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Should we tax robots to pay for pensions?

The UK Government's industrial strategy, launched at the end of November 2017, sets out a range of measures to increase productivity in UK business.

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"The nature of work is changing – and this could lead to declines in income tax and social security contributions."

One strategy identified is to support the increased use of Artificial Intelligence (AI) and Automation in the workplace. However, there are a number of knock-on long-term economic considerations that have yet to be fully debated and resolved. One of these is the likely impact of AI and automation on tax flows and the subsequent effect on the UK's finances. So what should our approach be to adjusting taxation for the increased use of automation and AI? After all, if it looks like a human and works like one, then shouldn't it pay tax - just like us?

The case for taxing robots

Some people claim 'robots will take our jobs', and that it's part of the future of work. While it may not happen overnight, there's no denying that the nature of work is changing and this could lead to declines in income tax and social security contributions.

As a result, tax flows might not keep pace with increasing obligations to pay for social benefits such as pensions and healthcare.

Autumn Budget: spending spree doesn't disguise £2tn challenge ahead for the UK economy.

The Autumn Budget has brought home the fiscal and economic challenges facing the UK

The case against taxing robots

No matter how human robots or AI look and act, they are simply tools businesses use to operate - they are just another form of investment to boost productivity and profitability. Therefore, it doesn't make any more sense to tax them as if they are people than any other item of business equipment or machinery.

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"In most G20 nations, a major part of tax revenues are derived from the taxes paid by human workers on their wages.

If employment income fails to continue to grow as projected, governments could face hard choices about how to adjust the tax base to compensate."

The heart of the problem

In most G20 nations, a major part of tax revenues are derived from the taxes paid by human workers on their wages. If employment income fails to continue to grow as projected government could face hard choices about how to adjust the tax base to compensate.

Even if corporations are seeing a rise in profits thanks to their robotic workforce, and therefore generating more capacity to pay corporation tax and more taxable dividends for shareholders, it will not necessarily be enough to compensate.

What can we do to compensate for eroding tax revenues? And how can we help those who might be left behind by automation? Read on to discover the options around automation, the future economy, taxation.

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How to tax a robot

The Tax Faculty's technical lead, Anita Monteith, looks at the tax challenges brought by the increasing use of artificial intelligence and 'bots.

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What is robotic process automation?

Robotic process automation (RPA) simply involves using software – known as a ‘robot’ – that is programmed to perform high volume, rules-based repetitive tasks that are normally carried out by people interacting with a computer.

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