Do robots dream of paying taxes?

The digital transition should be managed – and taxed – alongside other societal transitions, but any tax on companies that replace employees with aut

Publishing date: 05 October 2021
Authors: Rebecca Christie

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Robot taxes embody the more futuristic challenges of managing automation and legacy workers. As machines and artificial intelligence take on more roles that used to be performed by humans, policymakers and technologists are assessing the costs this transition imposes and what parts of society will pay them. A robot tax on companies that replace employees with automated systems is easy to dismiss in its most simplistic forms but should be considered in the context of managing the next industrial revolution.

A robot tax is a political construction, a way to shape democratic debate around technological shifts and societal needs. It is a construct of the public debate, and as such can contribute to broader discussions about how to make sure profitable companies pay their way in the economy. The political capital of ‘replacement robot’ imagery may be useful in designing a tax framework for legacy firms making the most of new economic opportunities.

It is best to consider a ‘robot tax’ as a rallying concept for targeted levies. These policies should target finance and other data-driven sectors as well as traditional manufacturing and mining automation. Policymakers should consider overall employment, specific job losses and how to assess firms that make layoffs in specific areas of their workforces. This last will be especially difficult in cases where total headcount rises, even though some generations of employees may be put out of work. Tax policy can compensate for distortions due to shifts from human-driven to capital-intensive production in specific sectors.

On the revenue side, there should be appropriate expectations of what a tech tax can raise and over what period, on the scale of targeted retirement assistance or retraining programmes with measurable outcomes, not long-running cash cows. Smaller and more innovative firms should not be asked to contribute disproportionately, particularly in legacy markets that are hard to break into, and they should be eligible for waivers and exemptions. Policymakers should stress that asking producers to help pay the costs of societal change is not immediately equivalent to stifling innovation, and they should make every effort to design policies in ways that protect against this type of side effect. Finally, any new tax on employers needs to fit with broader discussions of the corporate fair share, and with taxing the most profitable parts of the economy instead of relying on workers and consumers to foot society’s bills.

Recommended citation

Christie, R. (2021) ‘Do robots dream of paying taxes?’, Policy Contribution 20/2021, Bruegel

This policy contribution was produced within the project “Future of Work and Inclusive Growth in Europe“, with the financial support of the Mastercard Center for Inclusive Growth.

About the authors

Rebecca Christie

Rebecca Christie is a Senior fellow at Bruegel and hosts Bruegel's podcast, The Sound of Economics. She is also the Brussels columnist for Reuters Breakingviews. She writes about the crossroads of markets, policy and politics, particularly where it comes to the European Union and how it interacts with the world. She was lead author on the European Stability Mechanism’s official history book, "Safeguarding the Euro in Times of Crisis: the Inside Story of the ESM".

Over more than two decades in journalism, Rebecca has reported from Brussels, Washington and around the world for Bloomberg News, Dow Jones Newswires/The Wall Street Journal and the Financial Times. She joined Bruegel as a visiting fellow in 2019.

She has also served as an expert adviser to a European Economic and Social Committee panel on taxation, is a regular conference speaker and moderator, and has provided editing and policy analysis to the European Commission, members of the European Parliament, and the African Development Bank. A US-Belgian dual citizen, she holds degrees from Duke University and from the LBJ School of Public Affairs at the University of Texas at Austin.