VAT hike to delay tax freedom day in UK by two days

British workers would effectively need to toil till the end of May next year before they can call their earnings their own for, over the first 149 days of 2011, every penny they earned would go to the tax kitty.
 
Even with drastic cuts, Britons would spend two additional days working to fund state funding this year than the last. The so-called Tax Freedom Day would fall on 29 May next year, as against 27 May this year.

According to economists at the Adam Smith Institute, the free-market think-tank, the two extra days would be needed to meet the rise in VAT, which increases from 17.5 per cent to 20 per cent on 4 January.

 "The fact that we spend almost five months working for the state - and only seven months for ourselves and our families - is a shocking indictment of big, wasteful government," Tom Clougherty, its executive director, said.

"As well as hitting every household, the VAT hike is going to dent consumer confidence and put a dampener on economic recovery."

 "The coalition should examine the possibility of making targeted tax cuts now. But, in the long term, they need to fundamentally overhaul the system. Lower, simpler, flatter taxes would be fairer for individuals and better for the economy," Eamonn Butler, director of the institute, said.

The Tax Freedom Day date is computed by comparing tax revenue with net national income, which includes individual, government and business income.