The robots are coming, and they might have to pay tax | Business| Economy and finance news from a German perspective | DW | 27.07.2017
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The robots are coming, and they might have to pay tax

The European Parliament rejected plans for a "robot tax" back in February, but plenty of people remain in favor. Could the taxation of automation become part of our future? Arthur Sullivan reports.

A famous idiom states that nothing in this life is certain other than death and taxes. Yet, of the many ways that the films and novels of science fiction have imagined the roles of robots in our high-tech future, paying taxes has generally not been one of the functions dreamed up for our android friends.

Nonetheless, the futuristic-sounding concept of a "robot tax" is now a real topic in Europe and beyond, if still being quite a distance from becoming a real thing. For many years, issues around the rapid digitalization of the working environment and the increasing use of automation and robotics have energized economic and social debate.

A long established argument is that increasingly rapid advances in artificial intelligence (AI) and automation - a so-called "robot revolution" - will ultimately leave huge numbers unemployed, with no sector of the labor market left untouched. An oft-cited 2013 study by Oxford University economists Carl Frey and Michael Osborne grimly predicted that within the next two decades, almost 50 percent of total US employment is at a "high risk" of being lost to computerization and automation.

Naturally, such dramatic prognoses prompt many searching questions about the future of humanity, economic and otherwise, with one of the most obvious being who will pay tax when robots and computers are doing so much of the work?

'This is an argument we have faced for hundreds of years'

In May 2016, a draft motion proposed by the European Parliament suggested that robots could soon conceivably be classed as "electronic persons," with their owners liable to pay tax on their behalf.  In February of this year, those plans were ultimately rejected, although the parliament did propose the introduction of EU-wide legislation to regulate the rise of robotics across a number of areas.

Robot used in surgery (picture-alliance/dpa/M.Schutt)

Some experts believe a robot tax could negatively impact competitiveness and stifle innovation

While that February decision means a robot tax will not be introduced in the EU any time soon, the issue is not going away. A few months ago, Microsoft founder Bill Gates voiced strong support for the idea of a tax on automation and suggested its eventual introduction was inevitable. Meanwhile, debates over the increasing prevalence of artificial intelligence escalate elsewhere. In recent days, tech billionaires Mark Zuckerberg and Elon Musk publicly argued over Musk's views that AI poses a significant and fast-approaching threat to humanity.

The question of a robot tax is clearly part of a much wider ongoing discussion on digitalization, automation, AI and the future of employment. Yet this kind of debate is nothing new. Throughout human history, technological and industrial breakthroughs have had huge impacts on the nature of employment.

Some economists have argued that advances in automation will greatly increase production rates and therefore collective wealth, as has happened in the past. As a result, a well-designed robot tax could in theory be used to retrain people in different jobs and to provide a universal basic income.

Part of Gates' argument in favor of a robot tax is that slowing down the pace of automation advances would give governments more time to come up with adequate "transition programs" to deal with the social consequences, although one of the main arguments against a robot tax is that it would disincentivize technological advancement altogether.

"This is an argument we have faced for hundreds of years," Dr Enzo Weber, a labor market economist with the German Institute for Employment Research (IAB), told DW. "Somebody always wants to protect some workers but this would essentially end the road of technological progress and this is not really sensible."

While there are plenty of high-profile robot tax proponents, there is also plenty of opposition, not least in Germany. "In general, I would be against the idea of a robot tax because our research results don't show that we will have the major drop in employment that has been suggested," said Dr Weber.

A 2016 study by economist Dr Katharina Dengler on the impacts of digitalization on the working environment in Germany reached similar conclusions, countering the Frey and Osborne study and even suggesting that digitalization could ultimately create new jobs and lead to an overall increase in employment.

Robot used to assemble cranes (picture-alliance/ZB)

It remains unclear just to what extent robots will kill human jobs, but it can be taken for granted that the debate about the intoduction of a robot tax will come up time and again with more and more robots being used

Finding consensus

Germany is a world leader in robotics and automation technology, both in their production and use. In 2016, turnover in the industry rose by 7 percent to 12.2 billion euros ($13.8 billion). As well as that, a higher percentage of the German workforce works in industry (24.2 percent) than the EU average (21.9 percent). Therefore, it is not surprising that there is significant opposition to the idea of a robot tax from industrial and union leaders.

"The IFR believes that the idea to introduce a robot tax would have had a very negative impact on competitiveness and employment," said the Frankfurt-based International Federation of Robotics after the European Parliament decision in February. The German Mechanical Engineering Industry Association (VDMA) also came out strongly against the proposals while both the German Trade Union Confederation (DGB) and the Federation of German Industries (BDI) confirmed to DW that they were also against the introduction of a robot tax.

Considering that there is still such disagreement over how digitalization and automation will ultimately impact the future of work in Germany, the EU and beyond, the implementation of proposals aimed at dealing with those consequences, such as a robot tax, remains a long way off.

Most observers are agreed on one thing though - the robots are coming. Whether they are going to take all the jobs, just a few, or none at all, remains a thing of debate. Political and economic policy developments aimed at dealing with such potentially dramatic changes to the working environment - such as a robot tax - will only follow when the general picture becomes clearer.

 

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