Image Credit: Markus Bernet
According to thematic strategist Luke Templeman “A tax on remote workers has been needed for a long time, Covid has just made it (more) obvious.”
Templeman has said that “that remote workers were contributing less to the infrastructure of the economy whilst receiving its benefits”, by spending less on travel costs, lunch, clothing and socialisation. The pandemic has seen remote workers in the UK rise by 47 per cent and according to an international survey conducted by Deutsche Bank, a rise too in workers wanting to continue working from home. It’s not improbable that redistribution of capital needs to be re-examined in a new era of working from home, and perhaps this suggestion holds some merit.
Economist Jan Schnellenbach seems to disagree: "While it's true that they don't have any commuting costs," he continued, "they have higher costs at home for, say, heating, electricity, printing paper and other office materials."
Templeman states that the taxes can be used to support those who have been displaced during the pandemic. The work-from-home tax would raise £6.9 billion, which would cover the cost of a £2,000 grant to 12 per cent of workers aged over 25 earning a minimum wage.
Theoretically this could help millions of people across the UK, who have been hit heavily by the pandemic. The pandemic has exposed many flaws within the current economic infrastructure, especially regarding jobs that have always been able to be remotely operated. Although Templeman has stated the eagerness of many individuals who want to continue working from home, there is also a willingness from companies themselves to continue this trend.
During the pandemic the top thirty-two largest companies have seen their profits soar; Amazon has reached a whopping $401 billion net worth. Workers have saved on travel costs, lunch and socializing but companies have generally needed to pay less on upkeep of workplace maintenance and costs, less on facilitating face to face interactions, and recent research shows productivity has increased.
Facebook released the concept of moving executives to 100 per cent remote work, which found the financial benefit of adjusting executive pay based on locality, a strategy which could save other larger companies millions of dollars that can be reinvested in future products and services.
On average, medium to large companies are benefiting from remote work, but taxing low income remote workers doesn’t seem to be the answer according to general reaction. During the pandemic the redistributive justice has been stretched as much as the government has allowed. The suggestion for higher taxes on workers doesn’t guarantee any political support, or any promise that the government will redistribute that capital accordingly.
Templeman states it can help those who are required to engage in face to face interactions like the NHS. But as we’ve seen during the pandemic, the call for a pay rise for NHS staff has only been met with a round of applause.
Some have speculated that this suggestion was made to socialise losses in the heavy investment of commercial real estate (including offices and work environments) made before the pandemic. The Washington Post recently posted an article detailing how banks have been struggling with mounting debts from commercial real estate investing, with delinquent payments rising by 10.5 per cent since the pandemic.
Deutsche Bank, Goldman Sachs and JPMorgan Chase have bundled about $550 billion worth of commercial mortgages into securities and sold them as investments to pension funds, life insurance companies and mutual funds. This bundling is often done as a high risk/ high reward strategy done at times of economic crisis. A 5 per cent tax on remote workers for the use of redistributing it to those who have been displaced allows them to have enough disposable income to feed back into the economy, and hopefully this can stimulate the economy enough to reduce the rate of delinquent payments on mortgages.
According to experts remote working is here to stay, so we need to rethink how labour and the economy relate to one another in a rapidly changing work environment. However, Deutsche Bank’s proposal seems to be absolutely ludicrous and goes against the legal requirements of how taxes work in most countries, in that they should be targeted towards people’s economic performance.
Only around a third of FTSE 100 firms have announced cuts to executive pay in response to the Covid-19 crisis – and most of the measures are superficial in nature. If we’re looking for a legal and conservative means of taxation, shouldn’t we be looking at those near the top of the ladder?