How do you tax a robot?
Bill Gates wants robotic workers to be taxed on the same level as their human colleagues. But how exactly would a robot tax work?
With the fear of automation and AI systems replacing 'traditional' roles, affecting nearly half of financial services workers, the question of how to balance human labour lost with revenue gained has reared its head.
Robot employees may have the advantage of savings in salary, pension and taxable expenditures. However, the elimination of human jobs creates an economic problem for the government.
While most high-skilled positions are relatively safe from redundancy and new ones could potentially be created as automation breeds new processes, there will still be people out of work who may rely on financial help from the state for a period of time.
Currently, this cost would not be balanced by tax-generated revenue as businesses have fewer employees to compensate.
A robot tax would seek to solve that issue, as explained by Lecturer Duncan McKellar.
"The income of a worker would be subject to income tax and NIC," he said. "If a robot does the job, then this tax is lost but then the profits of the firm will be increased. Therefore we would expect to see an increase in other taxes such as corporation tax.
"If the robots manage to produce more goods than the human worker then we would also expect to see increased VAT as sales increase. However, economics tells us that the increase in production may lead to decrease in demand and therefore eventually corporation tax and VAT would also decrease meaning an even greater loss to the treasury!"
Practice scenario for TPE students
TPE students are encouraged to evaluate the implications for organisations when considering changes in strategy / operations. In this scenario, students may want to consider the potential for business disruption in the widespread adoption of automation. For example:
- What would a PESTLE (Political, Economic, Sociological, Technological, Legal, Environmental) analysis tell you about businesses going down this route?
- How would it impact on stakeholders i.e. government, employees etc.? For example, replacing human employees would lead to redundancies – what process would be followed?
- Are there any other similar options / alternative ideas to consider?
- What is your recommendation / conclusion?