Taxation of Robots and Intangibles…

Since robotics (and other forms of automation) have been introduced to work environments…there have been periodic, largely well-intended propositions for their taxation.  Most of the propositions share views that…

  1. there is an irreversible inevitability that conventional – repetitive work performed by humans is in transition, not unlike the Industrial Revolution of the late 19th and early 20th century.
  2. robotics and automation often replace the labor (work – jobs) otherwise performed by humans, there needs to be a tax to supplement the diminishing revenues generated by conventional personal income tax.
  3. it’s necessary to impose taxes on the ‘capital’ which businesses expend for robotics and automation, because, again, their introduction routinely results in human workers being replaced which removes humans from conventional ‘labor equations’, hence
  4. governments should legislate – commence taxing ‘business capital’ proportionately more, because, ‘business capital = labor capital’.

What I would like readers to consider is this…throughout the following narrative, try exchanging the phrase ‘robotics and automation’ with ‘intellectual, structural, and relationship capital’ ala intangible assets. Having done so, would you subsequently consider the potential taxation of businesses intangible assets to be a proverbial ‘slippery slope’?.

After all, in the U.S. today, humans performing work – labor for an employer; their income is taxed at specified rates by the government…is it prudent to do the same, i.e., assessing a tax to the work being performed by automation and robots?  To this, put me down as a yes!

Perhaps not surprisingly to readers of this blog, through my lens as an intangible asset strategist…when the words ‘business capital’ are used in-close-proximity to the word ‘taxation’, it prompts me to wonder if there may be similar perspectives – propositions being considered…

  • which favor the taxation of the various intangible assets’ businesses develop and/or acquire, more so than what currently exists, after all,
  • intellectual, structural, and relationship capital, ala intangible assets, represent another form of business capital, especially in-light-of,
  • the economic fact – business operation reality that 80+% of most company’s value, sources of revenue, competitiveness, and growth potential, etc., either lie in – evolve directly from intangible, not tangible, assets.

Dr Carl B. Frey, Oxford Martin School…authored The Technology Trap: Capital, Labor, and Power in the Age of Automation  a worthy read for followers of this blog.

Frey examines the history of the Industrial Revolution as a plausible guide to current developments…with respect to expansion of robotics and automation, by…

  • noting millions of workers could soon find their (employment) careers devastated, with the ultimate benefits of technology not being fully realized for decades in the future.
  • projecting that almost half of U.S. jobs could become redundant through emerging technologies, ala robotics, in the next 30 years.

We are obliged to consider this transition from human dominated labor to…machine dominance, and whether it is to be interpreted as (a.) an inevitably, and, also as (b.) an expandingrisk that will further divide (distinguish) us politically, economically, socially, etc.,

  • those who acknowledge – favor – accept a milieu of presumably adverse consequences to humans, versus
  • those who don’t.

I don’t believe it is or will be quite that simple!

As readers already know, the ‘industrial revolution’…took the greater part of 60+ years to fully materialize. A comparable transition (revolution) is the one we are addressing here which has already commence and can fully materialize far more rapidly.  Not suggesting I know or could project with any precision the time frame for this transition to fully materialize. But, based on the recent past, it’s a no brainer, it will be less than 60 years…

  • there are some who assert higher taxation rates on the business capital which specifically underlies robotics and automation, could slow down the current upward trajectory of introducing more automation and robotics that displace human labor.

As I understand it, South Korea became the first country to…actually-apply a tax on – to robotics, i.e., the ‘taxability’ on capital that company’s spend on automation.  The European Union, it’s said, sort of sidestepped what South Korea did by regulating versus taxing the rise in automation and robotics. 

  • of course, the E.U’s approach to this matter may be interpreted as another tactic – strategy for slowing the expansion of robotics in conventional ‘labor intensive’ workspaces.

Readers recognize the proverbial playing field, as currently practiced, is not necessarily level…the introduction of robotics – automation in the workplace, as the latter carries a substantial tax advantage, that is…

  • those familiar with business taxation know that when a business automates,
  • they tend to save a substantial amount in taxes, which in turn, 
  • provides businesses with a significant advantage by virtue of not being required by law to pay certain taxes related to employing people.

An economic reality is, a significant percentage of the U.S. government income arises from…taxes on human labor ala personal income tax.  So, as more businesses automate, there will likely be a corresponding decline in local, state, federal government revenue generated by personal income taxes.  

One manifestation of this…will likely be reflected in the growth of autonomous vehicles and drones, i.e., Uber, FedEx, UPS, Amazon, and independent interstate trucking companies, each of which will be paying less in employee – driver (personal income) taxes.

On the other hand, as companies presumably become more efficient and profitable through -the-use-of automation and robotics…their higher profits will be taxed accordingly.  So, as some argue, a prelude to making this current ‘revolution’ more efficient, workplace robotics and automation should be taxed.

Will ‘this revolution’ require a global reboot…with respect to the current practice of deducting percentages of worker’s salaries for personal income tax? If – when governments begin imposing taxes on automation – robotics, etc.,

  • surely there will be U.S. states, which tax business capital at lower rates than others, thereby ensuring another form of inter-state competitiveness, and
  • manufacturing – assembly (labor intensive) work will merely relocate to states – countries with the lowest taxation rates on automation, much as U.S. companies have been doing for the past 40+ years?

I suspect, with respect to any taxation of robotics and automation…it’s unlikely, at least foreseeably, circumstances will arise in which the ‘contributory role and value of each specific robot – automaton would be assessed, differentiated, and accordingly assigned a tax rate commensurate with their ‘output’. That is, each robot’s contributory role to (business) value, revenue generation, competitive advantages, and reputation, etc., are, as described in this blog and my work, distinguishable.

Regardless, it’s likely we can expect that continued – sustained growth in…workplace automation and robotics, at some point in time, it will serve as a collective impetus to examine the conventional way governments have (historically) taxed human labor salaries.  Especially, if-when relevant legislative bodies recognize – conclude that labor performed by robots is an additional form of taxable ‘business capital’.  Perhaps that is far too much to assume, but, if it were to materialize that smoothly, it may be the epitome of political populism?

Some who generally oppose further workplace automation – robotics argue…either targets conventional (human labor) positions which are largely comprised of routine redundancies, i.e., likely lower income positions. Thus, taxation of robotics, etc. may drive – lead to even greater socio-economic (income) inequality than what already exists.

Too, if governments begin taxing automation and robotics…could this lead to depressing necessary – essential entrepreneurial research incentives that create new businesses which inevitably, will include even more sophisticated AI (artificial intelligence), ML (machine learning) etc.  This presumes, of course, ‘robotics taxation’ is not merely an attention getting marketing statement.

Proponents of taxing automation – business capital at higher rates argue…such taxation will not necessarily lead to ‘the rich getting richer, and the poorer getting poorer’, rather a leveling of the playing field.

This post was largely inspired by the content of the BBC Radio Program ‘Business Daily’ hosted by Ed Butler who spoke with Professors’ Carl Frey, Oxford University and Ryan Abbot, University of Surrey, and Dr. Janet Bastiman, Chief Scientist (for artificial intelligence) at StoryStream, on June 4, 2019

Michael D. Moberly  St. Louis June 19, 2019 [email protected], the ‘Business Intangible Asset Blog’ since May 2006, 650+ published (long form) blog posts, ‘where one’s attention span, business realities, intangible assets, and solutions converge’.

Readers are invited to explore other posts, video, position papers, and books at

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