage of the tax breaks available to you, such as effectively using the allowances for capital gains tax, inheritance tax and Isas."
Michael Howard, in his first party political broadcast as Conservative leader in November 2003, called for tax freedom day to be made a bank holiday. A Conservative spokesman said yesterday that after the election the pledge was no longer party policy. Asked how Mr Howard would mark the day, he said: "I don't think there will be a specific celebration, but I am sure he will be bearing it in mind as he enjoys his recess."
posted by Bruce Wayne at 8:37 AM
Tax Freedom Day
3 Comments:
It amazes me that this government has been allowed to slowly but surely raise taxes throughout their tenure. I'm sure that Blair and Brown are aiming to place the UK in line with the rest of Europe and tax the hell out of us!!
If you read http://www.adamsmith.org/tax/tÂechnical.php ("Only economists
click this page first. Sad, isn't it?") for the last four weeks the tax paid by us English has gone to Wales, Scotland and NI. And the writer points out that if you factor in government borrowing (deferred taxation IOW) Gordon has yet to match Ken Clarke's excesses.
Blair has had his day. The next four years will see the economy dramatically slow down and the Labour tax and spend policy will really mess up the country!!
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