Deutsche Bank’s globally proposed 5% remote worker tax has had some mixed feedback, but for the most part, you can expect “outrageous,” “ludicrous,” “unnecessary,” and even “discriminatory” to be among the responses of startups and their founders.
The proposals, which came out of a Deutsche Bank report called Konzept #19: What we must do to Rebuild, argue that working from home will be part of the ‘new normal’ well after the pandemic has passed and as such economic consequences and taxes will or should follow.
Luke Templeman, the London-based Deutsche Bank macro strategist and analyst of the remote working tax section of the report, argues the negative impacts that remote working can have on economies, such as the UK, US and Germany.
“The sudden shift to WFH [Work from Home] means that, for the first time in history, a big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life,” writes Templeman. “That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits. That is a big problem for the economy as it has taken decades and centuries to build up the wider business and economic infrastructure that supports face-to-face working. If a great swathe of assets lie redundant, the economic malaise will be extended.”
Templeman’s tax rate rationalisation
“Those who can work from home tend to have higher-than-average incomes,” said Templeman. “If we assume the average salary of a person who chooses to work from home in the US is $55,000, a tax of five per cent works out to just over $10 per working day. That is roughly the amount an office worker might spend on commuting, lunch, and laundry etc.”
Templeman writes: “A tax at this rate, then, will leave them no worse off than if they had chosen to go into the office. If we apply the same tax rate to workers in the UK with an assumed average WFH salary of £35,000, it works out to just under £7 per day. In Germany, a WFH salary of €40,000 leads to a tax of just over €7.50 per day.”
According to the Deutsche Bank analyst, a tax at this level means that neither companies or individuals will be worse off. “In fact, companies may be far better off as the savings from downsizing their office will more than make up for the cost of the WFH tax they will incur.”
However, one US-based commentator in the CNBC video interview argues that should he be compensated for the heavy prices he has to pay for his $20 lunchtime burger because his office happens to be located in one of the more expensive real estate zones in his city? Another asks should he be compensated for his daily tunnel fare now if he does decide to work in the office? Only one of the CNBC commentators said the remote worker tax was welcomed.
Others in the UK have also spoken their minds.
“I think it is the most ridiculous suggestion I have ever heard of,” Nick Woodward, Founder of UK and Australia tech recruitment company ETZ, told The Freelance Informer.
“It’s ludicrous to penalise workers just because through no fault of their own they manage to make some savings by working from home,” said Woodward. “I am not surprised the suggestion comes from a bank either. How about a bankers tax to recover the losses from the GFC that they inflicted on the economy?”
Alex Cohen, the Managing Director of Kent-based SaaS marketing firm, said the proposed tax on remote workers “seems unnecessary.”
“We’ve been remote for 11 years so what happens to companies like ours? Cohen told The Freelance Informer.
He also makes some interesting points about the tax and how they are counterproductive to the government’s zero-carbon objectives. “Not commuting has a better impact on the environment so this tax incentives people to commute and damage the environment. The cost for someone commuting into London every day will be far greater than someone who can walk 10 minutes to the office, so are both taxed the same?”
He also notes that working from home has a cost too – electric, water and heating, for example.
“In my view, remote working was always going to get more popular – this [pandemic] has just accelerated it by a few years,” said Cohen.
Infrastructure investors and core-plus real estate funds are already at the design table making new community-based concepts for the new normal of a more remote or WFH workforce. By having the job creation spread across a nation in a flexible WFH option rather predominately in commuter-based metro city centres is a compelling argument on so many levels.
Where remote talent is a win-win for startups
But what of the companies that have built their entire workforce with a remote worker model, some of which are the most successful, such as London-based unicorn startup Hopin. Hopin founder Johnny Boufarhat, and his Chief of Staff, Lily Chang, are on an impressive growth trajectory, as recently reported by The Freelance Informer. Boufarhat has plans to make 150 more remote hires by the end of this year and hundreds more in 2021.
Alex Hirst, the Co-founder and Co-CEO of Hoxby, a multi-skilled marketing and research agency behind the inclusive #Workstyle movement, has more than 1000 freelancers within its global network. Hirst points out some major flaws in the Deutsche Bank remote worker tax proposal.
“We at Hoxby are all for fair taxes, but a tax purely for choosing to work flexibly, and freelance, seems hard to understand,” said Hirst. “Working in this way means unstable income at times and so anything of this sort would need to be robustly means-tested. Consideration should also be given to the people, such as carers or those with physical disabilities, who work remotely because it’s the only way they can work. Should they be taxed for that ‘privilege’?”
Hirst added: “This is a proposed tax that penalises people for not going into an office; which in itself is an out-dated notion of what it means to work in the digital age. Working remotely has so many community, mental health, work-life balance and environmental benefits, that to be penalised for doing so seems ill-considered.”
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