The new normal – Are we ready?

The current pandemic has caused drastic disruptions to our daily lives, businesses and the economy. Government and regulators are tasked to develop various measures to provide some security and cushion the adverse impact to its people and businesses. Businesses too have been forced to implement workarounds and innovate, to ensure business continuity and identify enablers for its employees to continue working.

Agile employment, technology and the Future of Work

The Future of Work is generally characterised by technology - artificial intelligence, remote working structure and a digital platform which will affect three key areas – Work, Workforce and Workplace.

The domestic movement control and international travel bans have forced businesses to rely heavily on technology to enable remote working arrangements. We have seen innovative ways of individuals conducting work from various locations, e.g. home or in a hotel of a country where they are currently stranded in:

• Virtual meetings
• Webinars
• Virtual supervisory work
• In Malaysia – A full virtual hearing in the Court of Appeal which was livestreamed
• In the UK and Canada -  Virtual parliament sittings

The effect of the ongoing pandemic does not seem to be easing. It is predicted that we may take a year, or even more, to return to normal – even then, a new normal. How do we then cope?

During this period, pressing matters such as business continuity plans and managing the new day-to-day operations take precedence. Companies should take this opportunity to lay the groundwork for the future phases of remote working and incorporate it in its recovery plan as we move towards the Future of Work.

I’m sure employees across industries are also asking if in-office requirements can be loosened post-pandemic since “working remotely is clearly working”. While actual productivity output has yet to be determined, anecdotal experience shows that we now see quicker responses to emails and generally increased working hours from employees.

In the west, working remotely is already widely accepted. During my tenure with a UK-based consulting firm a few years ago as the in-house workforce mobility lead, we were all working off-site. In-office presence was only when absolutely necessary. The HR lead was in the UK, the finance team in India; and consultants were scattered all over the region. It is not uncommon for us to work across countries/regions to deliver a project that is due in a country where we might not even have business presence.

Will there be a shift in the Asian culture of requiring employment to be exercised in a physical location and the rituals that come with it to embrace remote working?

Today, we have the Gen Y in the workforce and soon the Gen Z will be part of the workforce. Expectation of these generations who grew up with access to technology and the Internet could be a big push factor. Employers should thus work at embracing new forms of remote work arrangement and think of it as the new norm.

Regulators response – quick fix

In light of the current pandemic, government and regulators in this region strived as quickly as possible, to release measures and guidelines to mitigate and/or eliminate unintended negative consequences. This gave businesses some breathing space to navigate this period.

Tax authorities in the United Kingdom (UK), Ireland and Australia, in addition to the above, addressed global mobility issues, i.e. the unintended consequence of individuals who are stranded in their countries and are forced to continue working for the employer (who is from another country) until borders are reopened. Recognising that the individuals’ extended stay may lead to their employment income being taxed in two countries, these tax authorities implemented a more progressive concession, that is to exclude the period of stay that is due to COVID-19 for tax purposes, thus removing the potential tax triggering points. This prompted the Organisation for Economic Co-operation and Development (OECD) to release their guide on potential cross-border issues for stranded employees resulting from the COVID-19 pandemic.

At time of writing, Singapore was the only country that quickly adopted the OECD recommendation and released a similar ruling on stranded employees in Singapore. Recently, Malaysia followed with an announcement by the tax authorities that they will consider the concession per the OECD recommendations, provided that the specified conditions are fulfilled and evidences to justify the application of such concessions

Alignment of regulations to business

It is commendable how swiftly our authorities have reacted by implementing helpful measures to provide temporary relief to employers and employees. These measures focused mainly on operational leeway and have been effective in temporarily bolstering the economy as businesses scramble.

However, I personally feel that there is also a need to review and reassess the agility and flexibility of our current tax and immigration systems. The use of technology is reshaping the employment landscape, i.e. the employment structures, etc. My concern is – with the speed that changes are taking place, can the current systems withstand the coming transformation and be ready to handle the Future of Work?

For example, the employment derivation clause in the Malaysian tax law is dated way back in 1967. Except for the updates on the types of employment income, there has been no change to the derivation rules. Could the tax clauses from the 1960s be effective and relevant to present-day employment arrangements such as frequent business travellers and now remote working arrangement as well, the Future of Work?

What’s next?

As businesses evolve their way of work, tax authorities could take on a more proactive role to support the businesses while keeping up the pace with the current employment trend. They may consider three forms of partnerships here.

First, it would be useful for the authorities to take this opportunity to work with employers to identify tax policies that need to be updated and realigned to the current trend of employment arrangement. The tax authorities could ride on this crisis as an opportunity to modernise the tax laws and keep up with the current development.

Second, technology is likely to reshape the current employment arrangement to be more borderless, there is a need for countries in the region to come together and collaborate for the preparation of the Future of Work. Such collaborations and discussions provide opportunities for key stakeholders to engage in a mutual exchange of ideas stemming from similar economic development and cultural traits, while underpinned by international recommendations (from the OECD and International Labour Organisation (ILO)).

Third, in Malaysia, we have the advantage of moving ahead with the self-assessment system. We have observed that the Malaysian tax authorities’ main role has evolved - from an “assessor” to an “auditor”. They are constantly providing tax educational guidance via public rulings, technical and operational guidelines, practice notes, etc.

Personally, I reckon that our tax authorities are capable of elevating their roles to act as a business partner. Currently, for taxpayers to seek confirmation on a tax position or apply for a tax exemption are required to obtain a private ruling or apply directly to the Ministry of Finance. Such requests take time. Perhaps, tax authorities can implement an early engagement discussion process with taxpayers.

In Australia, the Australian Taxation Office (ATO) has in place an Early Engagement Consultation process. The objective of the Early Engagement Consultation aims to provide an avenue for taxpayers to discuss with the tax officer to agree on the best way to handle or interpret certain technical position from the tax authorities’ point of view, on a general basis and also to achieve a quicker resolution. As well, it could:

• assist to determine the best approach of a taxpayer’s circumstance
• assist the tax officer to get across the facts and technical issues more quickly if it transpires that lodging an objection is the better approach;
• provide guidance as to the type of information required to progress the objection; and
• reduce delays caused by the need to request and receive supporting documentation.

The adoption of a similar approach by the Malaysian tax authorities will definitely further enhance the “taxpayer experience”. It will also help reduce bureaucratic red tape, as well as allow tax authorities to obtain valuable insights from the taxpayers.

Another aspect to consider is immigration. Immigration laws, among others, are used to regulate the physical presence and movement of foreign individuals in a country. However, if the world moves towards cross-border remote working, should immigration laws be updated as well?

I say yes – to prevent inappropriate virtual presence.

The Future of Work may eventually translate into the implementation of virtual presence via enhanced Augmented Reality (AR) tools in the work place. We could expect employees from across the globe to collaborate online via avatars/hologram and shared 3D workspace or even via virtual presence in a real workplace.

Inappropriate virtual presence could potentially lead to infringement of privacy. Would you allow a stranger to enter your house without permission, even virtually? Imagine, you have a virtual intruder, whom you did not grant any permission to access, “enters” into your physical territory and scans through your family members or your belongings. Physically, you and your belongings may be safe, but your privacy is infringed. Now, let’s put it in a context of a country. Who should regulate these virtual presence - immigration or domestic security or both? How shall it be regulated?

With the rapid advancement of technology today, it could happen with just another triggering moment. I am of the view that it should be time for the authorities to start looking into this and laying the ground works now before the “future” realises. For example, for security reasons, generally a passcode would be provided for every e-invitation sent. If a system could be developed to embed an automatic visa completion requirement for any e-invitation sent to a cross border email address, this would assist authorities to track and monitor presence of foreign remote (virtual) workers in country and protect its natural citizens.

The task to future-proof our tax and immigration system for the Future of Work is a critical challenge. It is doubly challenging when we cannot gauge if the world post COVID-19 will revert or be radically different. This is thus the best time for the authorities and businesses to start laying the foundation to a more relevant system/structure, to put us in a stronger competitive position.

By Chee Ying Cheng, Global Employer Services Executive Director at Deloitte Malaysia. The views expressed above are solely theirs.