We will soon all be free of tax! Only joking – Tax Freedom Day doesn’t mean we can stop contributing to the government’s coffers any more, the average person will still have tax and national insurance deducted from their wages and pay VAT on their purchases throughout the year.
This year Tax Freedom Day falls on 31st May - at least according to the Adam Smith Institute, a group of economic brainboxes who work out these things. So what is Tax Freedom Day, why is it calculated and why is it important?
It is essentially the day when Britons stop working for the government and start earning money for themselves. So, for 150 days of the year the average person works solely to pay their taxes! This includes direct taxes like income tax and national insurance as well indirect ones like VAT and corporation tax. It is a few days later than last year which was 28th May – not a huge difference but it does indicate we have paid more tax as a proportion of our earnings this year.
Tax Freedom day is important because it is designed to illustrate to the public what the real level of tax is – which is often shrouded by the often long and complicated nature of our tax codes and ‘stealth’ taxes.
It is widely acknowledged that government isn’t particularly keen on Tax Freedom Day since it shows the tax burden on us all so starkly. It is fairly amazing that the average citizen has to work for 5 months just to pay tax. It causes us to pause and perhaps ask are we getting value for money!?
Just as depressing is the Cost of Government Day. It represents the amount of time each individual has spent working to pay off his or her share of the money the government spends – this fell on June 26th last year so it will be interesting to see the date this year after the austerity measures and cuts that have continued in order to cut the deficit over the last 12months.
No matter – come the evening of 30th May we can all celebrate that we have ‘paid off’ our tax burden and can start earning for ourselves. Let us all hope the day comes earlier next year!