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Should a ‘Robot Tax’ be implemented to fund a permanent dividend fund(UBI)?

By CryptoCelt97 | LegalArticles | 19 Mar 2021


 

A new age of automation and AI is emerging, and the ramifications could have severe implications for the workforce and resultingly the personal wealth of the citizens. This is especially true for the lower classes of society where the automation takeover will happen first. These rapid changes to our society will require an appropriate response by the country’s lawmakers to safeguard the population from poverty and unemployment.

Also, as a form of poetic justice, automation itself could be taxed as a source for a dividend fund (A form of UBI). Therefore, as automation increases, and the profits gathered from the process grows – more money would be gathered into the fund. Thereby increasing the dividend payment to the recipients, which would help them support themselves. In this sense, automation would pay for the losses that it would cause to the labour market. When the labour force gets replaced by automation, the government will lose the privilege of charging income tax on many individuals.

A ‘robot tax’[1] should be implemented, with the proceeds raised from the tax being poured into the dividend fund. Income Tax could be placed on each robot that replaces a human employee, with the company having to pay for it. This would involve tax reform and the granting of a legal personality to the ‘robots’[2]. The EU has already discussed this possibility, stating how automatons are becoming similar to workers who can interact and alter their environment[3]. The UK may also consider doing this and could then tax robots as a legal personality, like they would tax an employee under the Income Tax Act 2007[4]. Therefore, an additional section could be added to Chapter 2 of the Act to include descriptions of taxing ‘robots’ who fulfil employee functions. If added, a definition of a robot would need to be provided in the legislation so that the correct income tax is applied. The International Organization for Standardization defines an industrial robot to be an:

“automatically controlled, reprogrammable, multipurpose manipulator, programmable in three or more axes, which can be either fixed in place or mobile for use in industrial automation applications.”[5]

This article suggests that if the Tax Act 2007 were reformed to place an income tax on robotics to fund a permanent dividend fund, the legislation uses the definition above and recognise robots as a legal personality. The concept of a legal personality was upheld in Salomon v Salomon & Co Ltd[6]. Definitions of a legal personality stretch beyond humans, for example, corporations are seen as a legal entity. The Companies Act 2006 S16(2) provides that a company becomes a corporate entity upon registration[7], and upon incorporation, it is a distinct legal entity. As a legal entity, a corporation can enter into contracts, sue and be sued. Notably, a specific tax is then levied on a corporation through corporation tax. What this demonstrates is that an artificial creation can form a legal personality and be taxed. Robots could thus be recognised as a legal personality and have a tax liability under legislation. Therefore, reforms could be made to the Tax Act 2007 to accommodate robots as a legal personality, or a new piece of legislation could be introduced. For example, the legislation could be named the ‘Industrial Robot Tax Act 2025’ and set a tax on the profits made by automation, with the funds going into the shared dividend fund. Automation will have a major effect on employment which will result in less income tax being generated and the social security system that is currently in place will falter. Unemployment will increase, and the state will require alternative revenues to support the welfare system.

To conclude, industrial robots could be taxed as revenue for a dividend fund. Automation would therefore finance a universal basic income and uphold the welfare system. The rise of automation could thus be exploited to overcome the unemployment and economic despair to the populace by supporting a UBI scheme. This would require tax legislation reform and the recognition of robotics as legal personalities. Income tax would be charged on these robotics under reforms of the Tax Act. However, these robots are unable to pay tax and collect wealth for themselves. Therefore, the employer and owners of the industrial robotics will be subject to the tax for the use of robotics and automation.

 

 

[1] Lewis Silkin, (2019) ‘Robot Tax: The Pros and Cons Of Taxing Tech — Future Of Work Hub’ [online] futureofworkhub. Available at: <https://www.futureofworkhub.info/comment/2019/12/4/robot-tax-the-pros-and-cons-of-taxing-robotic-technology-in-the-workplace> [Accessed 17 December 2020].

[2] Xavier Oberson, ‘Taxing Robots? From the Emergence of an Electronic Ability to Pay to a Tax on Robots or the Use of Robots’, (World Tax Journal, IBFD, 2017) Available at: <https://www.ibfd.org/sites/ibfd.org/files/content/pdf/wtj_2017_02_int_3_SeptNewsletter.pdf> [Accessed 20 December]

[3] European Parliament, Committee on Legal Affairs: Draft Report with Recommendations to the Commission on Civil Law Rules on Robotics (2015/2103 (INL))

[4] Income Tax Act 2007 c.3

[5] International Federation of Robotics, The International Organization for Standardization’s definition of an industrial robot, available at: <https://ifr.org/standardisation> [Accessed 20 December 2020]

[6] Salomon v Salomon & Co Ltd [1897] A.C. 22 1896 WL 4725

[7] Companies Act 2006 c.46

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