Borderless offices : Opportunity for tax optimisation?

Abstract

The prevalence of telework, or working remotely or from home, has grown significantly in recent years, in which the COVID-19 pandemic played a major role. This paper focuses on a narrower subsection of remote work arrangements, and analyses employees’ possibilities for tax optimization and potential taxation risks in the context of cross-border remote work or telework. Major obstacles to the spread of remote work are identified by investigating the challenges associated with cross-border remote work from an employer’s perspective. As a further objective, the paper aims to explore how jobs offered in the Hungarian labour market, but performed remotely from abroad influence domestic tax revenues. Three scenarios were developed which reveal that the budget of Hungary suffers at least HUF 46 billion loss in fiscal revenues if 10% of remote job vacancies are filled from across Hungary’s borders. If only 50% of remote/workfrom-home job vacancies are filled within borders, the potential loss in revenue from taxes and contributions is HUF 229 billion. The research conducted under this study highlights the tax consequences of technology-driven changes in the labour market for individuals, employers and central budgets. States need to consider these factors when shaping their tax systems to ensure sustainable tax revenues.