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

You may think that robots are a thing of the future, but they are here today. From self-driving cars to automation software, robots have not only arrived, they’ve been embraced. Nowhere is this more apparent than in the world of small business.

Why Are Robots so Popular?

Small business owners wear many hats. Robots give business owners the ability to shed some of those hats without hiring more people. This is a hard offer for the average small business owner to refuse. After all, current Canadian tax law rewards employers that replace workers with robots. These rewards come in the form of a lower payroll tax, lower Canadian Pension Plan contributions, and lower Employment Insurance premiums. Hiring robots or automating a process also lowers Workers’ Compensation insurance and general hiring costs. There’s also a reduction in other employee-related costs such as sick pay, vacation pay, and travel expenses. No wonder robots have taken over. From a profitability perspective, this is win-win deal for owners, but what about the workers? The more the business community embraces robots, the more workers find themselves unemployed.

What Is the Impact of Robots on Society?

With the many advantages to automation come disadvantages. Most importantly, robots replace human workers. Studies show that between 1.5 and 7.5 million Canadian jobs are on the automation chopping block in the coming years. One Canadian study predicts over 42 percent of jobs will be lost to automation over the next two decades. Even white collar jobs such as law and accounting aren’t exempt. Another market research report predicts robots will take over five percent of jobs in the United States by 2021. The transportation and customer service industries are forecast to be hit the hardest.

The problem for the economy is that robots don’t eat. In fact, robots don’t buy anything at all. So, the impact of robots is an issue for producers of products as much as it is for the displaced worker. How do companies that automate Canadian jobs survive without paying the Canadian consumer the income required to consume?

The two most common solutions are related to retraining and universal basic income. Both cost money, and some people think that money should come from the robots replacing the labour in the form of a robot tax.

What Is the Robot Tax?

No one wants to tax innovation, but many feel the government has a duty to level the employment playing field, especially if it helps the economy. Enter the robot tax. With a robot tax, 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 impacts the bottom line of almost all industries.

If a tax on robots sounds crazy, it may surprise you to know that Bill Gates, the co-founder of Microsoft, introduced the idea. In a recent interview, Gates said he sees a robot tax as a way to help society transition to an automated world. Ideally, this new world includes reduced work hours and a better way of life for all. It sounds great. The reality is that businesses aren’t going to voluntarily take money out of their own pockets without being asked to. This is why people think the government needs to intervene.

Gates maintains a striking position in today’s world, especially as one of the world’s chief techno-optimists. Even more interesting is that lawmakers are starting to listen. Their biggest concern is the drain automation has on social security payments.

In May 2016, European Union lawmakers considered a proposal to tax worker robots as "electronic persons." The motion suggested the tax be the same as the savings a company makes in social security contributions. The proposal also suggests that "electronic persons" have certain rights and obligations. The goal of the measure was to slow the adoption of robots by imposing a tax. The money obtained from the tax would then be used to pay for retraining and basic income. In addition to proposing a tax, some lawmakers pushed for the adoption of an ethical framework for robots in the workforce. The proposal was rejected, but it proves there’s a growing concern around this issue. Not surprisingly, the decision to reject the robot tax was hailed by the robotics industry. In general, the robotics industry thinks a robot tax hurts innovation.

What Are Challenges to Passing the Robot Tax?

The challenges in taxing robots are many. For starters, 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 cell phone a robot? More challenges arise for actually collecting the robot tax. A tax can be applied as an income tax or a sales tax on robot-produced goods and services. Another question is who to tax.

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. He sees it as a way to protect society from eating itself. Ultimately, no one wants to get rid of robots. We just need to incorporate them into our economy without forgetting about the workers they’re replacing.

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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