Proposed ‘privilege tax’ for WFH employees set to polarise opinion
It should come as no surprise that the COVID-19 pandemic has caused a major global paradigm shift in the way we work over the past few months. AI and Machine Learning have come to the forefront of development, automation has become the new buzzword, supply chain weaknesses are being continuously tackled and working from home has become more norm than novelty. At this juncture, the biggest question is how our businesses are going to flourish and how many of these norms are going to be sustainable.
When it comes to working from home, several strides have been taken across the board. In India, several firms, including Facebook, Twitter and Hindustan Coca-Cola Beverages have all permitted employees ‘permanent’ work-from-home privileges. On the global front, Microsoft, Chevron, Tencent and Hitachi are a few amongst a whole host of firms which have permitted extended remote working privileges to their employees as well. The trend of promoting working from home may seem to have been forced upon us by the pandemic, but it is in no way a novelty. In fact, it concurrently matches a trend that had started to take shape from before the pandemic itself.
According to research by GlobalWorkplaceAnalytics, between 2005 and 2018, internet technologies had fuelled a 173% increase in the percentage of people who were regularly working from home (in the USA), although the overall number stood at just about 5.4% of the overall workforce. COVID-19, has, however, almost turbocharged that growth. During the pandemic, the proportion of Americans working from home saw a ten-fold increase to 56% in the United States, while the UK saw a seven-fold increase to 47%. According to a Deutsche Bank report released in November 2020, “many of (these) people will continue to work remotely for some time. Indeed, two-thirds of organisations say that at least three-quarters of their staff can work from home effectively, according to S&P Global Markets. Meanwhile, a DB survey shows that, after the pandemic has passed, more than half of people who tried out WFH want to continue it permanently for between two and three days a week.”
The Rewards of WFH
The high number of people moving towards a permanent ‘work-from-home’ status has very noteworthy repercussions for the overall economy as well. An argument states that even whilst disconnecting themselves from the physical economy, remote workers continue to reap complete benefits in spite of contributing ‘lesser’ to the infrastructure of the economy. Essentially, WFH is said to be financially rewarding.
The Deutsche Bank report opines: “WFH offers direct financial savings on expenses such as travel, lunch, clothes, and cleaning. Add to these the indirect savings via forgone socialising and other expenses that would have been incurred had a worker been in the office. Then there are the intangible benefits of working from home, such as greater job security, convenience, and flexibility. There is also the benefit of additional safety.
The newly-discovered gains of home working, both tangible and intangible, all have value. And they generally outweigh the costs. The latter have mostly come in the form of additional mental stress of juggling work and children, and dealing with an imperfect home-office setup. These costs should not be underestimated, however, they usually pale in comparison with the gains. Hence why the vast majority of home workers want to continue remote working, on at least a part-time basis, after the pandemic passes.”
A justified Tax regime?
Given the fact that working from home will now be part of the ‘new normal’ well after the pandemic has passed, a Deutsche Bank team of strategists led by Luke Templeman argue that remote workers should pay a tax for the ‘privilege’.
A 5% levy for the employees who are working from home on a regular basis out of their own volition (and not in response to a compulsory government mandate) has been proposed by the report. Such a measure is expected to raise upwards of $48 billion annually in the United States alone, apart from around £7 billion in the UK and €16 billion in Germany (the regions where such tax propositions are set to start from).
The proposition also has a rather interesting caveat: the tax would be paid by the employers if they do not provide their employees with a work desk. Else, if a worker decides to stay home-based out of their own needs, the tax would be levied on a daily basis for each day remote work is taking place.
The extra earning for the government could, ideally, go a long way in assisting subsidies for low-income earners and essential workers who are unable to work remotely owing to the nature of their jobs. According to Bloomberg, “in the U.S., the strategists calculate, such a tax could pay for a $1,500 grant to the 29 million workers making under $30,000 a year and unable to work from home.”
Deutsche Bank strategist Templeman further opines: “It does make sense to support the mass of people who have been suddenly displaced by forces outside their control. Those who are lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe it to them.”
Expectedly, such a radical tax proposition is set to receive major backlash as well. Many will argue that engaging with the economy at large is a risk – thereby making the decision to abstain from the workplace a matter of personal choice – that workers should not be penalised for. Yet, the designers of the tax argue that it is the only logical step of evolution of a tax regime – to adapt according to the needs of the social environment. They cite the first instance an ‘income tax’ was introduced in the UK – a socially unpalatable exercise at the time, which eventually seeped into the fabric of capitalist society.
While the proposition is surely one which will polarise opinion, one thing is for certain: the future viability of WFH will depend much on the outcome of this decision if it is pushed further in the legislature.