How taxing robots could help bridge future revenue gaps


© OECD Yearbook 2017

The development of artificial intelligence and of robots in particular is very likely to have a tremendous impact on the job market. Robots are not only replacing industrial workers, but also in the service sector.

Today robots become lawyers, doctors, bankers, social workers, nurses and even entertainers. While the effective impact on labour remains controversial among economists, we believe that solutions have to be studied now. Indeed, should mass workplaces for humans disappear in the future, from a tax perspective a double negative effect could occur. On the one hand, significant tax and social security revenues would be lost, while on the other hand, the need would increase for additional state revenue to support the growing number of unemployed human workers.

Various studies have started to focus on the legal status of robots. In a report of February 2017, the European Parliament has, for instance, considered granting a legal personality to robots. Given this interest, what about a tax on robots?

Our analysis suggests that a tax on the use of robots would make sense, as a potential solution for addressing the development of robots on the labour market. In essence, we believe that granting a legal personality to robots could lead to the emergence of an electronic ability to pay, which should be recognised for tax purposes. After all, we have seen in the past that states, when required, may introduce new forms of legal personality. Consequently, a specific tax personality would have to be granted to robots.

However, introducing a tax on robots raises some complex issues, both from a domestic and international standpoint.

First, a clear and agreed definition of robots would be required. The EU report already suggests a definition based on various characteristics, focusing notably on autonomy, self-learning and adaptation. In our view, the definition should be “form neutral” (it would include robots, bots and similar types of smart artificial intelligence machines) and focus on the autonomy of robots. Crucially, it would focus on the impact robots have on work exercised by humans. This definition should be justified from economic, technological and constitutional standpoints.

Second, various ways of taxing robots should be examined. One possible solution would be to levy an income tax on the “imputed hypothetical salary the robots should receive from equivalent work done by humans”. Under this quite straightforward concept, the imputed income would correspond to the economic advantage obtained using robots over a human workforce. An alternative, and simpler, system would be to impose a lump-sum amount representing an approximated ability to pay the tax. Initially, this ability to pay would be attributed to the employer or owner of the robots, but as the technology evolves, the robot’s ability to pay could be recognised. Consequently, the imputed income would also become subject to social security levies.

Another interesting possibility is the application of a value-added tax on robots’ activities. At first sight, neutrality should prevail. This would tend to apply the VAT to robot activities in a similar way to comparable human activities. But later on, a specific rule would probably have to be introduced as the nature of robots’ activities could evolve in such a way that it would become more and more difficult to compare them with human activities. A VAT on actual robots themselves is also a possibility, though the introduction of an (objective) tax on robots, similar to cars, boats or planes, would not fit a modern perspective on today’s job-replacing robots.

Other recent suggestions also focus on the design of a tax neutral system between robots and human workers. Consequently, some scholars have advocated an “automation tax”, for instance, based on the ratio of a company’s revenues (total sales) to their numbers of employees. The higher the ratio of robots to sales, the higher the tax.

Taxing robots raises issues that go beyond national borders and should be analysed globally, taking into account the international taxation work at the OECD and the UN. In particular, if we are to recognise a tax capacity to robots, the proper application of tax treaty allocation rules and transfer pricing rules would likely have to be revisited.


European Parliament, Committee on Legal Affairs (2017), Report with Recommendations to the Commission on Civil Law Rules on Robotics (A8-0005/2017)
Oberson, Xavier (2017), Taxing Robots? From the Emergence of an Electronic Ability to Pay on Robots or the Use of Robots, World Tax Journal, April 4, (volume 9, n. 2)
Abbott, Ryan and Bret Bogenschneider (2017), Should Robots Pay Taxes? Tax Policy in the Age of Automation, University of Surrey, March 17
Meisel, William (2017), The Software Society, Trafford, US, p. 220