Could the UK introduce a tax on robots?

Tax

Adam Pennington, employment solicitor at the national law firm Stephensons, looks at proposals to deal with the huge upheavals expected in workplaces due to the ‘rise of the robots’

South Korea has become the first country to introduce a dedicated tax on robots in a bid to quell fears that the machines will replace human workers and lead to mass unemployment.

The Korean government will limit tax incentives for investments in automated machines as part of wider legislative measures to revise the country’s tax laws.

It is hoped that the move will help to lessen the impact that increased automation has on income tax as well as providing a ‘welfare buffer’ to cope with the expected rise in unemployment as a result of the economy’s increasing dependence on robots.

In 2015, the International Telecommunication Union Index ranked South Korea as the most technologically advanced country in the world and the International Federation of Robotics recently estimated that there were more than 500 multipurpose industrial robots for every 10,000 employees in the manufacturing sector alone.

The same survey ranked the UK as the fourth most technologically advanced country in the world.  Robots are already in use in some workplaces here and new uses for them seem to be emerging on an almost daily basis. In coming years, this ‘rise of the robots’ will see them become common in our workplace environments with huge ramifications, from a legal perspective.

A robot could, on the whole, allow a business to generate a much larger income and at the same time not have to worry about the regulations and protections that would prevent tribunal claims being brought against them.

For example, a robot would not bring a claim for unfair dismissal or discrimination, nor would a robot employee require accountants to work out specific tax deductions and monthly wages.

This means the current model for how businesses operate will need to be completely rethought, with radical changes in employment law inevitable.

I fear that in the not so distant future, lesser skilled employees will face the brunt of redundancies as their jobs are taken by robots, while employees with higher qualifications, skill sets and experience are arguably less likely to be made redundant.

Debate is underway about how the UK will cope with these changes – and whether our Government needs to follow the South Korean example and introduce a robot tax.

Concerns about a “polarised labour market”, driven by increased automation, recently formed part of the high-profile Taylor Review into modern working practices and while other areas – such as the gig-economy – might be higher up the Government’s list of immediate priorities, business leaders and academics are already speaking out.

The founder and ex-chairman of Microsoft, Bill Gates, arguably one of the main drivers of advances in computing, has previously called for a robot tax in order to balance government incomes, given income tax revenues would also be lost as jobs are lost to automation. He believes that such a levy could also help slow down the pace of change as workforces adjust to new ways of working and provide money to hire additional employees in sectors that require people, such as health care.

Another supporter is Professor Robert Yates, professor of economics at Yale University, who said in an article for The Guardian:

“A moderate tax on robots, even a temporary tax that merely slows the adoption of disruptive technology, seems a natural component of a policy to address rising inequality. Revenue could be targeted towards wage insurance, to help people replaced by new technology make the transition to a different career. This would accord with our natural sense of justice, and thus be likely to endure.”

Another approach has been mooted by Colin Ben-Nathan of the global accountancy firm KPMG, in an article for Tax Journal. He proposes decoupling an employer’s National Insurance Contributions (NICs) from the employer/employee relationship, arguing that NICs could instead be calculated against the operating costs of a business as a whole, rather than be purely linked to employee costs.  In turn, this would remove one of the incentives for employers to replace human workers with automation.

So it is clear that whether the Government adopts the South Korean approach or not, the ‘rise of the robots’ is posing increasingly serious questions that we are going to need to answer very soon.

About Adam Pennington

Adam Pennington is an employment solicitor at the national law firm Stephensons

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