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A research team at Deutsche Bank proposed that people pay a 5% tax for the “privilege” of working from home, if they continue to do so after the pandemic, as this could subsidize income lost by lower-earners due to the coronavirus crisis.
Deutsche Bank thematic strategist Luke Templeman said in the investment bank’s Konzept research report, published Tuesday, that a tax on remote workers had been needed for years but “Covid has just made it obvious.”
Working from home meant that many people were saving on everyday costs such as travel, lunch, clothes and cleaning, as well as possibly spending less on socializing. However, the report also said it meant remote workers were “contributing less to the infrastructure of the economy whilst still receiving its benefits.”
Templeman said remote workers should pay a levy post-pandemic “in order to smooth the transition process for those who have suddenly been displaced” by the coronavirus crisis.
He explained that the global economy was not set up to cope with people disconnecting from face-to-face society. It had taken centuries to build up economic infrastructure which supported face-to-face working, he pointed out, and yet the sudden mass shift to working from home during the pandemic is a trend that wasn’t going away.
The pandemic had seen 10 times more people in the U.S. working from home, at 56% of the workforce, while the U.K. had seen this figure rise seven-fold to 47%. A Deutsche Bank survey showed that more than half of workers internationally wanted to continue to work from home two to three days a week post-pandemic.
$48 billion a year raised
Remote workers tended to have higher than average incomes, Templeman said. And based on the assumed average salary of someone working from home, he calculated that a 5% tax rate would leave neither companies nor individuals any worse off.
For example, based on an assumed average salary of $55,000 for a remote worker in the U.S., a 5% tax worked out to just over $10 a day — roughly what a worker might spend on commuting, lunch or laundry.
In the U.K., this would work out to just under £7 ($9.21) a day for a remote worker on a salary of £35,000, and just over 7.50 euros ($8.85) a day for someone on a salary of 40,000 euros in Germany.
Templeman calculated that post-Covid there could be 4.6 billion days in total worked from home in the U.S., based on country-specific Deutsche Bank survey data, meaning the 5% tax rate on the average salary would raise $48 billion a year. This could pay for $1,500 grants for 29 million workers who cannot work from home and earn under $30,000 a year.
If applying the same calculation to the U.K., the work-from-home tax would raise £6.9 billion, which would cover the cost of a £2,000 grant to 12% of workers aged over 25 earning a minimum wage.
In Germany, the tax could raise 15.9 billion euros, which would pay for a grant of 1,500 euros for the bottom 12% of people who have a standard of living equivalent to 12,600 euros.
The tax would only apply when working from home wasn’t a government recommendation, Templeman clarified, and wouldn’t apply to the self-employed or those on low incomes. He said it should be paid by employers if they don’t offer the worker a permanent desk.
Backsolved taxes
Templeman said that some people would oppose the proposed tax, arguing that “engagement with the economy is a personal choice and they should not be penalised for making that decision.”
However, he highlighted that governments had always “backsolved taxes to suit the social environment.”
Subsidizing businesses that had no long-term future in this shift toward “human disconnection” made no sense for governments, Templeman said, but supporting workers who had been “displaced by forces out outside their control” while they retrain or figure out their next steps did.
Therefore, he said, workers “lucky enough to be in a position to ‘disconnect’ themselves from the face-to-face economy owe it to them.”
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