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Sun 20 Jan 2019 01:38 PM

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Opinion: Should robots be taxed?

The benefits of automation are bringing tremendous benefits both physically and economically

Opinion: Should robots be taxed?
Technology leader the UAE is one of the top five countries in the Middle East with the highest technical automation potential

For much of the 20th and the 21st centuries, mechanisation has been seen as a good thing – in recent years, technological advances and digital transformation have changed the nature of work at an unprecedented pace, creating scepticism in the minds of many.

Automation and Artificial Intelligence (AI) have become integral parts of business operations spanning a multitude of industries – accountancy included. The increasing level of adoption and rapid development of disruptive technology have raised discussions about its potential threats to the workforce and the subsequent number of knock-on long-term economic and social considerations that have yet to be fully debated and resolved.

When considering threats posed by AI, the focus usually rests on two factors. Some foresee a terrifying terminator dystopia, with sentient computers identifying mankind as their greatest enemy and turning the world into a killbot hellscape. Others, slightly less alarmist, fear automation rendering vast swathes of the population literally redundant.

Automation and Artificial Intelligence have become integral parts of business operations spanning a multitude of industries

AI comes in many shapes and sizes, and its benefits are fairly evident. It allows organisations to efficiently execute processes that otherwise take up thousands of staff hours – freeing up skilled employees to work on more complex, added-value work.

There’s no denying that the nature of work is changing. Some industry professionals claim ‘robots will take our jobs’– but no one seems to know the extent. While it may not happen overnight, jobs will certainly be lost to automation – a recent report by McKinsey & Company estimated that 45 percent of existing human jobs in the Middle East could be replaced by automation.

AI is all about augmenting, or replacing, human judgment and expertise – the essence of the accountancy profession. The potential of AI for accountancy is extensive. It can be used to read documents and extract information that accountants need.

It can be used to find patterns in large amounts of transactional data and pinpoint anomalies. It may also move far further into areas that we think are about accounting judgement or intuition. An accountant may take 20 years to build up the experience and knowledge needed to make particular decisions. A computer will be able to learn from enormous amounts of relevant data in a fraction of the time and potentially make better decisions.

Although these technologies present great opportunities to boost productivity in nearly all industries worldwide, the consequences that they may bring should not be overlooked and must be discussed.

There are many aspects to look at – one is that for most governments, the switch to automation has potential to dramatically reduce tax revenue because less workers means less tax contributions. But most importantly, is technology’s ability to replace human jobs and contribute to the growth of inequality around the world.

So how should we address the risk these powerful technologies pose to jobs across the economy? Should we be creating taxes specific to these “job-devouring” robots? In a 2017 interview with digital news website Quartz, Microsoft founder Bill Gates said he believes that governments should tax companies’ use of robots and suggested that a robot tax could finance jobs for people to care for the elderly or to work in schools. Taxing robots is an idea that has been mooted in more than one jurisdiction. Now, inevitably, the use of technology itself is under the tax spotlight.

Human work itself seems to be under threat and more and more of our jobs are already being performed by robots

A suggestion is to impose a greater tax on companies with high profits compared to their workforce. A high profit-to-people ratio would indicate companies that are highly automated. The cost of this would be for them to suffer a higher corporate tax of some sort – and the money used to retrain workers – or perhaps to finance an expansion in socially important but hard-to-automate sectors like healthcare, education or social care.

But do we really want to discourage such inventions, even though they replace jobs? And how do we decide what counts as a robot? Is a vending machine a robot?

Opposing the idea, many argue robots offer huge benefits to society and that they are simply tools businesses use to operate – meaning they are merely another form of investment to boost productivity and profitability. In that case, it doesn’t make any more sense to tax them as if they are people than any other item of business equipment or machinery.

Human work itself seems to be under threat and more and more of our jobs are already being performed by robots. At least that is what the headlines tell us. It’s worth asking if taxing robots is the right approach to solving this issue and if there is an underlying problem which suggests a different response.

Michael Armstrong, FCA and ICAEW Regional Director for the MEASA region

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