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Issue 6 – 2019

1. Introduction 2

2. Delimitation of the Issue 3

3. Proposals 63.1. Tax on imputed income attributable to robots 63.2. Indirect taxation on the activities of robots 93.3. Object tax on robots 93.4. Fee on robots 103.5. Levy of an automation tax 113.6. Granting of offsetting tax preferences and other benefits for human workers 113.7. Levy of a corporate self-employment tax 113.8. Increase the corporate income tax rate 123.9. Disallowance of corporate tax deductions for automated workers 123.10. Increasing the tax cost of robots 133.11. Increased taxation on value added by robots 13

4. Concluding Reflections 134.1. Regarding the general idea: Does a robot tax discourage innovation? 134.2. Is a universal basic income the best solution? 144.3. The concept of “robot” may cause ambiguities and should be defined internationally in order to avoid

uncertainty and international harmful competition15

4.4. Robots’ ability to pay taxes? 164.5. Should we tax robots or not? 17

Table of Contents

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Robots and Tax Reform: Context, Issues and Future PerspectivesMaurício Barros*

The increasing use of machines equipped with artificial intelligence has caused great concern worldwide in terms of the impact of automation on existing jobs, with some studies showing that up to half of current human workers are threatened by this process. Though the replacement of human workers by machines has been experienced in the past (e.g. in the first, second and third industrial revolutions), it is believed that this time the impacts will be more drastic because, for the first time in history, machines are capable of substituting humans not only in repetitive functions but also in cognitive tasks. In addition to mass unemployment, the replacement of human workers by robots could lead to a great loss of state revenue, as revenues from taxes on wages would be reduced. It is also believed that there will be a significant reduction in the collection of indirect taxes, due to less consumption as a result of the job losses. Conversely, public expenditures are expected to increase, especially on unemployment insurance, welfare programmes, health and education. Some proposals have been made for taxing the robots; these are presented in the current article, together with some personal contributions on the subject.

1. Introduction

New technologies have provoked great debates in the tax arena, especially regarding the uncertainties amplified or even generated by the increasing digita-lization of social and business relations. These uncer-tainties have fostered intense debates in the field of international taxation, such as the ongoing discussion about new nexus connection criteria and the defi-nition/identification of value creation in the digital economy, which has led to detailed studies regarding the creation of a virtual permanent establishment framework,1 the revision of the withholding tax sys-tem2 and even the imposition of equalization levies3 and diverted profit taxes.4

However, a topic that is still beginning to be debated5 is what has been called a “robot tax”, which has as

* PhD in Economic, Financial and Tax Law, University of São Paulo; Master of Laws, Pontifical Catholic University of São Paulo; Taxpayer-Appointed Judge at the São Paulo Taxes and Fees Court; Partner at Gaia Silva Gaede Advogados, São Paulo.

1. P. Hongler & P. Pistone, Blueprints for a New PE Nexus to Tax Business Income in the Era of the Digital Economy, White Paper (2015), Journal Articles & Papers IBFD.

2. Y. Brauner & A. Baez Moreno, Withholding Taxes in the Service of BEPS Action 1: Address the Tax Challenges of the Digital Economy, White Paper (2015), Journal Articles & Papers IBFD.

3. S. Wagh, The Taxation of Digital Transactions in India: The New Equalization Levy, 9 Bull. Intl. Taxn. 9 (2016), Journal Articles & Papers IBFD.

4. UK: Finance Act, 2015, Primary Sources IBFD, imposes a levy on company profits that are routed via “contrived arrange-ments” to tax havens. AU: Tax Laws Amendment (Combating Multinational Tax Avoidance) Act, 2015, has a similar goal. Both have been called “Google taxes” by the media.

5. The author has recently published a shorter article regarding how robots could be taxed under the Brazilian tax system: see M. Barros, Tributação dos robôs: primeiras impressões e ref lexões sobre as propostas de tributar a automação, 17 Revista Fórum de Direito Tributário 97, pp. 141-165 (2019).

its background the expansion of the use of machines equipped with artificial intelligence (also called “robots”) by companies in order to replace human labour. This technological movement, if it actually occurs with the level of intensity that has been pre-dicted by some, could have drastic consequences for society, by completely transforming the mode of pro-duction and the relations between capital and labour. It is worth mentioning that the subject has drawn the attention even of Bill Gates, who categorically defends the idea of taxing robots.6 Robert J. Shiller, the 2013 Nobel Prize laureate in Economics,7 also defends “a moderate tax on robots, even a temporary tax that merely slows the adoption of disruptive technology”. Elon Musk8 and Stephen Hawking9 have also expressed concern about the issue, although they did not defend the institution of a tax as such (but rather some form of universal basic income for people who lose their jobs due to automation).

6. See K.J. Delaney, The robot that takes your job should pay taxes, says Bill Gates, Quartz (17 Feb. 2017), available at https://qz.com/911968/bill-gates-the-robot-that-takes-your-job-should-pay-taxes/ (accessed 16 Mar. 2019).

7. R.J. Shiller, Robotization without taxation?, Project Syndicate 1 (22 Mar. 2017), available at https://www.project-syndicate. org/commentary/temporary-robot-tax-finances-adjustment- by-robert-j--shiller-2017-03?barrier=accesspaylog (accessed 2 Sept. 2019).

8. C. Clifford, Elon Musk: Robots will take your jobs, government will have to pay your wage, CNBC (4 Nov. 2016), available at https://www.cnbc.com/2016/11/04/elon-musk-robots-will-take-your-jobs-government-will-have-to-pay-your-wage.html (accessed 16 Mar. 2019).

9. D. Bolton, Stephen Hawking says robots could make us all rich and free – but we're more likely to end up poor and unemployed, The Independent (9 Oct. 2015), available at https://www.independent.co.uk/life-style/gadgets-and-tech/stephen-hawking-says-robots-could-make-us-all-rich-and-free-but-were-more-likely-to-end-up-poor-and-a6688431.html (accessed 16 Mar. 2019).

M. Barros

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The use of robots today is extremely varied and may/should be even more diversified in the future: from the execution of household cleaning tasks, carried out by devices that go through a residence and aspirate all the particles they find, to sophisticated machines equipped with intelligence which interact with other human beings and even recognize their interlocutor (via facial recognition), which can already be seen in some hotels’ and companies’ front desks. There are also autonomous cars and drones employed in transport services, robot dolls that are designed to encourage children to learn and humanoids that assist doctors in remote surgeries (using virtual and/or aug-mented realities). Such activities clearly replace tasks that are also performed by human beings, which can lead to the unemployment of these people and several other consequences.

The discussion is quite broad and profound, as it includes scientific/technological, sociological, eco-nomical and legal aspects and, regarding the latter, public finance and taxation issues. Given this com-plexity, this article aims to present an overview of the discussion without any commitment to reaching a definitive opinion on the matter, especially because this is an open issue whose definitions will depend on time, place and social reality. However, the author will draft some ideas in order to address the main discus-sions related to the topic.

Please note that in this article the terms “robot”, “robotization” and “automation” will be adopted with-out any commitment to seeking precise definitions, either because these definitions are useless for the purpose of the text, or because these concepts are quite broad (which is precisely one of the points of reflection to be addressed in the whole discussion).

2. Delimitation of the Issue

The core of the problem is the possible generation of a large mass of unemployed workers, who could be replaced by robots both in repetitive tasks (which has been occurring at different levels since the First Industrial Revolution) and in cognitive tasks. In a pioneering study, Carl Benedikt Frey and Michael A. Osborne10 of the University of Oxford estimated that about 47% of jobs in the United States at the time of their research (2013) were in danger of disappearing.

In their study, Frey and Osborne started from the con-crete data, according to which computation has moved from playing only an auxiliary role in routine activ-ities to quickly recognizing patterns and replacing human work in a wide range of non-routine cognitive

10. C.B. Frey & M.A. Osborne, The future of employment: how susceptible are jobs to computerization?, Oxford Martin School Working Paper (2013), available at https://www.oxfordmartin.ox.ac.uk/downloads/academic/future-of- employment.pdf.

tasks; and they considered also the fact that advanced robots are developing improved senses and dexterity, which allow them to perform a broader range of man-ual tasks.

To evaluate the impact of computing on the labour market, Frey and Osborne implemented a new meth-odology to estimate the probability of computerization for 702 detailed occupations. Based on these estimates, they examined the expected impacts of future comput-erization on labour market outcomes, with the prima-ry objective of analysing the number of jobs at risk and the relationship between an occupation’s probability of computerization, wages and educational attainment.

The study distinguished occupations of high, medi-um and low risk, depending on their probability of computerization, and did not estimate the number of jobs that will be truly automated, since it focused on the potential automation of work over a non-specified number of years. According to the estimates, about 47% of total US employment is in the high-risk cate-gory, which consists of jobs that can be automated in the next two decades. Using a related methodology, McKinsey11 puts the same number at 45%, while the World Bank12 estimates that 57% of jobs in the OECD countries could be automated over the next two decades.

These numbers have been contested and reduced by other studies. Melanie Arntz, Terry Gregory and Ulrich Zierahn,13 departing from the Frey and Osborne meth-od based on the risk of occupations being replaced by robots, have developed a study that focuses instead on the risk of automated task substitution, starting from the premise that employees assigned to certain occupations perform more than one task. They con-clude that only 9% of Americans are at high risk of having their jobs automated. The threat represented by technological advances, therefore, seems much less pronounced when assessed through the task-based approach of Arntz, Gregory and Zierahn, in compari-son to the occupation-based approach.

The Arntz, Gregory and Zierahn study14 further argues that the estimated share of “jobs at risk” should not be equated with real or expected job losses from techno-

11. M. Chui, J. Manyika & M. Miremadi, Four fundamentals of workplace automation, McKinsey Quarterly (Nov. 2015), available at https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/four-fundamentals-of-work place-automation (accessed 16 Mar. 2019).

12. The World Bank, World Development Report 2016: Digital Dividends (2016), available at https://openknowledge.world-bank.org/bitstream/handle/10986/23347/9781464806711.pdf (accessed 16 Mar. 2019).

13. M. Arntz, T. Gregory & U. Zierahn, The risk of Automation for Jobs in OECD Countries: A Comparative Analysis (OECD 2016), available at https://www.oecd-ilibrary.org/docserver/5jlz9h56dvq7-en.pdf?expires=1532314646&id=id&accname=guest&checksum=8A7049B911C87D227B86D17899B9476D (accessed 16 Mar. 2019).

14. Id., at p. 4.

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logical advances for three reasons: (i) the adoption of new technologies is a slow process, due to economic, legal and social obstacles, so that technological sub-stitution often does not occur as expected; (ii) even if new technologies are introduced, workers can adapt to technological appropriations through the exchange of tasks, thus avoiding technological unemployment; and (iii) technological change also generates additional jobs through the demand for new technologies and increased competitiveness.

The main conclusion of the paper is that automation and digitization will hardly destroy a large number of jobs, although low-skilled workers are likely to incur adjustment costs, as automation of their work is great-er compared to highly skilled workers.

Another recent OECD study15 concluded that 14% of jobs are highly exposed to automation, while another 32% have a 50-70% risk of being affected. This study is based on the work carried out by Arntz, Gregory and Zierahn and explores adult skills research to explain the variation of tasks within restricted occu-pational groups. However, it covers a broader set of workers than the Arntz, Gregory and Zierahn study, and includes workers who do not have basic computer skills and/or are in jobs that do not require the use of a computer, which is the reason they believe there is a higher share of jobs at risk from automation.

The conclusions of this study were examined by Frey and Osborne,16 who criticize the use of adult skills research data in the absence of evidence that is appro-priate. For the purpose of refuting the OECD study, Frey and Osborne cite the example of the truck driver: while their own study treats all truck drivers as equals and considers that they will all be exposed to automa-tion when autonomous vehicles are adopted, the OECD study argues that its estimates are lower because a large proportion of drivers will not be exposed – but without providing any data to show that this is the case. Frey and Osborne also question the method used by the OECD study because they find it difficult to believe that the tasks performed by different truck drivers (or workers within any other occupation) vary widely, and that this would explain the striking difference – between 14% and 47% – in the proportion of workers found to be highly exposed to automation. More fun-damentally, even if there is variation in the tasks being performed in occupations, Frey and Osborne argue that companies can be expected to simplify production

15. L. Nedelkoska & G. Quintini, Automation, skills use and training (OECD 2018), available at https://www.oecd-ilibra ry.org/docserver/2e2f4eea-en.pdf?expires=1550966952&id=id&accname=guest&checksum=2E84FEA0928EB04B 97617CADC7E968C7 (accessed 16 Mar. 2019).

16. M.A. Osborne & C.B. Frey, Automation and the future of work – understanding the numbers, Oxford Martin School (13  Apr. 2018), available at https://www.oxfordmartin.ox.ac.uk/opinion/view/404 (accessed 16 Mar. 2019).

tasks in order to take advantage of the new technology. The fact that Frey and Osborne analysed 702 specific occupations and not broad occupational categories, which even according to the OECD itself entails the loss of valuable information when calculating the risk of automation, also motivated the criticism of this study by the Oxford researchers.

Apart from undertaking methodological critiques of the predictions of the impact of automation on employment, those who contest that a radical reduc-tion of jobs is to be expected from the robotization of the economy point out that there have already been profound technological transformations in previous times, without the labour market – and society – col-lapsing. The most frequently mentioned situations are, first and foremost, what have been called the first, second and third industrial revolutions, which have been characterized, respectively and roughly, by the use of steam engines, by the adoption of electric energy and mass industrialization and by industrial automa-tion, all of which led to the replacement of people by machines in production lines.

In addition to (but also based on) these past examples, it is also argued that the increasing use of artificial intelligence will, as has occurred with other techno-logical innovations, trigger the creation of new labour activities, such as those related to the maintenance and coordination of robots, which may absorb the workers deprived of their original occupations. Even authors17 who accept that artificial intelligence and robotics will be detrimental to labour markets, or that some jobs will be displaced or fundamentally altered in nature, point out that many new jobs will also be created and that the long-term net effect could be positive for the economy as a whole. In this context, there would be an accommodation of the potentially unemployed people by the market itself, fostered by the same technological evolution that had taken their jobs.

It is also argued18 that automation has the char-acteristic of generating increased productivity and, consequently, wealth. Along these lines, the Swiss Federal Council launched a study19 in late 2018 on robotization and loss of revenue that concludes that, whilst technological progress increases productivity

17. J. Hawksworth, R. Berriman & S. Goel, Will robots really steal our jobs?: An international analysis of the potential long term impact of automation (PricewaterhouseCoopers 2018), avail-able at https://www.pwc.com/hu/hu/kiadvanyok/assets/pdf/impact_of_automation_on_jobs.pdf (accessed 16 Mar. 2019).

18. G. Graetz & G. Michaels, Robots at Work (Centre for Economic Performance Publications Unit 2015), available at http://cep.lse.ac.uk/pubs/download/dp1335.pdf (accessed 16 Mar. 2019).

19. CH: Swiss Federal Council, Une étude prospective sur l’ impact de la robotisation de l’économie sur la fiscalité et le finance­ment des assurances sociales: rapport en réponse au postulat Schwaab 17.3045 du 1er mars 2017, p. 5 (7 Dec. 2018), avail-able at https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-73297.html (accessed 16 Mar. 2019).

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while putting downward pressure on employment and wages, it also favours an increase in income and employment. The study finds that, in a sufficiently competitive environment, automation has the effect of reducing the price of goods and services, which results in an increase in real household income (with nominal income unchanged) and thus an increase in general demand. The increase in the overall demand for goods and services ends up having a positive effect on the demand for labour, including in the branches subject to the automation process. However, there are studies20 according to which the wealth created is not distributed fairly and causes concentration.

However, regardless of possible future accommodation of the situation, the general idea is that, at least in the short term, the adoption of robots to replace human workers will generate some level of unemployment. Add to that the fact that technology is evolving expo-nentially and that what is yet to come is unknown (just as no one imagined 20 years ago having all music, telephone contacts, mail and banking transactions in the palm of the hand), which does not allow us to say for sure that the labour market will be very little or not at all affected. Moreover, while previous technological advances have caused unemployment by replacing physical and routine activities performed by people, the new technologies that are being unveiled, mak-ing extensive use of artificial intelligence, are able to replace human beings not only in these types of activi-ties, but also in cognitive and non-repetitive functions, which makes it possible for machines to replace people in positions that have never been imagined before.

In fact, notwithstanding the controversial discussion and the arguments against the high impact of robot-ization on jobs, there are many sources that fear the widespread replacement of human beings by robots in the coming years, especially in professions that require a greater degree of repetitive actions. Thus, according to the study by Frey and Osborne,21 telemarketing is the occupation with the highest risk of automation, and recreational therapy the one with the lowest.

If these predictions are confirmed, the replacement of human beings by robots, besides causing unemploy-ment (as an immediate effect) and worsening social inequalities, would lead to an abrupt drop in the col-lection of taxes in all spheres.22 While increased taxa-tion on profits can be anticipated, as companies would drastically reduce their labour costs, it is estimated

20. Frey & Osborne, supra n. 10, at pp. 13-14; A. Rathi, Stephen Hawking: Robots aren’t just taking our jobs, they’re mak­ing society more unequal, Quartz (9 Oct. 2015), available at https://qz.com/520907/stephen-hawking-robots-arent-just-taking-our-jobs-theyre-making-society-more-unequal/ (accessed 16 Mar. 2019).

21. Frey & Osborne, supra n. 10, at pp. 57 and 72.22. S. Mitha, Robots, technological change and taxation, Tax

Journal 1368, p. 6 (2017).

that this increase in tax collection will not be enough to cover the losses.23 In addition, the intensification of competition would most likely lead to a reduction in prices and, consequently, profit margins, which would tend to leave the collection of taxes on profits short of any significant increase (or even of any increase at all) and unable even to come close to offsetting revenue losses.

The decrease in tax collection would occur not only with regard to the most obvious taxes, such as with-holding income tax (at source on workers’ wages) and social contributions on payroll (due from both employee and employer), but also in indirect taxes, given that people deprived of work tend to cease con-suming or to consume only the minimum to guarantee their basic subsistence.

Conversely, although there are predictions of a drastic reduction in health and education service costs due to technological advances,24 especially in relation to preventive health, there would be an increased need for public expenditures on unemployment insurance, welfare programmes, health and education, the latter two being also due to the natural migration of private services, currently funded by salaries and indirect benefits granted by companies, to the public health system, which would become even more burdened. The fiscal pressure, therefore, would be significant and would aggravate the already very serious situation of public finances and budgets worldwide.

In addition to the natural spending needs arising from the suppression of many people’s income, it is hoped that the process will also lead to some government reactions, such as public policies to empower people to re-enter the labour market, which tends to be increas-ingly more sophisticated, and investment to foster new jobs. Obviously, this bill will also have to be paid for out of ever-increasing public expenditures.

Another expected negative outcome of robotization is the maximization of inequality, with the wealthiest people with financial capital simply buying intelligent robots and producing goods and services to maximize profit.25 There is also a direct relation between auto-mation and inequality, such that, as the cost of auto-mation falls, the wages of non-routine workers rise and the compensation of routine workers declines to make them competitive with robot use – resulting in a large rise in income inequality and a substantial decline in the welfare of routine workers.26

23. Id., at p. 6.24. P. Diamandis & S. Kotler, Abundance: The future is better

than you think (Free Press 2012).25. T. Marwala, On Robot Revolution and Taxation, arXiv.

org Preprint (5 Aug. 2018), available at https://arxiv.org/abs/1808.01666 (accessed 16 Mar. 2019).

26. J. Guerreiro, S. Rebelo & P. Teles, Should robots be taxed? p. 2, National Bureau of Economic Research Working Paper 23806

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The scenario requires at least a debate about the role of tax systems in reducing or even neutralizing the externalities that may be caused by robotization, as the central point at issue is precisely the possibility of a drastic increase in public expenditures accompanied by a possible sharp fall in public revenue. It is widely recognized that innovation fosters a country’s prog-ress and competitiveness, facilitates people’s lives in many ways and democratizes access to information, education and entertainment, which is very positive for any country. However, this should also be balanced against the possible benefits of a revision of current taxation on innovation, which is promoted in many countries through the provision of fiscal benefits and is often made more attractive than hiring employees, which is bureaucratic, exposes companies to many liabilities and is costly from a tax perspective. The debate must be started right now, if its conclusions are not to emerge into a reality that is already totally and irreversibly affected, considering the long process of maturation of these discussions within the public opinion until a legislative change, if any, occurs.

Some ideas for taxing robots have already been aired, each with its own advantages and disadvantages. In section 3., this article will briefly present the main sug-gestions, some obstacles to their implementation and their possible application in tax systems worldwide. Once again, the author warns that these points will only be outlined and not given greater depth, as well as that the opinions offered on each proposal are not definitive and require further reflection. To facilitate the f luency and clarity of the text, the author first out-lines some specific personal opinions regarding each proposal, and offers more general ones in the final and concluding section.

3. Proposals

Although discussion of the taxation of robots is still in its early stages, some proposals have already been tabled and debated. However, concrete action on the part of governments is still timid, as is shown by the news that, to date, only South Korea has instituted anything like a “robot tax”,27 albeit in the form of a suppression of tax benefits for automation (that is, no new tax was created for the phenomenon).28

(Sept. 2017, revised Jan. 2019), available at https://www.nber.org/papers/w23806.pdf (accessed 16 Mar. 2019).

27. C. McGoogan, South Korea introduces world’s first “robot tax”, The Telegraph (9 Aug. 2017), available at https://www.telegraph.co.uk/technology/2017/08/09/south-korea-intro duces-worlds-first-robot-tax/ (accessed 16 Mar. 2019).

28. B. Vigliarolo, South Korea “robot tax” is no tax at all; it’s a warning of looming automation crisis, Tech Republic (11 Aug. 2017), available at https://www.techrepublic.com/arti cle/south-korea-robot-tax-is-no-tax-at-all-its-a-warning-of-looming-automation-crisis/ (accessed 16 Mar. 2019).

San Francisco has also passed, in September 2018, Assembly Bill 1184,29 authorizing the city and county to impose a tax on each ride provided by autonomous vehicles originating in San Francisco, whether facil-itated by a transportation network company (e.g. a ridesharing app) or another person. Although auto-mated vehicle rides are not yet a reality in the city (as the activity still lacks regulation), once the bill comes into force the tax would be capped at 1.5% of net rider fares when a passenger shares a ride, and at 3.25% of net rider fees when the passenger does not share the ride. All the revenues from this tax are earmarked to fund “transportation operations and infrastructure” within the city. However, this measure cannot be regarded as a real “robot tax” either, as it affects a very specific industry.30

Notwithstanding these two concrete measures, the main proposals made so far tend to tax an imputed income attributable to robots, based on the possibil-ity of attributing to them a legal personality and the ability to pay taxes, and/or also increase the taxation on highly automated companies through a wide range of different taxes. The following sections will address the main suggestions that have been presented to date.

3.1. Tax on imputed income attributable to robots

The possibility of taxing robots is highly questionable, because robots are not (at present) vested with legal personality and do not possess an ability to pay in the classical meaning of the term. In this way, it is main-tained31 that it would not be possible to properly tax the robots themselves, but only a portion of the capital of the companies invested in them.

However, in a pioneering study on the subject, Xavier Oberson32 defends the need to attribute to robots some degree of legal personality (at least for tax purposes) and ability to pay, in a similar way to the attribution of legal personality to companies, which was also initially challenged. Oberson33 reminds that the legal system, apart from human persons, has recognized the pos-sibility to grant legal status of legal persons to other types organized entities, such as corporations, and also recognize some rights to animals and other types of entities. At this point, Oberson points out that tax legislation may grant a specific tax capacity to entities

29. US: California, Assembly Bill No. 1184, City and County of San Francisco – Local tax: transportation network compa-nies: autonomous vehicles, AB 1184 Ting, 21 Sept. 2018, avail-able at https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1184 (accessed 16 Mar. 2019).

30. In the same direction, see X. Oberson, Taxing Robots – Helping the economy to adapt to the use of artificial intelli­gence p. 124 (Edward Elgar, 2019).

31. Mitha, supra n. 22, at p. 10.32. X. Oberson, Taxing Robots? From the Emergence of an

Electronic Ability to Pay to a Tax on Robots or the Use of Robots, 9 World Tax J. 2, pp. 250-252 (2017), Journal Articles & Papers IBFD.

33. Oberson, supra n. 30, at p. 19.

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not considered legal entities according to the rules of civil law, since the tax legislator is not necessarily bound by the civil law definition of legal entity34. As an example, Oberson notes that, according to Swiss law, investment funds that directly own real estate are considered legal persons for income tax purposes in Switzerland.

According to this proposal, the recognition of robots’ ability to pay taxes would, in the first instance, imply an obligation to pay the tax on the part of the legal entities that own these robots; later (when the technol-ogy allows), the payment would be performed by the robot itself.35

In attempt to recognize a specific ability to pay attrib-utable to robots, or to their use, Oberson36 recalls that under Swiss law the ability of legal entities, notably corporations, to pay taxes has been recognized by the Swiss Federal Supreme Court and most scholars, according to the so-called “principle of separation”. This principle has also been used to justify the double economic taxation of profits, first at the level of the company and second upon distribution as dividends. Even if this principle is open to criticism, the author argues that there is a consensus that companies, as legal entities, benefit from a sort of “objective” ability to pay, justified by various privileges (including limit-ed liability) that correspond to a capacity to pay (thus, as long as profits are not distributed to shareholders, the company benefits from a sort of “transitory” ability to pay).

Transposing this reasoning on to the case of robots, Oberson37 maintains that they indeed have an ability to pay, which is derived from the activities (e.g. work, transfer of goods and services) they perform without any consideration (salary or income). As such, the robot does not generally have a financial capacity of its own, such as equity, personal assets or liquidities, but it is rather the employer (enterprise) or owner who, ultimately, benefits from their capacity to pay.

Taking into account the replacement of human work-ers by robots, and the consequence that these human workers would no longer receive their salaries, the proposal38 aims to impute to the robot a fictitious income that would be subject to the incidence of the tax as it would occur with the real remuneration of human employees, recognizing, therefore, an ability to pay attributable to robots. In this way, the legislation, always in a fictitious way, would assign a remuneration value to these machines, in an amount similar to that formerly received by the human employee(s) who per-

34. Oberson, supra n. 30, at p. 22.35. Oberson, supra n. 32, at p. 254.36. Id., at p. 252.37. Id., at pp. 252-253.38. Id., at pp. 254-255; S. Mitha, supra n. 22, at p. 11.

formed the same functions, in order to neutralize the loss of revenue caused by robotization.39

This concept – following Oberson – would rely on the legal characterization of the relationship between the company owner/user of the robot and the robot (as a tax person) in a similar way to an employment con-tract. If the robot is owned by a company or a person and acts under a services contract (entertainment, help, advice etc.), then the imputed income could be the approximated amount of an arm’s length consider-ation for similar services rendered by humans.

In defence of his proposal, Oberson40 clarifies that the imputation of fictitious income is a tax tech-nique adopted in some countries, as in the case of Switzerland, which imputes an income to real estate owners, corresponding to the estimated value of the rent on their property, in order to equalize them with people who do not have their own property and must rent it, given that the owners do not have rent expens-es.

One variation of this proposal41 is the possible imposi-tion of a social contribution on the income imputed to the robots, to substitute for payroll taxation, for which collection may be directly linked to the expenses of social security.

The proposal has as a disadvantage the possible doubts regarding double taxation of the same income, as the income imputed to the robots would be taxed both by the new tax (that is, at the level of the robot) and in the determination of the legal entity that owns it. To that end, Oberson42 maintains that two measures could be taken to counteract such an effect: (i) allowing deduction of a fictitious expense in the amount of the imputed income, as if it were a salary payment; and (ii)  introducing a proper adjustment in order to pre-vent a combination of asset depreciation and an imput-ed salary deduction. Of course, deductions would only make sense in jurisdictions in which the corporate income tax rate is lower than the personal income tax rates and the payroll tax, otherwise the measure would lead to a loss of tax revenue.

Joachim Englisch43 has expressed some reservations about this idea, maintaining that, from an income tax perspective, there is currently no compelling argu-ment to make robots themselves taxable persons, since taxes on income are usually conceived as direct taxes with pronounced redistributive objectives, to be borne by the taxpayer themselves and to be imposed accord-

39. Oberson, supra n. 30, at p. 114.40. Oberson, supra n. 32, at p. 253.41. Id., at pp. 255-256.42. Id., at p. 255.43. J. Englisch. Digitalisation and the Future of National Tax

Systems: Taxing Robots?, pp. 4-5, SSRN Working Papers (5 Sept. 2018), available at https://ssrn.com/abstract=3244670 (accessed 16 Mar. 2019).

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ing to their individual ability to pay. In addition, a liability to tax would imply that the taxable person should normally also bear the tax burden, thereby foregoing personal consumption in lieu of a fair and solidary contribution to the public purse. However, robots without an autonomously defined personal spending capacity could not even theoretically bear the intended income tax burden; instead, the inci-dence of the income tax would always fall on someone else (most likely primarily on their owner). Moreover, robots are not even vested with legal capacity that could make them the bearer of rights in funds and assets, which makes them not suitable as taxpayers for deemed “employment” income as long as they do not enjoy any public services. In a similar way, no social security could be levied upon their fictional wages due to the fact that they will never be entitled to social security benefits.

Even supposing that these taxes would be levied on their users and not the robots themselves, there are some concerns regarding such taxation. In this connection, Englisch44 points out that the fact that a time-honoured source of tax revenue might slowly be drying up does not, in itself, imply that a similar source of revenue has to be found; rather, this should encourage broader discussion on how to realign the taxation model. In addition, such substitute levies would effectively be imposed on a measure of expendi-ture for equivalent human employment that is deemed to have been incurred by the owner or user of the robot, in addition to the regular income or corporation tax on business profits to be paid by the owner or user. This would result in an additional tax burden, imposed only on this group of taxpayers, on income-generating activities that rely on new technologies, and would demand a convincing foundation from either a tax equity or a tax efficiency perspective in order to be accepted. Otherwise – so Englisch maintains – an eventual decline in wage and payroll tax revenues would be better offset by introducing or raising other and more general taxes.

Similar criticisms are presented by Sam Mitha,45 who maintains that it is impossible to tax robots directly, as they are non-sentient inanimate objects with no independent status or legal identity. As robots do not receive a share of the profits they produce for their owners, nor earn any income, taxing robots means exclusively taxing the portion of a company’s capital invested in robots, and not the machines themselves. However, Mitha admits that it would be possible to impute a notional salary to robots that displaced human workers, equivalent to the wages that were or would have been paid to the workers they displace, as long as such taxation is imposed at the company level.

44. Id., at p. 8.45. Mitha, supra n. 22, at p. 11.

Setting aside the difficulties involved in ensuring compliance, a company owning robots that displaced workers could be required to account for, and pay income tax and national insurance in respect of, their notional salaries. On the other hand, the company should not be entitled to deduct the notional salaries in arriving at its taxable profits.

Though accepting the taxation of the notional wage, Mitha46 believes that the technology used in automa-tion cannot easily be linked to specific job losses, as it is not always possible to say that this robot replaced that specific worker (or, more probably, that this robot replaced  those  specific workers). As an alternative, Mitha suggests that the wages of the displaced workers could be used as a reference point for assessing the company’s liability to this tax, and could be updated on an annual basis according to the growth in earn-ings or inflation to maintain the real yield of the tax over time. Oberson47 also suggests that comparable salaries could be adopted by the tax administration to calculate an estimated amount of adequate salaries in case of workers closely related to the corporations in which they work, or even an objective salary in accordance with the arm’s length standard, as a salary that would be comparable to what a third-party worker (not closely linked with the paying corporation) would have earned in similar circumstances.

However, it would still be very hard to link workers and robots, especially in the case of those companies that have already been through an extensive auto-mation process. Oberson48 reminds that the develop-ment of automation would make the situation more complex, as AI implemented in robots might replace different or combined activities, robots could work in collaboration with human workers or with different forms of automation, which could make more difficult to precisely delimit the amount of theoretical sala-ry attributable to centralized, combined or complex activities.

Considering all the pros and cons, it seems that the proposal is difficult to apply and justify within tax systems worldwide, especially because of the near-im-possibility of establishing a direct relation between robots and replaced human workers, and raises issues regarding the different taxation to be borne by indus-tries (and countries) that have already gone through extensive automation processes in the past and those still going through them (not to mention the difficulty of taxing robots used in simple tasks such as domestic cleaning).49

46. Id., at p. 11.47. Oberson, supra n. 30, at pp. 114-115.48. Id., at p. 115.49. T. Falcão, Should My Dishwasher Pay a Robot Tax?, 90 Tax

Notes Intl. 12 (2018).

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3.2. Indirect taxation on the activities of robots

This proposal,50 which could complement the taxation of the imputed salary, maintains that the activities of robots may be the object of indirect taxation, provided that (i) the characterization of the robots as indirect taxpayers is clarified; (ii) the activities of the robots are characterized as the provision of services or the supply of goods; and (iii) the location of the services is specified.

Regarding the first point (robots as taxpayers), Oberson notes that the European Union recognizes any activity exercised independently, for compensation, as poten-tially subject to VAT. In this context, it seems that a robot is not independent enough to become an entre-preneur subject to VAT, considering that behind the robots there are humans with some level of control. Therefore, Oberson maintains that the issue is linked to the attribution to robots of autonomy and a tax personality and that, although a specific definition of independence could be introduced into the VAT systems, in most cases the robot would act under the control (or supervision) of its employer (company), so that it would be its employer that would be subject to VAT. But in the future – Oberson says – with the development of the autonomy of robots, the concept of independence for VAT purposes could evolve, and it cannot be ruled out that robots could become subject to VAT (i.e. robots could be required to pay a tax on remuneration received for services or for the supply of goods51).

Englisch52 also criticizes the idea of recognizing a robot as a taxable person for VAT purposes, as mere independence or autonomy in rendering a service or supplying goods is not sufficient to qualify an enti-ty as a taxable person for the purpose of EU VAT. Englisch also maintains that, considering that VAT is conceived as an indirect tax and that the taxable person is acting as a tax collector for the government, only an entity that also disposes of a certain degree of legal and financial autonomy should be eligible to become a taxable person (e.g. by entering into contrac-tual relationships with customers on their own behalf, and receiving the payments in a financial fund legally attributed to them).

Regarding the second point (robot activities charac-terized as provision of services or supply of goods), Oberson53 explains that the specific nature of each robot’s activity should be considered in order to adopt a proper characterization of its activities for VAT pur-poses, which could be solved by comparing them with similar activities carried out by humans.

50. Oberson, supra n. 32, at pp. 256-257.51. Oberson further develops this idea in a more recent publica-

tion. See Oberson, supra n. 30, at p. 135.52. Englisch, supra n. 43, at p. 7.53. Oberson, supra n. 32, at p. 257.

However, Oberson54 also points out that, in many cases, comparable activities would not exist, especially because the nature of robots’ tasks could evolve in such a way that it would become more and more diffi-cult to compare them with humans. This point would also raise discussions over the inclusion or not of the services provided by robots within the VAT quadrants established in some jurisdictions, in which, depend-ing on the case, there may be variation in the tariffs, benefits and even the internal or external authorities to whom the tax is paid. Therefore, in some cases it will be necessary for the legislation to be constantly updated for the purposes of taxing such transactions, which could create significant instability and a lack of efficiency in such tax systems.

As for the third point (specification of the location of the services), similar concerns would occur in defining the place of supply, since it will not always be easy to attach the robots’ activities to a specific place (they may simultaneously occur in multiple locations). Oberson also suggests that clones or duplicated robots entering into similar activities in different places at the same time would be a distinct possibility, and one that could raise concerns on where to tax their operation.

It seems that, if the attribution of a tax personality to robots does indeed develop within different jurisdic-tions, countries would have to adapt their legislation (including international treaties such as the General Agreement on Tariffs and Trade and the General Agreement on Trade in Services) in order to address this issue, and therefore ensure the taxation of robots’ activities. However, even if this were done, imposing VAT on robots’ activities raises concerns similar to the imputed income proposal, inasmuch as (i) such taxa-tion will in reality be borne by the entity that owns or uses the robots; or (ii) will be a fictional tax based on a fictional transaction entered into by the robot and its owner/user – either way raising serious questions about the feasibility and constitutional basis of such taxation.

In summary, the proposal does not seem very feasible, due to the difficulty of recognizing robots as taxable persons for VAT purposes, the extremely hard (and potentially impossible) task of defining the place of supply and the difficulty of including the services pro-vided by robots within the VAT quadrants established in some jurisdictions.

3.3. Object tax on robots

Another alternative presented by Oberson55 is the introduction of an object tax on robots, which would operate similarly to taxes on planes, cars, animals or other products. On this model, the ownership or

54. Id.55. Id.

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use of a robot would be subject to a tax, which could be based on a f lat rate or adjusted as appropriate for different types of robots (similarly to taxes on cars or on motorbikes that include tariff variations based on power, noise or pollution components).

Oberson believes that this alternative is obviously inefficient,56 due to the fact that, first and in general terms, property taxation relates to tangible goods that have no autonomy, which is not the case with robots endowed with artificial intelligence and replacing human labour, as they will if some forecasts materi-alize. In this context, it would seem that adopting the model of property, as a presumptive sign of wealth to be taxed, would contradict the greater motivation behind the taxation of robots, which lies precisely in the recognition of their relative cognitive autonomy and their capacity to replace human beings in perfor-mance of work tasks. Hence, robots should be treated as something closer to subjects, not as objects.

In addition, robots will not necessarily have a physical form, but might exist in a purely digital form – which would make their taxation on these premises more difficult. This is the case, for example, with so-called chatbots, used in the online servicing of consumer demands, which use artificial intelligence without any physical form (i.e. everything happens through the Internet). Finally, there would be a great material difficulty in correlating property with the loss of rev-enue resulting from the unemployment generated by the robots.

3.4. Fee on robots

Another possibility57 is to impose a tax on robots based on the principle of equivalence; that is, as compensa-tion for services rendered by the state (infrastructure, etc.) and/or for the economic advantage obtained by the owners/users of the robots.

The principle of equivalence is one of the contrac-tualist theories of taxation that arose between the eighteenth and mid-nineteenth centuries, as a result of the contractual view of the relationship between state and citizens (the social contract).58 According to this principle, the tax is the price of the advantage that the individual gets from the activity of the state, i.e. a contribution paid by individuals to the state as consid-eration for the services rendered to them.

In fact, the fee is the kind of payment that is more commonly associated with the principle of equiva-lence, as it has the function of costing the provision of public and divisible services rendered by the state to

56. Id., at pp. 257-258.57. Id., at p. 258.58. E. Vanoni, Naturaleza y interpretación de las leyes tributarias

pp. 111-114 (J.M. Queralt trans., Instituto de Estudios Fiscales 1973).

its citizens. However, the payment of a fee on robots based on the principle of equivalence would present some challenges, since it would be very difficult to determine a precise and correct correlation between its payment and the services provided by the state.

Oberson59 also believes that a fee on robots would require a sufficient link between the use of robots and a counterpart from the state, but recognizes that it appears rather difficult to link the one to the other. He suggests that a service fee could still be regarded as a counterpart for specific registration tasks or infra-structure put in place by a state for the supervision and control of robots’ activities, but the idea of designing a compensatory fee in return for the theoretical income attributable to robots’ activities would seem contrary to the principle of equivalence, as the link between such theoretical income and a specific advantage granted by the state would appear too remote.

For all these reasons, it seems that a fee on robots would be closer to the principle of benefit, also based on the social contract theory but regarded as overcom-ing the theory of equivalence. According to the princi-ple of benefit, taxes in general should be regarded as a price for the general benefit that the taxpayer obtains from public services, and not for specific benefits. The paradigm, therefore, shifts from a concept of cost and direct relation between fees and services to that of favouring, in which a price is adopted for the enjoy-ment of the general services rendered by the state, and whose cost is distributed proportionately among the taxpayers who benefit most, in accordance with this benefit and taking into account the taxpayer’s ability to pay.

However, most jurisdictions require that any fee to be paid must be related to a specific and divisible coun-terpart from the state through public services, which is close to the principle of equivalence and not to the benefit principle. In such cases, it seems that the fee on robots would be difficult to apply unless the state carried out a tax reform in order to change the internal legal frameworks. There would also be the problem of charging such a fee in the case of cross-border transac-tions in which the robots (or their users) are domiciled in different jurisdictions and their activities are entire-ly carried out elsewhere.

There are also some doubts on the effectiveness of a fee on robots, i.e. whether such taxation would achieve its main goal as a way of minimizing the impact of automation of jobs. Mitha60 maintains that the fee on robots is the only kind of tax that would not create distortions in the economy, even though it would not impede automation because it is payable at the same level by everyone. Thus, it seems that the fee would

59. Oberson, supra n. 32, at p. 258.60. Mitha, supra n. 22, at p. 7.

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not affect the most automated industries and therefore should not be considered a real “robot tax”, but rather a new tax to be borne by everyone indiscriminately.

3.5. Levy of an automation tax

Ryan Abbott and Bret Bogenschneider61 came up with the idea of creating an automation tax, which would be an incremental tax corresponding to the extent that workers are laid off or replaced by machines. According to this proposition, employers should pay into an unemployment insurance scheme in propor-tion to their rates of layoffs due to automation, so that a taxpayer who has more layoffs due to automation pays more in taxes (i.e. the tax would be paid accord-ing to the level of elimination of jobs caused by auto-mation in each company). The idea is that companies are classified according to the levels of layoffs caused by automation and, on the basis of that classification, are taxed differently.

Alternatively, the tax could be levied in accordance with the reduction of salary expenses or the level of the taxpayers’ automation expenses, as suggested by Mitha.62 According to his proposal, companies that lay off workers following the introduction of robots could be required to pay a levy calculated by reference to the reduction in their aggregate wage bill or the level of their expenditure on robotic technology. The levy could be applied on an incremental basis, in order to protect small companies, as long as anti-avoidance rules are created to prevent the artificial fragmenta-tion of larger businesses to avoid the tax.

As disadvantages, the authors63 identify the increase in companies’ tax burden, the increased complexity of the tax system and the risk of acceleration of layoffs between the publication of the law and its entry into force, although a retroactive effective date for measur-ing employment levels for the tax would be a practical necessity and a recommendation to be considered.

This proposal seems feasible, as long as all industries are affected regardless of the timing/stage of their automation processes.

3.6. Granting of offsetting tax preferences and other benefits for human workers

Another option suggested by Abbott and Bogenschneider64 is the creation of tax incentives, such as exemption from social contributions on payroll, for companies that employ human workers in their activities, in order to equalize the situation of people and robots; or, alternatively, the creation of a system of

61. R. Abbott & B. Bogenschneider, Should Robots Pay Taxes? Tax Policy in the Age of Automation, 12 Harvard Law and Policy Review 1, pp. 170-171 (2018).

62. Mitha, supra n. 22, p. 11.63. Abbott & Bogenschneider, supra n. 61, at pp. 170-171.64. Id., at p. 171.

accelerated deduction of future wages, similar to what happens with the accelerated depreciation of assets (i.e. in this case robots) in some countries. With regard to indirect taxation, it is also suggested that the appro-priation of credits on the remuneration of employees be authorized, even if such taxes do not affect wages.

However, these measures, depending on the timing of their adoption, would have the great disadvantage of reducing tax revenue, which could further aggravate the fiscal consequences of the robotization of employ-ment and lead to a loss of public revenue. Therefore, such measures should only be applied before the onset of mass unemployment, so that they can be effective in maintaining jobs currently filled by humans, and alongside other measures that tend to increase tax revenues. If this can be achieved, any tax incentives to maintain existing jobs would be welcome and should be taken into consideration when countries rethink their tax mix.

3.7. Levy of a corporate self-employment tax

Abbott and Bogenschneider65 also suggest increasing corporate taxation for companies that produce out-puts without using human labour. According to them, the tax would be a substitute amount for wage taxes, including social security and compulsory health insur-ance contributions (such as Medicare in the United States), avoided by the taxpayer by the use of auto-mated labour. This would be similar to the individual self-employment tax, under which a small business owner is required to contribute to the social security system, approximating the social security taxes that would be paid on the wages deemed paid to self.

The suggestion is that the tax should be calculated as a substitute for the employment taxes that would have been imposed on the worker and employer if a human worker had continued to perform the work at the com-pany, i.e. based on a ratio of corporate profits to gross employee compensation expense. If the ratio were to exceed an amount determined by the state, based on industry standards, then backup withholding could apply on corporate profits. The gross amount of this corporate self-employment tax could be designed to match the wage taxes avoided by the company with automated workers.

In general, the proposal is similar to that of the imput-ed robot income, as it is also meant to replace the taxes that would be levied on the salaries of human workers, although it is not to be confused with it.

One variation of this proposal is to use as a parameter, instead of profit, the revenue/gross sales of companies in proportion to salary expenses. William Meisel66

65. Id., at pp. 171-172.66. W. Meisel, The Software Society pp. 220-221 (Trafford

Publishing 2014).

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suggests a similar automation tax on computers/soft-ware back in 2014, which would be based on the ratio of a company’s revenue to its number of employees, in a way that the tax rate would increase as the reve-nue-per-employees (ratio) grows. Meisel67 justifies the use of revenue rather than profit because profits can be manipulated with deductions and other accounting complexities much more than revenue.

However, this formula could cause distortions in com-panies with high turnover and low profit margin, for example in the retail industry.68 There is also a poten-tial problem regarding industries that have already gone through deep automation processes, as in the case of car manufacturers that have been using robots in their facilities for more than 20 years. Such indus-tries would not be as affected by the new tax as others, which would raise issues of equality and non-discrim-ination or, if the new legislation tries to include past automation processes, other sorts of issues.

Oberson69 also criticizes the suggestion by Abbott and Bogenschneider because of the controversy on the proper ratio (profits or revenue) to be adopted, demon-strating some of technical difficulties that it could raise, along with the different impact it could have on various types of industries, which could breach the principle of equality of treatment.

This taxation also seems to add an undesirable degree of complexity to national tax systems, which should also be avoided, especially in those jurisdictions that already have complex tax legislations.

3.8. Increase the corporate income tax rate

Another suggestion presented by Abbott and Bogenschneider70 is a significant increase in the cor-porate income tax rate in order to cover collec-tion losses due to robotization. The counter-intuitive advantage of this approach is that higher corporate tax rates increase the relative value of tax deductions for marginal investment, which could lead multinational firms to make capital investment into higher tax juris-dictions in lieu of tax haven jurisdictions, in order to claim tax deductions of relatively higher value. This would also benefit smaller and growing firms that are reinvesting profits back into their businesses, as ongo-ing tax deductions will substantially reduce the tax base regardless of the ultimate tax rate to be applied.

As disadvantages, (i) it would create a high tax bur-den for potential external investors, who could be discouraged from investing in that jurisdiction; (ii)  it may entail a greater concentration of automation, as it would accelerate the deductions on goods related to

67. Id., at p. 221.68. Id., at p. 172.69. Oberson, supra n. 30, at p. 121.70. Id., at pp. 172-173.

it (in the jurisdictions where it applies); (iii) it would affect all companies irrespective of their level of robot-ization; (iv) any increase in corporate tax rates may prompt firms to attempt to shift the tax incidence to workers or consumers; and, (v) another weak point of this proposal is that it does not take into account the large possibility of tax avoidance, aggressive tax plan-ning and transfer pricing possibilities in the area of the corporate taxation.71

Mitha 72 also expresses some criticisms of the idea, as an increase in the corporate tax rate would not reduce the incentive for firms to replace workers with robots, but would instead hurt labour-intensive businesses and firms using robots alike, and would additionally discourage domestic and international investment in the countries that adopt it. In addition, Mitha main-tains that raising the corporate tax rate would increase the incentive for firms to invest in robotics if the increase in the corporate tax rate were not accompa-nied by the withdrawal of capital allowances on robots, because it would increase the relative value of this relief for marginal investment.

In view of that, the proposal does not seem feasible unless it is applied in the context of a broader review of the tax system.

3.9. Disallowance of corporate tax deductions for automated workers

This proposal starts from the premise that tax systems are not neutral in their treatment of the employment of robots and human beings, as, while providing tax advantages for the former, they impose a high tax bur-den on the latter.73 Thus, the proposal74 is to no longer authorize the tax deductibility of investments in assets that entail any automation, much as has been institut-ed in South Korea.

In view of that, one idea is to limit expenditure deduc-tions for tax purposes in proportion to the level of tax-payer automation, so that highly automated companies are proportionally more affected than less automated ones. With respect to indirect taxes, the proposal is to no longer allow credits on goods related to automation.

Englisch75 criticizes this idea on the basis that, in the first place, wage taxes are designed by law as direct taxes on the income of the employee, withheld at the source and reflected in a correspondingly lower net salary. Therefore, they could be held not to constitute any cost for the employer because they are supposed-ly borne by the employee. As a consequence, the tax

71. See Oberson, supra n. 30, at p. 130.72. Mitha, supra n. 22, at p. 10.73. Cf. Abbott & Bogenschneider, supra n. 61, at p. 163; Mitha,

supra n. 22, at p. 5.74. Abbott & Bogenschneider, supra n. 61, at pp. 169-170; Mitha,

supra n. 22, at p. 11.75. Englisch, supra n. 43, at p. 9.

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treatment of the cost of the human workforce and of the cost of robots could be regarded as neutral under the current system, aside from incidental cash-flow issues resulting from the usual lack of immediate expensing of acquisition cost for machinery. The same reasoning would then also apply at least in part to pay-roll taxes in almost all jurisdictions, to the extent that they are legally conceived of as employee contributions rather than employers’ contributions to social security.

The criticism is partly true if considering solely the withholding taxes, as from a legal perspective both income and social security taxes withheld by employ-ers are indeed the employees’ burden. However, it must be considered that robots will not be paid by employers in order to perform their tasks, which weakens the argument if one takes into account all the costs of employees and robots, and especially the fact that the latter will substitute for a human labour force mainly due to massive cost reductions (otherwise no one would rely on a machine that is more expensive to acquire than human workers). Besides, most jurisdic-tions charge a social security contribution levied on payments that is entirely the burden of the company (i.e. a payroll tax), which is also a clear advantage to the use of robots as opposed to humans. The whole picture, therefore, leads to the conclusion that robots are cheaper than humans for tax purposes and that there will always be a lack of neutrality when it comes to their tax cost, which confirms the present situation as giving a clear advantage to the use of robots.

However, the proposal seems not so feasible if one con-siders that it would necessarily have to be accompa-nied by strict anti-tax avoidance rules, so as to prevent taxpayers from splitting their operations into different companies.

Another negative point raised by Oberson76 is that, to the extent that human income is slowly disappearing, the solution lies in finding new sources of income linked with automation rather than in limiting invest-ments in innovative technologies.

3.10. Increasing the tax cost of robots

Mitha77 also suggests that governments could substan-tially increase the VAT rate payable on the purchase of robotic technology and deny firms that use this tech-nology the ability to deduct such payments from the VAT they must account for on the sale of their goods and services.

This measure could also encompass other taxes, such as import duties, in a way that allows internal labour markets to prevent themselves from being deeply affected by automated solutions offered by offshore companies, although such measure would only affect

76. Oberson, supra n. 30, at p. 125.77. Mitha, supra n. 22, at p. 11.

hardware as non-material goods/services are not sub-ject to import duties.

In any case, this measure seems unlikely to be very effective, inasmuch as robotization has the potential to reach such a high level in the labour market that only very high VAT tariffs would be enough to cover the loss of tax revenue generated by automation. In such a case, the taxation could be as high as the operating value and could lead to prohibitive or confiscatory tax-ation (that is, taxation approaching or even surpassing the value of the transaction – be it a service or acqui-sition of merchandise), which is not allowed in most jurisdictions. Therefore, an increase in VAT should be applied only alongside other tax measures, and never as the only tax policy to be adopted.

3.11. Increased taxation on value added by robots

Finally, there is a proposal presented by Mitha78 to increase indirect taxes on goods and services produced with the use of robots, in order to reflect a higher rate to the value added by them to these goods and services. Alternatively, higher rates could be imposed on com-panies that have a higher rate of layoffs as a function of total turnover.

Though complexity is observable in many of the ideas presented so far, the first of these proposals has the great disadvantage of presenting extremely high com-plexity, given the enormous difficulty of separating the added value attributable to the robots from the other elements that make up the exit value of the goods or the price of the services. The measure could also pro-voke the adoption of tax-avoiding actions, such as the segregation of certain activities into legal entities with low profitability for the purpose of reducing the value added by the robots, which would reduce the impact of the measure.

The second proposal seems likely to be more easily adopted by countries, even though it also brings the familiar problem of industries (and different taxpay-ers in a single industry) that are in different stages of automation and the different taxation that would apply to them, which raises concerns regarding equality and the principle of non-discrimination.

4. Concluding Reflections4.1. Regarding the general idea: Does a robot tax

discourage innovation?

The first point that must be considered is that taxa-tion of innovation can discourage the technological progress; the effect of this can be dramatic, especially in countries that are not among the most developed in this area. Even the European Parliament, on 16 February 2017, rejected a proposal to create a tax on

78. Id., at pp. 11-12.

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robots, among other reasons for fear that innovation would be discouraged.79

On the other hand, the extremely worrying prospect of a massive loss of jobs as a result of robotization seems to be inevitable. This could lead to a tremen-dous decrease in the consumer market, which in the medium and long terms could also discourage inno-vation. The reasoning here is relatively simple: with fewer jobs there would be fewer consumers, and with fewer consumers there would not be so much appeal in a significant investment in innovation: few people would be able to consume the new (and innovative) products, and major investments are usually recovered only when a certain scale of consumption is reached. Thus, the imposition of a specific taxation on robot-ization, although it may lead to a higher tax burden on innovation and discourage such investments in the short term, could in the medium and long terms instead guarantee the continuity of technological development.

In addition, it should be remembered that innovation is partly funded by state resources, directed through the advanced research centres of public universities. In view of this, an abrupt drop in public revenue would also suppress resources for such research, which could also lead to a reduction in technological advances.

Regardless of the solution adopted, tax relief in order to foster the creation and/or preservation of jobs for humans could avoid the negative consequences in society likely to be generated by a large mass of unem-ployed people. At this point, it must be remembered that the civilizing process has always depended and still depends on the collection of taxes, without which contemporary societies could be brought into total chaos.

Notwithstanding such considerations, one thing poli-cymakers worldwide must be aware of is that techno-logical innovation has helped many countries to thrive in the past decades. In view of that, slowing down technological development could leave some countries at a major competitive disadvantage in comparison to others with greater incentives for innovation, which should also be a point of attention and a reason for a wider (i.e. worldwide) discussion on the taxation of robots. Solely for this reason, any type of Pigouvian tax would be inappropriate (at least in the long term), since taxation should not stop or limit innovations in AI or robotics, but only find a way to equalize the loss of public revenues with the rise of public expenditures caused by mass unemployment.

79. See G. Prodham & A. Williams, European parliament calls for robot law, rejects robot tax, Reuters (16 Feb. 2017), available at https://www.reuters.com/article/us-europe-robots-law making/european-parliament-calls-for-robot-law-rejects- robot-tax-idUSKBN15V2KM (accessed 16 Mar. 2019).

The real challenge for countries, thus, is to find the correct balance between robot taxation (if this is to be instituted) and innovation, in such a way that the former does not completely annihilate the latter.

4.2. Is a universal basic income the best solution?

Discussions about the taxation of robots have been accompanied by new proposals to introduce a uni-versal basic income,80 which would be paid by gov-ernments to citizens so that they could finance their basic needs in a world with fewer jobs due to the robotization of the workforce. The basic idea, though not linked to the automation process, is not new and has had its pros and cons discussed over the years.81

In some countries, a similar goal has been achieved through the adoption of a so-called negative income tax, a formula for the progressive calculation of income tax according to which individuals with incomes below a minimum limit (including those with none) receive a payment from the government, instead of being called upon to pay the tax. The idea of a “neg-ative income tax”, based on liberal guidelines and on welfare and redistributive principles,82 has its foun-dation in the idea that all individuals should receive a certain amount of money from the state whenever their income is below a certain limit of subsistence, in a proportional way. This mechanism, developed by Milton Friedman83 of the Chicago School and in the United Kingdom by Juliet Rhys-Williams,84 is based on the liberal thought that, by linking the transfers to the tax system, the administration of the same becomes simpler: the negative tax would replace the numerous welfare institutions of a country’s social protection system and, in a medium-term perspective, also the social security sector.85

Years later, Philippe Van Parijs86 developed the idea of a universal basic income according to which every-one, including wealthier people, is regularly paid a set amount of money. According to his theory, even

80. Abbott & Bogenschneider, supra n. 61, at p. 162; Mitha, supra n. 22, at p. 8. See also E. Brynjolfsson & A. McAfee, The sec­ond machine age: work, progress, and prosperity in a time of brilliant technologies pp. 232-233 (W.W. Norton & Company 2015); A. Stern, Raising the f loor: how a universal basic income can renew our economy and rebuild the American dream pp. 13-14 (PublicAffairs 2016).

81. For a historical review of the idea, see Stern, supra n. 80, at pp. 174-183.

82. R. Targetti Lenti, Reddito di cittadinanza e minimo vitale, Società Italiana di Economia Pubblica Working Papers p. 8 (July 2000), available at http://www.siepweb.it/siep/images/joomd/1397925611009.pdf (accessed 27 Aug. 2019).

83. M. Friedman, Capitalism and freedom p. 161 et seq (University of Chicago Press 1982).

84. J. Rhys-Williams, A new look at Britain’s economic policy pp. 159-172 (Penguin 1965).

85. Targetti Lenti, supra n. 82, at pp. 8-9.86. P. van Parijs & Y. Vanderborght, Renda básica de cidadania:

fundamentos éticos e econômicos pp. 63-94 (M.B. de Medina trans., Civilização Brasileira 2006).

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if the income is also paid to the rich, the poor will always benefit the most, as progressive income tax will make the portion destined for the wealthy invariably very much affected, which should not occur with the poorest. As everyone receives the same amount (as opposed to the negative income tax that would only be paid to the poorest), the universal basic income has the advantage of avoiding the side effects of welfare, namely, the stigmatization of the poor as dependents of the state, the creation of two distinct social classes and the removal of the desire to work from the poor (the so-called “poverty trap”), with the additional ben-efit of reducing administrative costs when compared to providing the income in a selective manner.87

While such suggestions are relevant, the debate on policies to minimize the problem of robotization and unemployment should take into account that state subsidies do not eliminate other externalities arising from unemployment, such as low self-esteem, family breakdowns, illnesses, evictions, etc.88 Fiscal policies aimed at alleviating the problem should therefore not only focus on raising money to finance the survival of the unemployed, but also on trying to keep jobs to a maximum or create new occupations for people.

In view of this, and in light of all the proposals put for-ward, it would be more appropriate to start discussing those which tend to maintain as many jobs as possible, especially in the jobs/functions most vulnerable to automation, rather than those that address already established unemployment, such as the proposals to match the ideal costs of maintaining employees and robots (which could be done, for example, by replacing payroll contributions with another source of social security funding). In any case, as a universal basic income is a viable means to avoid or at least reduce poverty (including extreme poverty), governments should be prepared to enhance already existing simi-lar programmes or even to create new ones if nothing exists in their jurisdictions, always taking into account that such policies depend on public revenues that are mainly funded by tax revenues. Thus, it is rec-ommended that countries fund their unemployment programmes with revenues that are not likely to be reduced by the automatization process (e.g. taxes on wages, VAT), which means that the implementation of any basic income policy would probably depend on making changes to the internal tax system.

4.3. The concept of “robot” may cause ambiguities and should be defined internationally in order to avoid uncertainty and international harmful competition

It should be kept in mind that the concept of “robot” is quite vague and does not yet have a sufficient legal

87. Targetti Lenti, supra n. 82, at pp. 11-15.88. Along the same lines, see Mitha, supra n. 22, at p. 7.

definition at the international level89 – although there are a series of solutions that currently exist that could be used in framing it, from the most classic conception of a machine with a shape and movements similar to humans, allegorically presented in works of science fiction for many years, to fully dematerialized artifi-cial intelligence solutionss.90 Even already widespread vending machines, depending on their degree of con-sumer interaction, could be framed as “robots”,91 as well as highly sophisticated goods such as self-driving cars and drones. Moreover, the exponential evolution of technology means that any excessively strict defini-tion can be relativized or even overcome in the future. Therefore, as Englisch warned,92 the definition of “robots” must reconcile the two potentially conflicting objectives of legal certainty, on the one hand, and f lex-ibility, on the other, and allow for a clear delimitation of the substantive – or personal – scope of the tax, while at the same time being future-proof and com-prehensive enough to take into account the relevant technological progress.

Therefore, whatever path may be followed by coun-tries’ legislation, the creation of laws that are ambig-uous also has the potential to exacerbate harmful tax competition and to facilitate the adoption of tax-avoid-ance practices, even if legislative construction has been f lexible enough to cover as many present and future situations as possible.93 Another important warning is that a proper definition of “robots” must take into account the objective of the robot tax, as well as the socio-economic situation of the jurisdiction that seeks to enact it.94

Furthermore, precisely because of the difficulty of conceptualizing or defining “robots” or levels of robot-ization/automation, some proposals incorporate very sophisticated criteria for determining the effective tax impact on companies, which could make countries’ tax systems even more complex, not only regarding the tax frameworks but also the fulfilment of ancillary obligations. Therefore, more complex solutions should give way to simpler alternatives, provided that taxpay-ers’ isonomy (material or vertical equality) and ability to pay are preserved (i.e. extreme simplification should not lead to a lack of material equality).

As a matter of fact, it seems that the set of rules for taxation of robots should be agreed on an internation-al basis, as the imposition of additional tax burdens on the use of robots by any individual jurisdiction will

89. Oberson, supra n. 32, at p. 249.90. Mitha, supra n. 22, at p. 9.91. Example from J. Walker, Robot Tax – A Summary of

Arguments “For” and “Against”, Tech Emergence (last update 2 Feb. 2019), available at https://www.techemergence.com/robot-tax-summary-arguments/ (accessed 16 Mar. 2019).

92. Englisch, supra n. 43, at p. 18.93. Mitha, supra n. 22, at p. 10.94. Falcão, supra n. 49, at p. 5.

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likely lead to reduced competitiveness95 and make it significantly less attractive as an investment location, reducing social welfare in that jurisdiction, as many jobs are offshorable and could be performed abroad. As an example, Frey and Osborne estimate that 22% to 29% of US jobs are or will be offshorable in the next decade or two, clarifying that these estimates are based on two defining characteristics of jobs that cannot be offshored: (i) the job must be performed at a specific work location; or (ii) the job requires face-to-face per-sonal communication.96

Since jobs could be offshorable and performed by robots abroad, it has been suggested97 that this must be reflected in the respective rules on profit allocation for international tax purposes, in such a way that the physical presence of intelligent robots that form part of the business assets should constitute a taxable nexus for the purposes of international direct taxation, even absent any relevant human workforce. The allocation of assets, risks and profits to such a “robot perma-nent establishment”, as suggested by Englisch, should reflect the functions performed by the robot.

There is also a major concern on the determination of the place of residence for robots, since the standards applicable to corporations (place of incorporation, place of effective management) are not directly or nec-essarily linkable to them.98

Therefore, actions aimed at taxation of robots should be discussed internationally, so that there is no harm-ful international competition between countries that adopt robot taxation policies and those that deliber-ately fail to do so (which could be considered “tech-nological tax havens”).99 However, such a development seems implausible in the near future, given (i) the fact that some countries have already discarded the idea of implementing any sort of robot tax, as may be seen in the statement of the New Zealand Tax Working Group,100 which considers that there are likely to be better ways for the tax and transfer system to address these problems if automation becomes more wide-spread in New Zealand; and (ii) the longstanding tradition of international tax competition, as well as (iii) the current crisis of multilateral institutions built by Western democracies.101 As a result, robot taxation seems to present an inescapable dilemma: if only some

95. G. Bottone, A tax on robots? Some food for thought p. 17, Dipartimento delle Finanze Working Paper no. 3 (Ministerio dell’Economia e delle Finanze 2018).

96. Frey & Osborne, supra n. 10, at p. 5.97. Englisch, supra n. 43, at p. 20.98. See Oberson, supra n. 30, at pp. 151-152.99. Oberson, supra n. 32, at pp. 258-260; Abbott & Bogenschneider,

supra n. 61, at pp. 168-169; Walker, supra n. 81.100. Tax Working Group, Future of Tax: Interim Report p. 95 (New

Zealand Government 2018), available at https://taxworking-group.govt.nz/resources/future-tax-interim-report (accessed 16 Mar. 2019).

101. Englisch, supra n. 43, at p. 13.

jurisdictions adopt it, affected local industries will tend to move their activities elsewhere, worsening the countries’ fiscal, welfare and labour situations; if no robot taxes are adopted, all the negative predic-tions could come true anyway, unless countries find alternative ways (i.e. other than taxation) to rebalance their accounts and keep as many jobs as possible. It is a tricky challenge.

4.4. Robots’ ability to pay taxes?

Another crucial issue relating to taxation of robots, and one which could lead the discussion in completely different directions, is whether robots can or should be legally considered persons with the ability to pay taxes.

It is suggested102 that the ability to pay principle is derived from the ideas of Aristotle regarding distrib-utive justice, which distinguished between horizontal and vertical equity. According to the idea of horizon-tal equity, people who are equal regarding certain characteristics should be treated equally. At the same time, however, people who are unequal with respect to certain characteristics should be treated unequally regarding these characteristics and in proportion to their inequalities (vertical equity). Applying the idea to taxation, people with similar income or wealth should be taxed the same amounts (horizontal equity), where-as those with greater income and wealth should pay a larger tax than those with less (vertical equity).

The ability to pay principle is also present in other historical writings – for example, the Magna Carta of 1215, the thought of St. Thomas Aquinas, the work of Adam Smith and the Declaration of Rights of the Man and the Citizen of 1789. However, this principle was more fully addressed by the public finance scholars of the nineteenth century, and especially in the work of Adolph Wagner,103 who understood it as a powerful tool for the distribution of wealth.

Deriving from its study by the public finance scholars, the ability to pay principle was perceived as the “cause” of taxation in the work of Oreste Ranelletti104 and later by the School of Pavia, headed by Benvenuto Griziotti, and with exponents such as Dino Jarach105 (an Italian author of great influence in Latin America), Enzo Vanoni106 and Renzo Pomini.107

Following the rejection of the ideas of the public finance scholars by post-World War II tax doctrine,

102. E. Tragakes, Economics for the IB Diploma p. 315 (2nd ed., Cambridge University Press 2012).

103. A. Wagner, La scienza delle finanze (M. Ferraria & G. Bistolfi trans., Unione Tipografico-Editrice 1891).

104. See R. Pomini, La “causa impositionis” nello svolgimento stori­co della dottrina finanziaria pp. 308-309 (Giuffrè 1951).

105. D. Jarach, O fato imponível: teoria geral do direito tributário substantivo passim (D. de Campos trans., Revista dos Tribunais 1989).

106. Vanoni, supra n. 58, at pp. 134-135.107. Pomini, supra n. 104, at p. 311 et seq.

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based on the positivist view of separating tax law from the financial sciences, the ability to pay was no lon-ger considered as a basis for taxation – especially in the work of Achille Donato Giannini,108 who did not recognize it as a legal principle or rule but rather as a purely economic issue. The ability to pay as a basis for taxation would be rescued only by Emilio Giardina109 in 1961, a few years after the principle was included in the Italian constitution.

Indeed, based on the Italian constitution and invoking its principle of unity, Francesco Moschetti110 argues that economic capacity is prior to the ability to pay, as the latter implies the economic capacity to contribute to, in the economic and social fields, the collective expenses set forth in the constitution, and must surpass the vital minimum of the individual. This is similar to the position of Luigi Ferlazzo Natoli,111 who argues that an individual may be economically capable, in the sense of having income and wealth, but still lack the ability to pay, if all this income is no more than the vital minimum necessary to sustain them. Relevant contemporary authors112 follow a similar line, in the sense that the ability to pay is derived from the economic capacity of the taxpayer, limited to the material manifestations that are available for taxation and preserving the reservation of the vital minimum.

Transposing these views to the discussion of the taxation of robots, it is not possible to identify their economic capacity even if they are vested with some degree of legal personality. In fact, there is no concrete manifestation of wealth in their activities, except if the moment should come when they become more auton-omous to the point of charging for their activities in a way that is separate from any entity to which they belong. Leaving this scenario aside, it seems that the ability to pay will always be identified in the entity or individual that owns or uses the robots and earns income from their use; therefore, it is normally the corporate income that will be subject to taxes in a given jurisdiction, and never that of the robots.

On the other hand, it is clear that social evolution must be acknowledged by the interpreters of legal texts113

108. A.D. Giannini, Istituzioni di diritto tributario pp. 82-87 (9th ed., V.M. Romanelli Grimaldi ed., Giuffrè 1972).

109. E. Giardina, Le basi teoriche del principio di capacità contri­butiva (Giuffrè 1961).

110. F. Moschetti, Profili generali, in La capacità contributiva pp. 24-25 (F. Moschetti ed., CEDAM 1993).

111. L. Ferlazzo Natoli, Fattispecie tributaria e capacità contribu­tiva p. 56 (Giuffrè 1979).

112. H.T. Torres, Direito constitucional tributário e segurança jurídica p. 599 (Revista dos Tribunais 2011).

113. F. Müller, Métodos de trabalho do direito constitucional (3rd ed., P. Naumann trans., Renovar 2005); F. Müller, O novo paradigma do direito: introdução à teoria e metódica estruturantes do direito (P. Naumann trans., Revista dos Tribunais 2007); F. Müller, Teoria estruturante do direito, vol. 1 (P. Naumann & E.A. de Souza trans., Revista dos Tribunais 2008).

(including the “authentic” ones, in Kelsenian terms), so that legal systems are not totally separated from the new reality and thus become outdated or inapplica-ble. This is especially true for the legal terms that are more vague or ambiguous, such as the principles and, among them, the principles that guide taxation. In this context, it is worth remembering that a key point at issue in the current discussions on international tax-ation regarding the digital economy is the taxation of value creation,114 which in itself is already a doctrinal construction that exceeds the traditional bounds of the ability to pay, as it shows the manifestation of wealth only indirectly in a given country (i.e. regardless of any source of payments on the spot). In view of that, would it be possible to tax robots based exclusively on the value they create in certain jurisdiction? Would the value creation principle support the taxation of robots in this case, as a way of overcoming the robot’s lack of ability to pay? The answer should be negative if robots and their owners are located in the same juris-diction, as the latter will be taxed as usual according to their ability to pay and such taxation would probably encompass the value created by the robots. However, the answer should be different, for instance, in case of a service provider that uses its own robots located in a different jurisdiction, in such a way that the country where the robot is located could claim the right to tax the value created by the robot in its territory.

In short, it does not seem appropriate to support the existence of a true ability to pay possessed by robots, but, if this ability is evaluated within the universal framework of the ability to pay of the entities or indi-viduals that make use of these robots to obtain their income, it seems that the idea is feasible. In any case, one would always be discussing the taxation of the use of robots, not of the robots themselves, at least until the moment they have complete autonomy and decide whom to work for and how much to charge for their work (and hopefully this moment will never arrive!).

4.5. Should we tax robots or not?

As has been seen, everything leads one to believe that the world is headed for some significant level of loss of human-performed jobs, as humans are likely to be replaced by robots capable of doing the same functions in many tasks and occupations. Although it is not yet clear when mass unemployment will occur, it is advisable that governments start discussing the possible consequences of job automation and even that they take some preventive measures against mass unemployment.

114. OECD/G20,  Addressing the Tax Challenges of the Digital Economy – Action 1: 2015 Final Report (OECD 2015), Primary Sources IBFD. OECD/G20,  Tax Challenges Arising from Digitalisation – Inclusive Framework on BEPS: Interim Report 2018 (OECD 2018), Primary Sources IBFD [hereinafter Inclusive Framework Interim Report].

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There is also a major concern115 that a tax on robots could ultimately be borne by the workers, as robots and human workers are expected to function in a complementary way (regardless of whether robots replace human labour), and any increase in the cost of capital as a result of the taxation of robots will reduce investment in this type of technology and consequent-ly limit the growth of labour productivity. Therefore, it is believed that, since wages paid are related to labour productivity, part of the economic cost of the tax will be borne by the human workers.

Notwithstanding that, there is no doubt that there are other tax measures that can be adopted by gov-ernments right now, such as the reduction of payroll taxes and their replacement by other sources of tax collection. However, the existing proposals for robot taxation stricto sensu bring even more complexity into tax systems and cannot be considered effective measures, for which reason their adoption must be discouraged initially.

In this context, the most appropriate action would be to increase the taxation of some sectors that are notoriously more automated or that present a greater potential for automation, as well as to explore some possibilities for increasing public revenues by taxing some activities that are lightly taxed or not taxed at all (it is known that many jurisdictions, for example, charge too little for water use and inheritance).

Another idea is to implement bank transaction taxes at low rates, similar to what was introduced in Australia in the early 1980s (and abolished in 2005) and in some Latin America countries (including Brazil) in the following decade. Apart from the revenues arising from the new tax, bank transaction taxes allow tax authorities to monitor the volume of wealth that is managed by taxpayers as compared to what is declared in their returns, which helps countries to tackle tax evasion. Though such taxation could be avoided by the use of cryptocurrencies (which is also among the concerns of the BEPS Project),116 a similar tax on the circulation of cryptocurrencies could guarantee the expected revenue, especially if technology is used by the tax authorities to inspect its collection or if the countries concerned request cryptocurrency traders to report all transactions mediated by them (or even appoint them as responsible for the tax collection, in a similar manner to the bank’s liability regarding bank transaction taxes).

The resulting increase in the tax burden could give countries an initial foothold, helping them to cover the loss of tax revenues and fund public policies towards minimizing the social impact of unemployment.

115. Swiss Federal Council, supra n. 19, at p. 22.116. OECD/G20, Inclusive Framework Interim Report, supra n.

114, at pp. 206-208.

Alternatively, each country might change the config-uration of its internal tax system in order to increase taxation on some transactions and reduce it on oth-ers, in accordance with the new matrices of wealth production in the age of technology. Examining the American tax system, and judging that taxation is heavier on labour income and less heavy on trade and business profits, investment income and capital gains, Jay A. Soled and Kathleen DeLaney Thomas117 suggest that new legislation should (i) not distinguish between types of income and instead impose the same tax rates across the board, as for example by repealing payroll taxes in their entirety while simultaneously increasing the tax rates imposed on trade and business profits, investment income and capital gains, as well as repealing the preferential tax rates currently extended to capital gains and dividend payments; (ii) no longer subsidize and promote capital usage through gener-ous tax expenditures; and (iii) modernize the nation’s labour force, by investing more heavily in tax expendi-tures that cultivate human capital and increasing tax expenditures designed to promote education, such as tax credits and deductions for post-secondary educa-tion expenses, the exclusion of scholarship and fellow-ship income, and qualified tuition programmes. These suggestions accord with some of the ideas outlined in the present article, and coincide with the author’s sug-gestion (similar to that of Englisch)118 that the response to the loss of human jobs due to automatization should take into consideration the whole tax system rather than implementing isolated (and complex) measures.

Obviously, each measure must be evaluated against the reality of each jurisdiction. Moreover, if the imposition of a real tax on the use of robots becomes inevitable in the future, countries should seek a multilateral agree-ment in order to standardize this taxation, although this proposal, given current experience with multi-lateral measures, seems quite utopian. Alternatively, countries could start taxing the use of robots only in certain industries that are not significantly affected by international tax competition, especially non-remote services rendered to final consumers that require a local physical presence where the robot is in operation (such as, for example, the transportation and logistics industry or the restaurant sector).119

Last but not least, any tax measure should be evaluated along with other measures that may also have an effect on the issue, such as possible reductions in weekly working hours and revisions of the contribution time required of employees for retirement purposes.

117. J.A. Soled & K.D. Thomas, Taxes in the Age of Technology, 161 Tax Notes, p. 465 (2018).

118. Englisch, supra n. 43, at p. 8.119. Id., at pp. 16-17.

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INTERNATIONAL TAX STUDIES

Robots and Tax Reform: Context, Issues and Future Perspectives

Author:

Maurício Barros

Exported / Printed on 8 Jan. 2020 by javier.ramon@ief.minhafp.es.