Deutsche proposes work from home tax

Controversial proposal would see companies pay extra tax on salaries of those working from home

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Working from home should be taxed, according to a new report. A remarkable suggestion from Deutsche Bank would see employers pay an extra 5% tax on the salaries of staff working remotely.

The thinking behind the idea is that homeworkers save money by not buying lunch out or using public transport. How it fits with employees who take a packed lunch or cycle to work is unclear. Some reports have hinted that local high streets have been boosted by the huge uptick in homeworking this year and folk buy lunch closer to home. The takings from the homeworking tax would be used to support under threat jobs.

The proposal appeared in a briefing published this week by strategist Luke Templeman of Deutsche Bank. He argues that the economy depends on businesses linked to commuting. And he calculates that doing nothing would extend the economic fall-out from Covid.

Indirect savings

Templeman says there are costs to working from home including domestic heating, lighting and – during Covid – working with children. However homeworkers save on expenses such as travel, lunch, and buying a work wardrobe. There are also indirect savings associated with less socialising and other expenses that would have been incurred had a worker been in the office. He adds that there are also “intangible benefits” including “greater job security, convenience and flexibility” and “additional safety”.

He says the tax would only apply outside the times when the government advises people to work from home. It would exclude the self-employed and those on low incomes. It would be paid by the employer if it does not provide a worker with a permanent desk. If the employee has a desk and chooses to work from home – full or part time – they would pay the tax. Those working from home, he says, would be no worse off than if they went to the office.

In the UK, Deutsche Bank calculates the tax would generate a pot of £6.9bn a year. The radical plan would see that then paid out in tapered grants of £2,000 a year to adult workers over 25 on the minimum wage and those under threat of redundancy. It would help them to shift to the new hybrid economy, retrain and would take into account the added risk they have taken during the pandemic.

Tax on remote workers

“For years we have needed a tax on remote workers,” says Templeman. “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.”

He adds: “The sudden shift to WFH 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. That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits.”

Deutsche Bank announced last month that its investment arm made over £2billion in its latest business returns. The firm plans to sack 18,000 staff by 2022.