Today is Tax Freedom Day

For the full press release, click here. This year’s Tax Freedom Day, the day when Britons stop working to pay their taxes and start earning for themselves, falls on 31st May, according to Adam Smith Institute calculations.

The Adam Smith Institute estimates that Britons will work 150 days this year solely to pay their taxes. This is one day later than 2014′s Tax Freedom Day, which is not statistically significant. However, the UK’s Tax Freedom Day falls more than a month later than it does in the United States, where citizens started earning for themselves on 24th April.

Tax Freedom Day is designed to reveal to the public how much they really pay out in taxes, which Britain’s lengthy tax code can often obscure. The Institute’s calculations include all taxes raised by HM Revenue and Customs: direct taxes like income tax, national insurance and corporation tax, and indirect taxes like VAT and excise duties.

Cost of Government Day, which represents Total Managed Expenditure as a day of the year, falls on 29th June, three days earlier than it fell in 2014. While this suggests a slight improvement over last year, the money borrowed to cover the month-long gap between Tax Freedom Day must eventually be paid off with future taxes. This means without tax cuts or major growth Tax Freedom Day would eventually have to drift even later.

Director of the Adam Smith Institute, Dr Eamonn Butler, said:

The Treasury hates Tax Freedom Day, because they don’t want us to know how much tax we really pay. They prefer to conceal the tax burden through stealth taxes and indirect taxes that we don’t even realise we’re paying.

Most people are shocked to learn that the government takes over two-fifths of the country’s earnings – and then borrows more. Mediaeval serfs had to work about a third of their time for their feudal lord, but we are in serfdom to the government for even longer!

High taxes are very bad for economic growth, as talent and initiative drain abroad. Ask President Hollande of France.

Alan Mak, Conservative MP for Havant, added:

The ASI’s work on Tax Freedom Day reminds us that we must carry on reducing the tax burden on hardworking individuals and businesses so we have greater economic growth and individual prosperity. That’s a goal I champion as a member of the new Conservative intake; income tax cuts and frozen council tax and fuel duty have so far made millions of Britons better off, but politicians must continue to look for new ways to get money back into taxpayer pockets, not out.

The ASI calculates Tax Freedom Day by measuring local taxes, direct and indirect national taxes, and national insurance contributions as a proportion of the UK’s net national income (41.2% per cent in 2015), mapping that proportion onto the days of the year.

Tax Freedom Day figures are not available up-to-date for calendar years so they are proxied from government and OBR forecasts and financial year numbers. They are then revised when exact numbers become available.

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@old.adamsmith.org | 07476 915072

Isn't it EUronic

I actually can’t tell if they’re kidding or not. From the BBC:

The UK has been told it must pay an extra £1.7bn (2.1bn euros) towards the European Union's budget because the economy has performed better than expected in recent years.

Replace ‘UK’ with ‘worker’, slot in a different extremely high number, change ‘EU budget’ to ‘UK budget,’ and the system starts to resemble something quite similar to tax law in the UK.

The article continues:

The payment follows new calculations by the EU that determine how much each member state should contribute.

It would add about a fifth to the UK's annual net contribution of £8.6bn.

A government source said the demand was "not acceptable" while one Tory MP said the UK should simply refuse to pay it.

“UKIP leader Nigel Farage said the UK had been "hammered again" while Labour said it was imperative that the European Commission must reconsider the "backdated bill".

It appears UK politicians are in complete shock that hard work and serious efforts to pull out of the recession are being threatened by a big, bureaucratic government body that feels it’s entitled to some of those earnings.

This is priceless.

On the issue itself, I agree it’s “not acceptable”, and I dearly hope the UK “simply refuse(s) to pay it.” What a wonderful precedent that would set for next year’s tax season, when hard-working taxpayers (who, according to this year’s stats, will have been working for the Chancellor for 148 days to pay off their obligations), decide that they, too, don't want to be penalised for working harder and being a bit better-off financially.

Politicians can be slow on the uptake, so I guess there’s no deep surprise that it took them this long to understand the mechanics of ‘hard work = rewards.’ I just hope they whistle the same tune come next tax season.

HMRC, you had one job

It can be frustrating to state the obvious. But, typical to its nature, HMRC has forced me to do just that. In 2013, the average Briton had to work 150 days into the year to pay their total tax bill. Not until May 30^th did UK residents stop working for the Chancellor and started earning for themselves

It’s simple, really. Brits earn the money, and HMRC arranges to have it taken away through a variety of different taxes—VAT, National Insurance, and of course, income tax.

It's a tough job the HMRC has—to tax and tax some more—but it’s probably safe to say the average earner has the harder job – to supply both the government with the funds it needs to run the country, and the funds she (and potentially her family) need to live on.

So it should be expected, at the very least, that the taxation process be as smooth and simple for the earner as possible; that those 150 days worth of earnings be transferred without fuss…

If only. From The Telegraph:

“Four months ago, HM Revenue & Customs admitted it had collected the wrong amount of tax from more than five million people in the 12 months to April 2014.

Since then, the taxman has sent those affected notification letters explaining how it would claw back or issue refunds for on average £300.

In an email leaked to The Telegraph, a select group of senior HMRC staff and accountants were told "thousands" of mistakes were made.

The recipients were advised to tell taxpayers who questioned their bills "not to repay any underpayment" of tax.

It said anyone who had overpaid tax should not cash any cheques they had received. Anyone who has already cashed a cheque will see the money potentially clawed back if a mistake has been made.”

Mistakes happen, sure. But such levels of incompetence, without any offer of compensation, can only be the work of the public sector.

In almost any exchange between a customer and a private business, over-charges and under-charges play out in the customer’s best interest. If a hotel or restaurant accidentally over-charges you, a refund is surely made (often with sincere apologies and some form of compensation for the trouble). If a grocery store under-charges you for fruit purchased, no letter comes through the post asking you to make up the sum.

But when HMRC makes not one bad calculation, but a series of wrong calculations for millions of customers, the inconvenience falls on the taxpayer, who will have to make up the difference calculated or wait months for her rebate.

Of course, taxation isn't a voluntary transaction, the taxpayer isn’t considered a customer, and the government’s a monopoly—so blatant incompetency shouldn't be a surprise at all.