Deutsche Bank suggests that remote workers pay a 5% tax for the privilege of working from home and to support frontline workers who risk their lives every day.
When the pandemic hit the world, every entity decided that the safest way to sustain business continuity was to ensure that all employees can work from home. Remote work, once a benefit a few could opt for, was now a necessity for the entire workforce. Companies have recognized it as a viable operating model and many have chosen to continue with it even after the pandemic.
But a new and radical idea is now creating waves. Deutsche BankOpens a new window argues that governments around the world should tax employees who have the privilege of working remotely during the pandemic at the rate of an additional 5% on their earnings to raise revenues for on frontline emergency workers and others who can’t work from home.
The Deutsche Bank researcher Templeman’s article, “A Work-from-Home Tax,†was published online in Deutsche Bank’s November 2020 What We Must Do to RebuildOpens a new window report. The suggested approach is that the tax itself will be paid by the employer if it does not provide a worker with a permanent desk. If an employee chooses to work from home, the employee will pay the tax out of their salary for each day they work from home.
The Twitterverse took to slamming the idea rather quickly, indicating how this was just another imposition on remote workers.
This wins the stupidest-idea-of-the-week award.
The government forces people to stay home and then taxes them for complying?
— pierrepoilievre (@PierrePoilievre) November 14, 2020Opens a new window
My real problem is that most companies right now are treating remote work as a perk and not like they are shifting their overhead back onto employees
— Clara (@thatclarafied) November 13, 2020Opens a new window
As if we weren’t in enough trouble. We have pay more for utilities, our mental welfare is in trouble and now should this proposition go ahead, less money.
— JK (@jk31283003) November 12, 2020Opens a new window
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Does Taxing Remote Workers Make Sense?
As per the report, such a tax could raise $49 billion (£37 billion) a year in the U.S., €20 billion (£17.8 billion) in Germany and £7 billion in the U.K. But is this the right approach toward remote work?
If such a tax is being suggested an opportunity to raise revenues, there are serious concerns about how remote work is being perceived. Despite the necessity of this model, and its positive implications, positioning it as a privilege takes away from the purpose of creating a model that allows for work from home.
As per Templeton’s assumptions, remote workers earn more than other employees. But is that true? There is no specific data to support this. Remote workers are already struggling to support families and have other burdens to manage from home. Not every organization has provided or promises to provide remote employees funds to set up home offices or a stipend to work from home. They also bear the burden of increased electricity costs and the like.
Some remote workers may also get salary cuts for moving out of expensive cities. This not only puts a dent in their income it also has separate tax implications. For example, those who are now working from home in a different state than their place of work could have some new tax consequences to address. As per reportsOpens a new window , several states have specifically stated that a telecommuting employee who is not engaged in sales, and whose home is not considered to be a place of business could face out-of-state employer income tax burden.
CNBC sharesOpens a new window how tax presence or nexus is the driver of how states levy taxes on companies and workers. The presence of telecommuting employees could make the company fall within the gamut of the state payroll tax registration requirements. This additional tax burden is likely to be passed on to employees.
Grant ThorntonOpens a new window has also shared its views about how it is time for U.S. employers to now incorporate tax planning into policy development since flexible working arrangements will become a way of life. And they could lead to tax complexities and risks if not addressed proactively.
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The Privilege of Remote Work May Soon Lose Its Charm
Not every remote worker is a high-income worker and not everyone who steps out to go do their jobs is at risk or does not have the potential to earn more in the future. If employees are forced to pay a tax for every day they choose to work from home, it is unlikely that many will even opt for it. While they may have the “privilege,†as the Deutsche Bank report calls it, imposing such taxes will require a sound framework for calculation. For instance, will it consider an employees’ needs – such as child/elderly caregiving or disability? How will such a tax be imposed on employees who go to work twice a week and work from home for the rest?
Will the future of work then be remote? And more importantly, if it is meant to improve diversity and drive inclusion, will this move render it truly inclusive?