While 2020 may go down in history as “The Year of Resilience,” 2021 may come to be known as “The Year of Adjustment” as individuals, companies, and governments adapt to the new realities of a world where a COVID-19 vaccine is (keep your fingers crossed) greatly reducing the virus’ effects.
Take some time to consider the following four key areas regarding taxes and the post-pandemic remote workplace:
- The new meaning and practices of sustainable and safe business travel
- The rise of a new employee-driven remote work paradigm
- The modern location-free meeting
- The tax compliance issues of the new distributed workforce
On this last topic, Scott Peterson, VP of U.S. tax policy and government relations, Avalara, an SAP Concur partner, shared an interesting perspective at a December webinar on 2021 sales tax changes. He observed that after the tax revenue shortfalls of 2020, states could be looking for other ways to increase tax revenues in 2021.
This is borne out by the Center on Budget & Policy Priorities’ October 2020 report that states budget deficits are likely to exceed $500 billion over the next two years. As a result, says Peterson, governments will be seeking to broaden their tax bases. He predicts they will be looking into a host of new revenue sources, including new ways to tax remote work.
The new “work from anywhere” paradigm has generally been a win-win, with employees getting more freedom and less drive-time, and employers benefitting from productivity increases of up to 47%. These benefits could result in additional profits for states from taxation of industry, and income from taxation of individuals.
One central issue for companies and individuals to consider include what new taxes will states, provinces, and countries incur for the new distributed workforce norm. Different locations have different tax regulations, so business and employee income tax liability may change based on the location they are in for work purposes. Though your desk may be in British Columbia, your employer may be in Hong Kong. This raises questions: Where is the individual earning the income? Where does the company have a tax presence? What state? What province? What country?
Considering those pandemic-triggered tax revenue shortfalls, it’s understandable that any jurisdiction will want their fair share of potentially increased income tax revenue and corporate payroll taxes. These are trends for which SAP Concur and our service partners are already planning.
Case in point, Ian Scott, Asia-Pacific nternational tax and transaction services leader at EY, an SAP Concur ecosystem partner, noted in a recent blog:
“The concern would be as governments start to see revenue falling because of the economic downturn, they will need to pursue additional tax revenue. And obviously, if the rules aren’t clearly stated either way, it leaves the door open to do so.”
He noted that the pandemic has created highly complex cross-border individual and corporate regulatory and tax risks. Scott calls on tax, immigration, and mobility teams to work closely together to proactively address these challenges before we need to react to new laws.
Paul Klimowicz, EMEA business travel leader at Deloitte, another SAP Concur ecosystem partner, announced a new remedy for this evolving tax issue at an SAP Concur travel consultants’ webinar in early November 2020. A new app called Travel Ready now helps cross-border business travelers and remote workers comply with regulatory requirements, including travel restrictions, visa and work permits, income tax, European Union cross-border posted worker rules, social security and payroll and corporate taxes, according to the company.
The tax implications of the new world of remote work and travel are still emerging as governments and organizations look to maintain tax revenue and optimize financial performance. However it plays out, one thing is true: the SAP Concur organization and our expanding universe of partners will continue to proactively innovate, working to keep our customers ahead of the ever-changing business landscape.
Learn more about the SAP Concur service partners today.