Tax Freedom Day is pushed back
The slight rise in VAT means that people in Britain will spend an extra three days working for the taxman in 2011 as Tax Freedom Day is pushed back to May 30.
UK employees will have to work for 149 days this year to pay their taxes, according to the Adam Smith Institute think tank. This is the equivalent of every penny earned between January 1 and May 29 being used to support Government spending.
The most up-to-date information by the Government claimed that Tax Freedom Day would fall on May 27 but this has now been pushed back slightly.
Adam Smith Institute executive director Tom Clougherty said: “As well as hitting every household in the country, the VAT hike is going to dent consumer confidence and put a dampener on our economic recovery – as the office of Budget responsibility has already pointed out.”
However, Adrian Houstoun, VAT partner at Kingston Smith LLP, points out that: “If you don’t raise this amount of money from the VAT rise, it would have to be from something like National Insurance. Unlike with National Insurance, which is levied on people's incomes, households can reduce their VAT bill because they have a degree of flexibility over what they spend their money on.”
Dr Eamonn Butler, director of the Institute, added: “The coalition should examine the possibility of making targeted tax cuts now to encourage economic growth.”