An Automation Tax- Adopt With Caution

3 Pages Posted: 5 Aug 2022 Last revised: 23 May 2023

See all articles by Vincent Ooi

Vincent Ooi

Singapore Management University - Yong Pung How School of Law; Singapore Management University - Centre for AI & Data Governance

Date Written: June 27, 2022

Abstract

The post highlights three main issues that may result from the rapid and widespread automation of jobs: 1) declining tax revenues; 2) inequitable distribution of gains and losses from automation; and 3) social costs of job displacement, such as social support and retraining programmes for displaced workers.

An automation tax may be imposed on a temporary basis to manage (slow) the rate of displacement of workers due to the adoption of automation technologies, but should not be a permanent feature. Otherwise, there will be a risk of loss of competitiveness in the long-term, possibly resulting in even greater economic harm.

One main problem with an automation tax is figuring out what to base the tax on. Attempts to tax "robots" have faced difficulties in defining what a robot is.

A potential solution proposed in the paper is to build on the existing capital allowance/depreciation mechanisms. Such frameworks in many tax systems are schedular, allowing governments the flexibility of attaching a particular tax benefit to each item in the schedule. An automation tax could be determined based on the type of technology adopted and the field it is applied in, correlating with the social costs associated with its adoption (which can be conceptualised as “negative depreciation”).

This mechanism could also allow for a distinction to be drawn between employment-substituting technologies, which render human workers redundant and should be disincentived, and employment-complementing technologies, which can be used by human workers to enhance their productivity, and which should be incentivised.

Keywords: Tax Law, Taxation, Automation Taxation, Robot Tax, Regulation, Tax and Regulation, Labour Law

JEL Classification: K34, F38, H2, H20, H24, H25, H26, H27, H29

Suggested Citation

Ooi, Vincent, An Automation Tax- Adopt With Caution (June 27, 2022). Austaxpolicy, 27 June 2022, Singapore Management University School of Law Research Paper, Available at SSRN: https://ssrn.com/abstract=4164456 or http://dx.doi.org/10.2139/ssrn.4164456

Vincent Ooi (Contact Author)

Singapore Management University - Yong Pung How School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

HOME PAGE: http://vincentooi.com

Singapore Management University - Centre for AI & Data Governance ( email )

55 Armenian Street
Singapore
Singapore

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