work from home / the design garage

In November, Frankfurt-based Deutsche Bank released a paper arguing that Covid-19 has made the need for a tax on remote workers “obvious.”

The premise behind the proposed tax is simple: remote workers — who usually are higher-income earners — have benefited financially from Covid-19 by not having to pay for a daily commute, dry cleaning, lunches out, etc.

Meanwhile, low-income earners have, in many cases, lost their jobs or can’t work remotely and have endured a higher level of risk during the pandemic.

“Those who can [work from home] receive direct and indirect financial benefits and they should be taxed in order to smooth the transition process for those who have been suddenly displaced,” the Deutsche Bank paper proposed.

Data indicate that here in Canada, the pandemic has been especially hard on low-income workers. According to reports from CIBC, low-wage workers account for 80% of the jobs lost since February, while many mid- and high-income workers have seen their household savings skyrocket. (See sidebar.)

Covid-19 has widened the gap between the haves and have-nots — but how to address that gap?

The Deutsche Bank paper proposed levying a tax of 5% per day on remote workers, arguing that 5% of an average remote worker’s daily pay is “roughly the amount an office worker might spend on commuting, lunch and laundry, etc.” Money raised from the tax could then be distributed to low-income workers and people who’ve lost their jobs.

“Many will have to take low-paid jobs while they retrain or figure out their next step in life,” the Deutsche Bank paper stated. “From a personal and economic point of view, it makes sense that these people should be given a helping hand.”

The proposal — which, coming from an investment bank, surprised many — made headlines around the world. Support for the idea, however, has been harder to come by.

Elliot Hughes, senior advisor with Ottawa-based Summa Strategies Canada Inc., describes the notion of a work-from-home tax as “somewhat outlandish” and politically unsaleable.

“I think what this tax could also be called, other than a work-from-home tax, is a never-get-any-more-votes-in-downtown-urban-ridings tax,” says Hughes, who previously worked as deputy director of tax policy under former finance minister Bill Morneau.

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, says he gives Deutsche Bank “points for creativity” on its proposed tax — but that’s about it.

“Most work-from-home jobs are white-collar jobs. Those jobs tend to pay better,” Wudrick says. “So, really, the type of benefit [Deutsche Bank is] trying to capture with this tax is already captured by a progressive income tax.”

Wudrick adds that remote work has been one of the very few “positive externalities” that have arisen from Covid-19.

“If you look at the approach we’re taking to climate change, we’re trying to discourage commuting,” Wudrick says. “Working from home is a big positive externality, so it seems counterintuitive to want to tax that.”

David Macdonald, senior economist at the Canadian Centre for Policy Alternatives (CCPA) in Ottawa, notes that people who work from home aren’t necessarily high-income earners. They could be office administrators who have no choice about whether they work from home.

“I think that we should be taxing people based on income and wealth, not on where they happen to work,” Macdonald says.

Macdonald suggests a new top marginal tax rate would be more effective than a work-from-home tax. He also suggests an inheritance tax or a wealth tax would be a better way of addressing income inequality.

A September report from the CCPA stated that Canada’s top 20 billionaires saw their fortunes grow by a combined total of $37 billion during the pandemic — a statistic that may lend credence to the call for a wealth tax.

A survey last month from Ottawa-based polling firm Abacus Data found almost eight in 10 survey respondents support such a tax.

However, so far, calls for a wealth tax haven’t received support in Parliament: in November, the Liberals, Conservatives and Bloc Québécois defeated an NDP motion in the House of Commons calling for the imposition of a wealth tax on Canadian residents with more than $20 million in assets. The same motion proposed higher taxes for companies that have garnered excess profits during the pandemic.

In the fall economic statement, the Liberals announced that a plan to limit the preferential tax treatment of employee stock options will move ahead next year but stopped short of introducing new taxes.

Wudrick says he doesn’t anticipate the government will roll out any new taxes while Canada is still in the grips of Covid-19.

“It would be political suicide for [the government] to hit people who are just trying to stay afloat with income taxes or sales taxes,” Wudrick says. “I don’t see that in the next budget — or even the one after that. But after that, all bets are off.”

Tax breaks for working from home

According to a report from CIBC, mid- and high-income Canadians saw their household savings rate skyrocket to 28.2% in June from 3.6% before the pandemic as they cut down drastically on discretionary spending. Savings rates are expected to remain “miles above” pre-pandemic levels throughout the winter.

If that wasn’t already enough money in the bank, employees who’ve worked from home during the pandemic also are entitled to tax breaks. The federal government announced in its fall economic statement that employees who worked from home in the 2020 tax year can claim up to $400 in “modest” expenses without having to track those expenses or submit a T2200 form.

People who’ve worked from home may claim eligible expenses exceeding $400, and they should keep a record of their expenses. At press time, whether this would require a T2200 form was unclear.

Employees also are eligible to have up to $500 in qualifying home-office expenses reimbursed by their employers without incurring a taxable benefit.