Do androids dream of income tax?

By 2030, it is estimated that one in five jobs in Britain will be automated. When you consider that the workers currently doing these jobs pay income tax, this may pose quite a problem for the Inland Revenue. One solution that has been suggested is that of a ‘robot tax’.

You could be forgiven for not knowing that the word ‘robot’ comes from the Czech language. Capek used the word ‘robota’ in his play, R.UR, to describe the fictional humanoid characters who were made to carry out forced labour. They allowed humans to produce goods at a fraction of the cost.

Increased automation has become an accurate reflection of today’s society. Just think of AlphaGo, the computer program which defeated a professional human player in the game of ‘Go’ in 2015. This only contributes to the underlying fear that a robot may one day take our jobs.

Logically, however, this would mean that tax revenue would reduce by a significant amount. Automation would mean fewer human workers, which would therefore mean fewer tax contributions. This, in turn, would have a detrimental effect on public services like education and the NHS, so Bill Gates has suggested robots should be taxed just like the workers.

“Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things,” said Gates. “If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

Put like that, the idea does seem to make sense. A robot tax isn’t just some vague notion. EU lawmakers have voted on it before, although they ultimately rejected the proposal and in South Korea there are already tax incentives for investments in automated machines. In the UK, the Business, Energy and Industrial Strategy (BEIS) Committee has launched an inquiry into automation and the future of work.

Some people have been quick to pour cold water on the idea of taxing robots, however. Phil Hall, the head of the Association of Accounting Technicians’ public affairs and public policy, said that, ‘While some jobs will be lost because of automation, it is likely that many more will be created.’ He believes that a robot tax would undermine investment, limit employee skills and income and risks relegating British business and the British economy to second or third-tier status.

Nervousness about jobs is understandable but it’s important that any forward-looking economy embraces change rather than views innovation with a 19th century attitude. There has been some discussion about the need to tax profits rather than the means of making those profits, i.e. we need to be careful that investments in technology are not made even more expensive for companies.

The conclusion seems to be that it is premature to think about taxation at the moment. Automation is not going to go away and its effect on the economy will have to be addressed somehow but the pressing issue, currently, is how governments balance the positive impact of innovation on society with the unease over employment.

Posted In : UK, Tax, Europe