A proposal in South Korea’s recently announced tax plan could become the world’s first “robot tax” if enacted into law. However, the concept of imposing such a tax to offset reduced payroll taxes as employers replace human employees with automation and artificial intelligence is not new.
Earlier this year, Microsoft Corp. co-founder Bill Gates suggested that work completed by robots should be taxed in the same manner as comparable work by employees, which would be subject to income taxes and social security taxes. “If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level,” Gates said Feb. 17 in an interview with the online business publication Quartz. Following Gates’ proposal, robot taxes would be calculated by taxing a notional salary paid to the robot that employers would supposedly be able to deduct for the purpose of corporation taxes.
South Korea’s proposed robot tax takes a different approach.
Instead of imposing additional taxes on employers who replace human employees with automated technology, the proposal that has been dubbed a robot tax in South Korea involves reduction of tax incentives available to employers who would receive a tax credit under current policy for investment in automation technology with the goal of enhancing productivity.
President Moon Jae-in’s tax plan for South Korea aims to reduce tax deduction benefits previous governments provided to employers for infrastructure investment intended to boost productivity through automation. Under South Korea’s existing tax policy, employers who invest in automation qualify for an investment deduction of 3 to 7 percent in corporate taxes, with the rate varying by the size of the company. The policy was scheduled to expire Dec. 31, 2017, but is to be extended through 2019 under the proposed tax plan with the deduction rate reduced by up to 2 percentage points.
While South Korea’s policy change does not directly impose extra taxes on employers who rely on robots or other forms of automation that could replace human employees, the concept a robot income tax has gained momentum across the globe
A European Parliament report released in May 2016 was the first serious proposal to address the viability of the social security systems in E.U. countries in light of increasing reliance on automation, suggesting a link between universal income and a payroll tax on the work product of robots or other forms of automation. A resolution based on the report submitted by the European Parliament’s Legal Affairs Committee recommended imposing reporting requirements on employers detailing the impact of artificial intelligence and robotics "for the purpose of taxation and social security contributions, urging the European Commission to seriously consider general basic income and monitor “new employment models and the viability of the current tax and social system for robotics.”
The European Parliament’s draft motion recommended that robots could soon conceivably be classified as "electronic persons," whose owners or employers would be liable to pay taxes on their behalf. The European Parliament rejected the proposal to impose a tax across the E.U. on robots as electronic persons in Feb. 2017, but is continuing to address the rise of robots more generally.
In the U.S., San Francisco Board of Supervisors member Jane Kim (D) launched an initiative called Jobs of the Future to study the viability of a statewide payroll tax on employers across the state of California that replace a human employee with a robot, algorithm, or other form of automation. The initiative proposes that California employers would continue to pay a portion of the lost tax into a fund that can then be used for education, retraining and targeted investments in new industries.
On Aug. 22, the Swiss business lobby Economiesuisse released a broad-based report analyzing economic growth in Switzerland, including method s of ensuring the future viability of the country’s tax and social systems. The report concluded that regulating technology through fiscal measures would dissuade investment in innovation and hurt the country’s ability to compete in the international economy, instead recommending that the tax system incentivize employee productivity to increase revenue.
Without an established definition of what automation or artificial intelligence constitutes a real threat to human jobs, robot taxes continue to face substantial backlash for effectively penalizing workplace innovation and efficiency. Although promoted as a robot tax, South Korea’s proposal is essentially a reduction of tax incentives for investment in automation.
Payroll professionals may breathe a sigh of relief that there is no official consideration by the government for direct taxes on robot work product in the same manner that human employee income for comparable work would be taxed.
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