Sunday Telegraph: Annual earnings for first five months go in tax

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1 May 2010

Written by Myra Butterworth

Every penny earned by Britons during the first five months of this year will be used to pay their taxes, according to a leading think-tank.

Tax Freedom Day is the day when Britons begin working for themselves rather than the taxman and it is on May 30 this year compared to three days earlier on May 27 last year, figures compiled by the Adam Smith Institute suggested.

The institute said the date could have been weeks later on July 8 had the Government used tax receipts to pay for its spending rather than loans.

It said the gap between the tax receipts and the Government spending is the widest since 1976 when Britain had to be bailed out by the IMF and it suggested workers face “savage” tax rises unless public spending is urgently brought under control by the next government.

Tom Clougherty, executive director of the Adam Smith Institute, said: “Since all budget deficits eventually have to be financed, borrowing should be viewed as deferred taxation.

“Our government relies so much on debt to fund their spending, that our traditional Tax Freedom Day measure makes them look more virtuous than they actually are. In reality, all they are doing is piling up obligations on future taxpayers.”

The biggest part of Britain’s tax burden is income tax, which people will have to work 41 days to pay in 2010. They will work another 27 days to pay National Insurance Contributions, and 21 days to pay VAT.

Various excise duties account for 13 days, corporation tax for 12, and council tax and business rates for another seven days each.

Britons will work for three days to pay stamp duties, and 18 more days to pay a range of miscellaneous taxes. This includes inheritance tax, which takes 15 hours to pay.

Tax Freedom Day is later than last year primarily due to the rise in VAT which came into force on January 1, according to the institute.

Published in the Telegraph here.