(c) Chartered Professional Accountants of Canada. Contact CPA Canada for permission to reproduce this article., Tax

Should we tax robots?

by David Descôteaux

A robot tax could ensure governments don’t lose revenue and workers don’t become obsolete. But is this idea even desirable or even practicable?

In 2017, as thousands of US retail workers lost their jobs, Amazon acquired 75,000 robots. According to news outlet Quartz, the company is investing so heavily in robotics that machines may account for 20% of its workforce this year.

News of this kind is prompting a growing number of politicians, businesspeople and critics to call for something that was the stuff of science fiction a short time ago: a tax on robots. Proposed by European politician Mady Delvaux, the idea of a robot tax is twofold. First, if robots will replace more and more workers in the future, then their work should be subject to taxes just like an employee’s (yes, your income tax). This would ensure governments don’t lose revenue. Secondly, taxing robots and making it more expensive to “hire” them than people would prevent humans from becoming obsolete. The tax revenue generated could also be used to compensate workers and help them re-enter the workforce.

Even Microsoft founder Bill Gates supports the idea, and prominent economists, including Yale University’s Robert Shiller, think it’s an option worth exploring. Shiller recently wrote that devices, such as Google Home or Amazon’s Echo Dot (Alexa), are beginning to perform tasks once done by household help. Also, in Singapore and elsewhere driverless taxis are replacing human drivers, and restaurants are using self-driving vehicles instead of delivery people. In the US, there is increasing talk about driverless trucks that may soon steal jobs from millions of Americans. Here in Canada, a 2016 Brookfield Institute for Innovation and Entrepreneurship report predicted that 42% of jobs are at risk of being affected by automation in the next two decades.

More than meets the eye

But is taxing robots desirable or even practicable? Sure, once robots have two hands and two legs, it’ll be easier to define them. But what about a robotic arm on an assembly line? An automated supermarket checkout? A web application? Should we tax Microsoft’s Office suite because it has replaced clerks and secretaries? Where do we draw the line between an innovation that replaces a worker and one that boosts that worker’s productivity and wages?

And couldn’t this result in double taxation for businesses, including many SMEs? Today, a company that uses technology to increase productivity pays taxes on its profits. However, if using a robot helps a company generate more profit, it will then have to pay more income tax plus a tax for having used a robot to increase its profitability.

Clearly, the notion of taxing robots conjures up the fear that machines are replacing people and sentencing them to lifelong unemployment. But history has shown that this fear is unfounded: technological progress does not impoverish humans, but rather it enriches them, creating opportunities and jobs year after year. While some jobs disappear, others are created. According to the latest news, unemployment is at an all-time low.

As for the poor government coffers being deprived of workers’ payroll taxes, I wouldn’t bet on it. Over the past 40 years, countless jobs have been lost to technology and robotics. Have governments suffered? Have they shrunk in size? On the contrary, governments have never dug as deep into our pockets as they do today.