Time to tax the Robots?

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Time to tax the Robots?

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Author Mark Richards

Robots are predicted to take 800m jobs worldwide by 2030. This will mean that national governments face a huge drop in tax revenue, with millions living on benefits instead of paying tax on earnings. Surely the only logical solution is to tax the robots that are taking the jobs?

6 am Christmas morning. And Ethan Scrooge was walking round Production Unit 4, a smile of satisfaction on his thin, bearded face. An outstanding year for the company: record profits for SCRooge Everyday Widgets Unlimited – or SCREW-U as he had re-named the company.

Yes, record profits – and all achieved without a single worker. He looked down on to what had once been the ‘factory floor.’ There they were: 1,000 robots producing 1,000 widgets an hour. Getting rid of his ‘human capital’ had been the best decision he had ever made. How his Great-Great-Grandfather Ebenezer would have approved…

Cratchit and the other bean counters had been the first to go. An entire accounts department replaced by a single computer programme: automated invoicing and automated credit control. Then the marketing and advertising department – those useless ‘creatives’ replaced by a simple algorithm linked to the Facebook/Amazon database to exactly target his advertising. Then the delivery drivers had gone: the drones did a far more efficient job.

…And finally he had waved goodbye to the last of his ‘workers.’ He laughed to himself: their ridiculous demands for holidays and sick pay and pensions. Wanting time off because their children were ill. The day his production bots had arrived had been the best day of his life. And his new security bots were doing a fine job patrolling the perimeter of Unit 4. ‘Must remember to turn them up to maximum aggression,’ he thought to himself. ‘There are always food riots at this time of year…’

Scrooge’s former employees

I should start by offering my apologies to Charles Dickens. But could it be that if the Ghost of Christmas Future arrived today she would describe the scenario above? All the technology I have mentioned is already in use – or it is a long way down the road to development.

Meanwhile, what about Scrooge’s former employees? A few of them managed to get jobs with fast food chains, either serving behind the counters or working as delivery drivers. But even in 2016 the CEO of McDonald’s USA had been complaining about the minimum wage and suggesting that a $35,000 robot arm was a better bet for serving fries. So the jobs behind the counter disappeared and – with delivery drones dropping rapidly in price – the idea of someone pedalling around town with a meal on their back soon became as outdated as going to a shop to rent a video…

A grim prediction

Time to tax the Robots?

If that scenario came about – and a report by consultants McKinsey has forecast that robots will take 800m jobs worldwide in just 12 years’ time – then a simple question emerges. Who will be left to pay the tax? With McKinsey predicting that one-fifth of the global workforce will be under threat from robotics and artificial intelligence by 2030, where will the government’s income come from? It certainly will not come from taxing a multinational like SCREW-U: Scrooge’s company is registered in the newly independent tax haven of Scotlandia.

Will there be anyone left to pay tax?

In the days when Scrooge employed people, his staff paid tax on their earnings. There were national insurance contributions, from both the employer and the employee. With no staff, all that tax revenue disappears: like millions of others, Scrooge’s employees are now dependant on benefits. A few have joined the ranks of the self-employed and work in low-paid, highly competitive manual jobs like gardening and plumbing – but they generate little in the way of profits and, despite the continuing efforts of various Chancellors, the self-employed still do much of their business in cash or Bitcoin, away from the prying eyes of the taxman.

Maybe Bill Gates has the answer – tax the robots

Bill Gates is the co-founder of Microsoft and was – until recently – the richest man in the world, a title you do not achieve by thinking short-term of failing to spot future trends. And Gates has an obvious answer to the problem: tax the robots.

His argument is simple: if a human does $50,000 worth of work in a factory that income is taxed. If a robot does the same work it is not taxed. But if we tax the robots, that would provide the income for jobs that humans remain especially suited for: jobs where empathy is required, such as teaching, nursing or caring for the elderly.

Bill Gates’ argument has plenty of supporters – who point out that robots are unlikely to complain about tax levels, do not use any of the services that taxation funds and are unable to salt their income away in tax havens…

In effect, a tax on robots – presumably levied in the geographical area in which they are situated – is a tax on the capital employed by corporations. It would represent a shift back to taxing companies rather than people. In 1981 Corporation Tax in the UK was above 50%: there are now plans to reduce it to 17%. In contrast VAT (largely paid by consumers) has risen from 8% to 20% – so individuals are paying a far greater proportion of the overall tax burden.

If robots come along and replace the individuals who pay tax and spend on goods and services the consequences are inevitable. Therefore national governments need to start thinking a very long way ‘outside the box’ when they consider future tax revenues. So should we tax the robots?

When Chancellor Philip Hammond delivered his Budget speech last month, it included income and spending projections up to 2022/23. That is just seven years before McKinsey’s grim prediction. If robots take the amount of jobs they are predicted to take and are not taxed in some way, then governments – especially in the West – will find themselves with unsustainable budget deficits. Perhaps their only option will be a return to taxes on windows, fireplaces and beards.

He had long suspected the changes were coming. Scrooge sighed and reached for his razor. Tomorrow he would brick up the fireplace and board up the windows…

By | 2018-12-14T09:33:56+00:00 December 6th, 2017|Business, Technology|0 Comments

About the Author:

A previous financial services business owner, Mark is an experienced Journalist Speaker, Speechwriter and Coach. He has written for a number of websites related to the financial sector and won numerous awards. Mark has also published a number of books.