Working from home? Then you should pay more tax for the privilege, say economists

IT news

Working from home: What the new ‘normal’ looks like, plus remote management tips

To compensate for the money they aren’t spending on commuting and lunch breaks, employees who choose to work from home should pay extra tax, according to Deutsche Bank’s economists.

In a new report, the bank’s researchers argue that the billions in tax money that could be generated as a result could be redistributed to low-income workers who cannot carry out their jobs remotely, like nurses and factory workers.

The report presents a series of radical ideas meant to rebuild businesses and societies after the Covid-19 pandemic, and describes itself as a controversial set of proposals, meant to inspire debate among decision makers.

Deutsche Bank’s researchers maintain that new styles of working will require new tax systems. “Working from home will be part of the ‘new normal’ well after the pandemic has passed,” reads the report. “We argue that remote workers should pay a tax for the privilege.”

Deutsche Bank researcher Luke Templeman, who co-authored the report, wrote that a tax on WFH should have existed for years, given that telecommuting has boomed in the past two decades with the advent of internet technology. Between 2005 and 2018, the number of Americans who regularly worked from home increased by 173%.

Now, the global health crisis has turbo-charged the trend, and new work habits are here to stay. According to a Deutsche Bank survey, after the pandemic has passed, more than half the people who have been working from home will want to hold on to the option for two or three days a week.

In a country like the UK, where about 33 million workers are employed full-time or part-time, this would mean that around one billion days would be worked from home every year, even after the crisis has passed.

Templeman suggests a 5% tax for every day of remote working. For a salary of £35,000 – the average salary in the UK – this would represent a £6.73 contribution per employee, every time that they decide to log in from their sofa.

Based on the same calculation, the average employee in the US would pay $10.58 per WFH day, while a German worker would be taxed €7.69 for choosing to work remotely.

The tax would be paid by the employer, if the company doesn’t provide an office-based desk; and exemptions would be offered to the self-employed and those on lower income. But every other employee who would choose to work from home when given the option of coming into the office would have to pay the tax out of their own salary.

Templeman argues that it is only fair that workers pay more tax, given the benefits of working from home. “WFH offers direct financial savings on expenses such as travel, lunch, clothes, and cleaning,” he wrote. “Add to these the indirect savings via forgone socializing and other expenses that would have been incurred had a worker been in the office.”

Home-workers, according to the researcher, are stripping the economy of this potential spending, threatening the infrastructure of a system that was built on face-to-face working.

On the other hand, some employees have not been given the option to work remotely; typically, those employees also have lower incomes. The money paid in WFH tax, therefore, should go towards increasing the wages of those less well-off.

“From a personal and economic point of view, it makes sense that these people should be given a helping hand,” said Templeman. “It also makes sense to recognize essential workers that assume Covid risk for low wages. Those who are lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe it to them.”

Deutsche Bank’s research shows that a WFH tax in the UK could boost the annual pay of the country’s three million low-income workers by £2,307, while the US’s 29.2 million low-income employees could see their yearly earnings rise by $1,666.

The idea is still likely to be met with resistance. Phil Flaxton, the chief executive of non-profit Work Wise UK, which advocates in favor of smarter ways of working, tells ZDNet: “It is obvious that the report is designed to stimulate debate. It’s a great discussion piece and I understand the point they are making, but I would certainly not come down in favor of it.”

Trading an overpriced city-center lunch sandwich for a tax that might help those who are less well-off might sound reasonable in theory, but the practical reality might be different. Barring lockdown rules, says Flaxton, employees who are working from home still participate in the economy, although in different ways than before.

“People are still meeting friends for lunch or spending two or three hours in a coffee shop to work,” says Flaxton. “They’re just supporting the local economy instead.”

There are still many uncertainties surrounding the future of work. Deutsche Bank’s latest report certainly brings forward an issue that is only going to gain prominence: that of regulating work in an environment that is changing quickly.

As workers increasingly embrace telecommuting, new questions will multiply, ranging from whether employers should be legally forced to provide ergonomic chairs, to whether employees should be able to claim compensation for bigger rents. Some companies are even thinking about adapting their staff’s pay to the cost of living in the areas that their employees have chosen to work from.

Previous Post
DDoS attacks are cheaper and easier to carry out than ever before
Next Post
The web is full of junk health info. This startup wants to change that

Related Posts

No results found.

Menu