Improving tax breaks for those who work from home could weigh heavily on the state, given widespread support from employers and workers for remote work, a new paper says.
The Treasury-led Tax Strategy Group says the case for increasing relief is weak from an economic perspective, with up to 95 percent of teleworkers wanting to work in some form outside of the office.
Improvements would have little effect on encouraging more workers to use telework if the employer offered them to do so, he argues.
However, the report adds that in the context of government policies to facilitate remote working, changes to the current tax regime could underline and strengthen support for it.
The new paper looks at a number of options for a change in tax policy ahead of the 2022 budget. These include legislative changes, the introduction of a flat-rate tax break for working from home, a tailored tax credit for teleworkers, the expansion of existing regulations, increases continued payment of wages (PAYE) and earned income as well as “super” accelerated capital allowances.
According to rough estimates by the Tax Strategy Group through the combination of Eurostat and Revenue data, around 875,000 people in the republic are classified as teleworkers. That’s an estimated 600,000 pre-pandemic increase.
The document notes that the rate of teleworking adoption accelerated rapidly during the pandemic, with the number of people working away from the office increasing from 22 percent in 2019 to 38 percent by the end of 2020, both employers and Workers express an interest in continuing this in some way, remote work is here to stay.
“It is not clear whether there is indeed a market failure that requires government intervention, as both workers and employers seem to support the transition to a remote working model, and there is evidence of such moves,” it said.
“Given the level of support for some level of remote working, there will likely be a very large deadweight on new tax spending to incentivize remote working at the employee level.”
No cost option
One of the cost-neutral options proposed by the group is to formalize the current tax regime for teleworking through legislative amendments to put it on a legal footing. This would have the advantage of giving employees and employers security, it is said.
A tax break for daily work from home could “further help to shift the burden of employer-related costs from the employer to the state,” it says.
While tailored tax breaks are attractive to teleworkers, they cost the state around € 25 million for every € 50 tax break, which makes them expensive. Improving the current tax regime to ease the burden on utilities would be cheaper, but not necessarily well received by workers, most of whom would prefer “general” credit.
A proposal to increase PAYE and income tax credits by € 50, which would cost the treasury an estimated € 85 million, could be problematic as not everyone can use remote working.
Finally, an accelerated capital allowance of $ 38 million in the first year would
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