In February, the European Union (EU) considered legislation that would have levied a new tax on robots. Although the proposal did not compute with most EU lawmakers, its materialization shows that robotics – along with machine learning, artificial intelligence (AI) and related forms of 21st Century automation – are pushing traditional tax concepts into new territory.
Shortly after the EU rejected its robot tax proposal, the digital publication Quartz posted an interview with Microsoft founder Bill Gates. In that exchange, Gates discussed the advantages of taxing robots: “Certainly there will be taxes that relate to automation,” Gates explained. “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. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”
Gates’ argument was rejected by some notable individuals and publications, including the Free Exchange blog in The Economist, which maintained that automation taxation could deter investment and limit business productivity. “Investments in robots can make human workers more productive rather than expendable,” according to The Economist. “[T]axing them could leave the employees affected worse off.”
That’s a key point — machine learning applications are more likely to augment rather than replace human expertise and jobs (at least for now). By way of example, there are “robo-advisory” services offered by wealth management and investment firms; the firms that deploy this technology also rely on human investment managers to oversee the decisions robo-advisors make.
It’s no surprise that early arguments calling for robot taxes show a bit of rust. This thinking will evolve, by necessity. As it does, corporate tax professionals should monitor how robotics, artificial intelligence (AI) and machine learning influence their decisions, activities and planning. On this matter, you can count on me and other Vertex humans to keep you posted.
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.