This week's opinion: 11 June 2020

With the gradual easing of the lockdown thoughts inevitably turn to the long-term impact of the crisis on the tax system. There will clearly be tension between the need to kick start an economic stimulus through further tax concessions and the need to raise taxes to fill the yawning gap in the government’s finances. The setting of tax rates will be crucial but, beyond that, what will the future tax base look like? 

Let’s consider one aspect: increased working from home. If, as seems likely, businesses will require less space in expensive city-centre offices, tax receipts from rental income and business rates will decline. And what about the homeworkers themselves? Will there be demands for more tax relief for the expense of working at home, including the provision of new equipment? Will the rules for home to work travel for employees need to be looked at again if large numbers of people have their home as a base, with occasional trips into the office? Indeed, what will be the impact of employment status on home-based workers? Will the traditional test of control, for example, make sense when people can work at home in whatever pattern suits them, with the employer interested in outputs rather than hours worked?

That is just one aspect of what will be a wide-ranging debate. It seems inconceivable that after the immediate crisis has passed life will go back to how it was. That must also be true of tax. Ghastly though the pandemic has been, we should at least collectively grab the opportunity it has given us to reconsider some of the basic assumptions on which our tax system is based. Let’s not waste it.