DAIDA HADZIC

As remote work arrangements, enabled by technology, become more popular, it’s not just companies and their employees who stand to benefit. Studies show that flexibility in working arrangements can produce significant benefits for the broader economy and act as a catalyst for improved productivity and growth.

At the same time, this trend is challenging traditional notions of personal income taxation in a crossborder context.

Already we’re seeing signs that the enforcement of existing rules is stepping up and, looking ahead, global mobility teams may face a period of uncertainty and disruption as governments begin to examine existing crossborder personal tax and social security rules in the context of increasingly virtual workplaces.

Benefits and drawbacks

In September 2021, KPMG International’s global webcast on Work from Anywhere issues found that nine out of ten companies are considering introducing a remote working policy or have already introduced one.

A study by the US National Bureau of Economic Research suggests that working from home will persist beyond the pandemic for several reasons, including better-than-expected experiences; new investments in physical and human capital; and the pandemic-driven surge in technological innovations.

The study predicts that employees will enjoy large benefits from greater remote work – especially higher earners – while companies could see a five per cent productivity boost due to re-optimised working arrangements.

The European Agency for Safety and Health at Work’s assessment similarly notes the benefits for organisations and individuals in terms of flexibility, autonomy, performance and work-life balance, although it also acknowledges drawbacks, such as inadequate working conditions, excessive working hours and unpredictable schedules, which it aims to deal with through legislation and policy.

For economies more broadly, the European Commission identifies home-working arrangements and temporary work from another jurisdiction (teleworking) as major factors in achieving both growth and better work-life balance, and has noted that as well as increasing resilience and productivity, this could also "contribute to the green transformation of economies and help bring vulnerable groups into the economic mainstream."

Remove obstacles

For companies, the tax and legal implications are the biggest obstacle to realising the full potential of remote working, according to the KPMG survey. Governments could remove some of these barriers by revising thresholds for triggering taxation, social security obligations and permanent establishment determinations, thereby modernising the legislation to address the current and future working arrangements and promoting economic growth both regionally and globally.

For government revenues, the impact of losing workers within their jurisdiction to remote work elsewhere could be substantial. This is especially true among OECD countries, which take in up to five times more in personal income taxes than they do in co