The “robot tax” debate is heating up, according to the Wall Street Journal. Bill Gates has called for a tax on certain forms of advanced automation, and so has New York Mayor Bill de Blasio. While that argument currently grabs headlines, there are productive discussions taking place behind the scenes on a more compelling question with longer-lasting implications:
What if robots can do our taxes?
The short answer is highly appealing. Robots — algorithms, really — can transform the way sales taxes and other transaction taxes are paid, reported, and audited (or not audited, a truly alluring aspect of this development from a taxpayer’s perspective). The way in which taxpayers and tax authorities transform this capability into policy and action will have highly beneficial implications on tax compliance processes.
I presented on this topic — ways in which advanced technologies can facilitate the tax compliance process — at a recent meeting of one of the OECD’s most influential committees, the “Working Party Nine Technical Advisory Group.” While the advisory group has a bit of an Orwellian name, its interest in integrating algorithms into taxable transactions is anything but Big Brother-esque.
By integrating a mutually agreed upon algorithm at the transaction level, taxes could be immediately and accurately recorded, collected, and relayed to governments. In response, taxpayers would not need to be audited; instead, a legal “safe harbor” provision would insure them against this risk. It’s also important to note that this arrangement would not require the government to collect taxpayer’s transaction data as that’s needed for the safe harbor is proof you used the algorithm.
That’s the high-level concept, anyway. If you think it sounds a little too futuristic, think again.
Colorado, led by its Sales and Use Tax Simplification Taskforce, appears poised to adopt new legislation that integrates algorithms at the transaction level via a geographic information system (GIS) database, including the safe harbor provision when used.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.