Paying more tax to work from home? That could be the least of the troubles ahead

IT news

Working from home (WFH) is such a privilege that you should actually pay more for it: that was the premise of a report from Deutsche Bank economists, which has created something of a stir.

The researchers argued that WFH will remain part of the ‘new normal’ after the pandemic has passed, and that this poses a big problem for economies with long-established infrastructure built around face-to-face working. The answer: remote workers should pay additional tax to support the broader economy and those unable to work from home.

“For years we have needed a tax on remote workers — COVID has just made it obvious. Quite simply, our economic system is not set up to cope with people who can disconnect themselves from face-to-face society,” the report said.

The COVID-19 pandemic of 2020 has certainly accelerated the trend towards home working, with governments ordering workers to stay put where possible. When the lockdowns lift, it’s unlikely that any return to the office will be full-time or for everyone.

The economists argue in favour of a relatively modest tax — perhaps $10 a day — to be paid by the remote worker, or by the employer if they do not provide staff with an office to go to.

There are plenty of reasons disagree with this proposal, not least because the idea of taxing people more for working from home, instead of travelling to the office and buying a sandwich at lunchtime, seems like a challenge. It also throws up many more questions.

Taxing matters

If economic inactivity is the issue, should you be taxed more if you cycle to work with a packed lunch? Conversely, should you pay even less tax if you promise to drive a big car into the city and have a long lunch every day in a restaurant?

And while many of those who can work from home would agree that front-line workers like nurses deserve better pay, it’s most unlikely that any government would ring-fence the money raised from a WFH tax for these workers. Instead, the proceeds would simply disappear into general spending.

So it’s most unlikely that a WFH tax would ever actually take off.

But that’s not really the point; rather, the Deutsche Bank economists are pointing out that if the hundred-year-plus reign of the office is coming to an end, that’s going to mean some big changes. Some we’ll come to see as positive, others less so.

The most obvious changes will be in city centres. Over the next few years, many organisations are likely to rethink the amount of office space they require — accelerating a trend that has been going on for a while.

But if office blocks no longer dominate the city, what will take their place? We could see emptiness and stagnation, or we could see people returning to dwell in the business and commerce areas of cities, which are usually deserted out of office hours. Bringing a community back into those cities could be a welcome development.

Some people will want to work from home, and some will just want to work nearer to home.

That might mean an expansion of local shared offices in smaller towns or suburbs, where workers from different organisations can share a printer and a chat over the coffee machine. That could reinvigorate local communities and reduce commutes, and maybe even favour local businesses over giant chains.

Some consequences are harder to measure.

If WFH is here to stay — and it is — then we may see more people leave the big cities, deciding that a better work-life balance is now possible. But there’s already a growing battle over what this means for wages.

Many companies pay more to workers in big cities because the cost of living is higher. What happens when staff can do the same job remotely from an area with a lower cost of living? Should they be paid less, even though they are doing the same job?

More broadly, if we’re all working from home more, there will be new personal challenges. If you never see your colleagues in the real world, what does that mean for teamwork and innovation? There is evidence to suggest that while we are productive at home, we may be less innovative. Keeping teams working smarter as well as harder will be the new challenge for managers.

And for individuals, motivation and ambition may be hard to maintain; it’s hard to demonstrate your skills to a manager you never see, so suddenly that promotion gets a lot harder. Technology may help with some of this, just as Zoom and Microsoft Teams has kept people connected in recent months. But we’ll need ever better, even more engaging tools if WFH is really going to work long-term.

The coronavirus pandemic has accelerated trends around work that have been building for years.

Navigating these changes, encouraging the ones we like and avoiding those we don’t, is the really taxing challenge ahead.

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