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Expectations On Remote Work Add Burden For Tax Agencies

By Alex M. Parker · February 11, 2021, 7:34 PM EST

As remote work becomes normalized during the novel coronavirus pandemic, the need for corporate tax departments to work with other divisions to ensure that tax issues are minimized and that companywide policies are adopted has skyrocketed, tax officers said Thursday.

This is especially true as the tax department is often left delivering the bad news to employees about adverse tax consequences for potential location changes.

"The pressure point for my team really is the cross-border scenarios. Many of them originally were caused by COVID travel restrictions, but we see that morphing now into personal circumstances," said Katie Lodato, vice president of global tax at Eli Lilly & Co. She was referring to COVID-19, the respiratory disease caused by the virus, on a panel discussion during a virtual conference hosted by the Tax Council Policy Institute.

Lodato said Lilly's tax department felt "a lot of the pressure to lead the conversation" on employees hoping to work remotely in a new jurisdiction.

"There's a lot of individual pressure because it's a circumstance that we are looking at for a particular person," she said. "So we are very focused on making sure there is a cross-functional team around those topics, and establishing a more objective internal policy."

Lodato said the goal was to create a policy based on factors like "job level, job functions, tax risk in that country, Lilly presence in that country," rather than making decisions "specific to an individual's personal circumstances and questions."

Urvi Doshi Sood, vice president for taxes and general tax counsel at Lockheed Martin Corp., said another tax consequence the company had to look at was whether employee relocation would affect tax incentives the company receives around the world.

"It's a must that tax have a seat at the table," Sood said. "There's consequences not only for employees, but also for the company."

The Organization for Economic Cooperation and Development has issued guidance, most recently updated last month, on the potential international tax consequences of remote work during the pandemic.

--Editing by Leah Bennett.

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