2018-04-03 15:01:58TaxesEnglishGrow your sales by using automation software. As the use of artificial intelligence and automation grows, employees are being replaced....https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/04/Two-developers-review-robot-tax-pros-and-cons.jpghttps://quickbooks.intuit.com/ca/resources/taxes/small-business-robot-tax/Should There Be a Robot Tax?

Should There Be a Robot Tax?

4 min read

If you think the days of using robots for everyday tasks are part of a faraway future, think again. From self-driving cars to automated vacuums, robots have arrived, and your fellow members of the small business world are embracing them.

Why Business Robots Are So Popular

You wear many hats as a small business owner. Promising new developments in robotics offer you the possibility of taking off some hats without hiring more people. Isn’t that an offer too hard to refuse?

Plus, current Canadian tax law rewards you for replacing workers with business robots or automating your processes. Your rewards include:

  • Lower payroll taxes
  • Lower Canadian Pension Plan contributions
  • Lower Employment Insurance premiums

Your Workers’ Compensation insurance and general hiring costs drop, along with other employee-related costs, such as sick pay, vacation pay, and travel expenses. No wonder robots are the potential darlings of the small business community. From a profitability perspective, bringing business robots on board lowers business costs, so it looks like a winning hand for you as an owner. But what about workers?

What Impact Do Business Robots Have on Society?

True, automation brings you many advantages, but it comes with many disadvantages, too. Most importantly, robots replace human workers. The more business owners embrace robots, the more workers find themselves unemployed. A 2018 Royal Bank of Canada (RBC) research paper covering 300 occupations reveals that automation may potentially lead to the disruption of 50% of Canadian jobs in the next 10 years.

Problems for the economy arise because robots don’t eat and they don’t buy anything. So, if your small business produces or sells food or consumer goods, an influx of business robots impacts your business as much as it impacts displaced workers. After automating Canadian jobs, how does your company survive if no one is paying Canadian consumers the income they need to purchase and consume what you produce or sell?

Two common solutions are tied to retraining workers and providing universal basic income. Both cost money. Some people think the money should come in the form of a robot tax and the robots replacing the labour force should pay it.

What Is the Robot Tax?

No one wants to tax innovation, but many feel it’s the government’s duty to level the employment playing field, especially if it helps the economy. That’s where the robot tax comes in. Under a robot tax regime, companies pay the government a tax based on how much money each robot makes or the profits that come from the labour savings of a robotic workforce. Whether you agree with this tax or not, it has an impact on the bottom lines of almost all industries.

If a robot tax sounds crazy, here’s something that might surprise you. During an interview, Bill Gates, co-founder of Microsoft, introduced the idea of robot taxes. Gates said he sees robot taxes as a way of helping society transition to an automated world.

It would be great if this new world reduces your work hours, increases productivity, and provides a better quality of life for everybody. But the reality is that businesses don’t like to take money out of their own pockets when it doesn’t directly serve their self-interests. That’s why people think the government needs to intervene.

As one of the world’s chief techno-optimists and world’s richest men, Gates holds a position of great influence. Lawmakers, including those in the European Union, are listening, but their biggest concern is the drain automation has on social security payments.

Proposals such as taxing worker robots as electronic persons would impose a tax equal to the savings your company makes in social security contributions. The electronic persons would have certain rights and obligations. The idea behind the measure is to deter businesses from adopting robots by imposing a tax. Governments would use the robot tax money to pay for retraining and basic income.

In addition to proposing a tax, adopting an ethical framework for robots in the workforce is a consideration. The bottom line is there’s a growing concern around this issue. As you would expect, members of the robotics industry don’t support a robot tax, because they think the idea of such a tax hurts innovation.

Challenges to Passing the Robot Tax

So, what are challenges in taxing robots? For one thing, lawmakers need to define what a robot is.

  • Is a robot a mechanical being that does manual labour?
  • Is a Roomba vacuum cleaner a robot?
  • Does a robot have to speak or interact like Alexa or Siri?
  • Is your cellphone a robot?

You have to know what you are taxing. More challenges arise for actually collecting the robot tax. A tax can be an income tax or a sales tax on robot-produced goods and services.

There are two main sides to the robot tax debate. Those against a robot tax believe it discourages innovation, which hurts job growth. Those in favour of a robot tax think robots replace humans, which hurts job growth. They believe a robot tax can help those that have lost a job due to automation. Bill Gates, made rich in large part due to automation, supports a robot tax because he sees it as a way of protecting society from eating itself.

Ultimately, no one wants to get rid of robots, but they want to incorporate them into the economy without forgetting about the workers they’re replacing.

Whether you’re a sole proprietor with no employees, or a small business with a payroll covering live workers and robots, you’re paying taxes. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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