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Volume 90, Number 12 ■ June 11, 2018

Should My Dishwasher Pay a

Reprinted from Tax Notes Internaonal, June 11, 2018, p. 1273

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EMERGING ECONOMIES
tax notes international®

Should My Dishwasher Pay a Robot Tax?

by Tatiana Falcão
• for national governments, the opportunity
Tatiana Falcão is a
Brazilian lawyer to raise additional revenue to the extent the
specializing in development of a new business interface
international taxation gives margin to an expanded tax base; and
and policy • for tax policymakers, the opportunity to
development. She was revisit international tax rules and reinstate
formerly at the both the origin of wealth principle1 and the
Secretariat of the concept of economic allegiance (a taxpayer
United Nations, should be liable to pay tax in the jurisdiction
overseeing the work of where it is economically active and enjoys
the Committee of 2
Experts on the benefits of public infrastructure and
3
International public goods ).
Cooperation in Tax However, under a wider legal framework
Matters, and is now a beyond tax, digitization — or rather, the
member of the Subcommittee on
Environmental Taxation. She is also a founding automation of certain activities — may affect job
member of the Women in Tax group (London) creation and social security systems, as well as
and an associate expert with the BEPS pose new civil liability and responsibility
Monitoring Group. questions, requiring a revision of ethical
In this article, the author discusses how the standards used in robotics.
development of artificial intelligence and the The labor and social security aspects, delved
further digitization of the economy could lead into more deeply within this article, are not
to calls for taxation, including levying a robot completely detached from the OECD and U.N.
tax. discussion of business digitization. However, the
effect of this discussion — whether one should
Over the last few months, I have been apply a tax on the mechanization of activities — is
contacted numerous times to provide my opinion limited in scope and reflects only a concern with
on whether an automation tax — or a “robot tax” the need to raise additional (or replacement)
as it is more popularly referred to — would be a revenues, once (and if) human jobs are replaced
suitable solution to the “impending” loss of jobs by robots.
and the social security welfare state to robots.
There are several problems with the previous
sentence, but I will get to that later.
The digitization of the economy (the fourth
industrial revolution) is being analyzed through a
variety of perspectives. As perceived by the OECD 1
OECD, “Tax Challenges Arising from Digitalisation — Interim
and the U.N., the digitization of business has Report 2018” (Apr. 2018), at 167. The origin of wealth principle was
roughly three dimensions: enunciated in a 1923 report commissioned by the League of Nations. In
this report, the economists took a view that the place where the income is
• for taxpayers, the opportunity for base produced should be assigned a preponderant share of the tax revenue
erosion and profit shifting — and the because that should be considered to be the place of origin.
2
possible distortion of competition from the BEPS Monitoring Group, “Tax Challenges of Digitalization:
Comments Received on the Request for Input, Part I” (Oct. 2017).
resulting competitive advantage obtained 3
Wolfgang Schon, “Ten Questions About Why and How to Tax the
by highly digitized multinationals; Digitalized Economy,” 72 Bulletin of International Taxation (Mar. 2018).

TAX NOTES INTERNATIONAL, JUNE 11, 2018 1273

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Hence, the introduction of a robot tax or an digital technologies on decent work and
automation tax is only justified by the need to sustainable enterprises. The meeting participants
provide tax neutrality between human and analyzed, among other things, the impact of
automated workers, allowing the marketplace to technology on the quality and quantity of jobs.
adjust without distortions,4 or by simply
substituting the tax currently levied on humans Job Loss and a Robot Tax
by one levied on robots. A robot tax has two potentially conflicting
This is a discussion relating to budget objectives. The first, as mentioned above, is to
concerns if the development of artificial compensate for the loss in revenues derived from
intelligence and further automation leads to a the destruction of jobs. The second, as suggested
decline in jobs, and the consequent loss of 7
by some, is to reduce the pace of development,
personal income tax revenues and social security giving countries time to adapt and respond to
contributions. new technologies. In the case of the latter
The “if” dimension is extremely relevant here, objective, the tax would act as a deterrent against
as there is no actual data to support that there will technological development. Is this a policy one
be, or ever has been, a decline in jobs resulting would want to pursue?
from the automation of activities following In February 2017 the European Parliament
digitization. As many studies point out, considered a January 27, 2017, report on civil law
5
automation is not necessarily equal to job loss. rules on robotics, rejecting a proposal to create a
Technological change can also create a range of robot tax. The report also proposed, among other
6
new jobs. things, to introduce a system to register advanced
International Labour Organization (ILO) data robots that would be managed by a new EU
points out that from 1984 to 2012, job destruction Agency for Robotics and Artificial Intelligence.
rates declined substantially, in line with The idea for a robot tax sprang from the
digitization costs — although inequality proposed registry. The tax would preserve social
increased. This means that, historically, process cohesion and prosperity by funding the support
automation has tended to create jobs (or and retraining of workers whose jobs have been
alternative jobs), although the rent derived from reduced or eliminated. Within the context of
technological gains has been concentrated in a preserving social security and maintaining the
few hands. social welfare system,8 the report considered the
The ILO has created the Global Commission possibility of levying tax on the work performed
on the Future of Work to investigate these issues. by a robot or a fee for using and maintaining a
The commission met April 27 in San Francisco, at robot. Under the terms of the rejected robot tax,
the World Economic Forum’s Center for the the robot would have potentially been an entity
Fourth Industrial Revolution, to discuss the with juridical personality, hence liable to tax.
effects of the leveraging of data, algorithms, A loss or reduction in personal income tax
artificial intelligence, blockchain, and other revenues and social security contributions is
particularly troublesome in Europe, where the
bulk of national tax administration revenues

4
Ryan Abbott and Bret Bogenschneider, “Should Robots Pay Taxes?
Tax Policy in the Age of Automation,” 12 Harvard Law and Policy Review
(2017).
5 7
In January 2017, the McKinsey Global Institute in the United States Abbott and Bogenschneider (supra note 4) and Bill Gates (2017) also
claimed that roughly half of the current work activities could be supported a tax to slow the spread of automation. See, e.g., James
automated, leading to a potential elimination of $2.7 trillion in wages in Titcomb, “Robots That Take People’s Jobs Should Pay Taxes, Says Bill
the United States (supra note 4). Gates,” The Telegraph (Feb. 20, 2017).
6 8
International Labour Organization, “The Impact of Technology on The European parliamentary report calls on the commission “to
the Quality and Quantity of Jobs,” Issue Brief No. 6, prepared for the explore the possibility of introducing a notification system prior to the
second meeting of the Global Commission on the Future of Work (Feb. establishment of robots and their relative participation to the companies’
15-17, 2018). turnover for the purpose of taxation and social security contributions.”

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9 13
derive from these two sources. Job loss and civil liability for the use of robotics. Without a
automation could therefore have a significant legitimate robot definition for tax purposes,
budgetary impact on the countries in question at explanations about potentially taxing a thing,
a time when they would need additional funds to process, activity, or asset are convoluted and
retrain workers to assume new functions confusing, referencing different policy
compatible with an automated market. approaches depending on the intention of the
proponent.
What Does ‘Tax a Robot’ Mean? According to the rejected EU parliamentary
Defining a robot is central to implementing a report, a “smart robot” is:
robot tax. Is a robot a tangible asset? Can it be a one which has autonomy through the use
process? Is a robot an asset capable of executing of sensors and/or interconnectivity with
an action that would typically be executed by a the environment, which has at least a
human (is the definition of a robot intrinsically minor physical support, which adapts its
connected to its ability to perform human jobs), or behaviour and actions to the environment
is a robot also a process that can outperform and which cannot be defined as having
human beings? “life” in the biological sense.
Scholarship on the subject is vague as to 14
whether a robot tax should be a tax on an activity, This definition is not legally binding.
process, or asset that substitutes for human Most countries aim to tax activities once,
activity. None of the existing definitions of these carefully avoiding double taxation. It is therefore
activities, processes, or assets contains tax important that the definition of robot be agreed
implications, nor were they drafted with tax upon internationally. This will facilitate uniform
consequences in mind. They reflect concern with treatment on the object or process being taxed.
10 11 12
international standards, ethics, safety, and
Robots and Legal Personality
There are some who think it will one day be
possible to tax robots at the robot level. Swiss tax
law professor Xavier Oberson15 argues for a
specific fiscal capacity for robots resulting from
their recognition as a legal entity. According to
Oberson:
this would lead to a kind of electronic
9 taxpayer capacity for robots . . . at a later
According to the OECD:
Taxes on personal and corporate incomes remain the most stage, one could even recognize a taxpayer
important source of revenues used to finance public spending in 17 capacity specific to robots, if the
OECD countries, and in 9 of them — Australia, Canada, Denmark,
Iceland, Ireland, Mexico, New Zealand, Switzerland and the United technology allows them to be attributed a
States — the share of income taxes in the tax mix exceeds 40
[percent] . . . Social security contributions as a share of total tax
revenues on average across the OECD accounted for 25.8 [percent]
in 2015. They were highest in the Czech Republic and the Slovak
Republic (43.1 and 42.7 [percent], respectively). In contrast, 13
Australia and New Zealand do not levy social security European Parliament, “Draft Report with Recommendations to the
contributions. Commission on Civil Law Rules on Robotics” (not accepted), Committee
Together, therefore, personal income taxes and social security on Legal Affairs (May 31, 2016). The draft report identifies certain basic
contributions account for more than 50 percent of revenue accumulation. criteria to define “robots” from a civil liability perspective. These are:
As per OECD, “Revenue Statistics 2017 — Tax Revenue Trends in the • acquires autonomy through sensors and/or by exchanging data
OECD” (2017). with its environment (interconnectivity) and trades and analyzes
10 data;
ISO 8373:2012 standard on robots and robotic devices operating in
industrial and nonindustrial environments: ISO defines robots as • is self-learning (optional criterion);
“actuated mechanism(s) programmable in two or more axes with a • has a physical support; and
degree of autonomy, moving within its environment, to perform • adapts its behaviors and actions to its environment.
intended tasks.” Xavier Oberson, “Towards Taxation of Robots or Their 14
European Parliament, “Civil Law Rules on Robotics” (not accepted)
Use?” International Tax Review (Jan. 30, 2018).
11 (2017).
European parliamentary report. 15
12
Oberson, “Taxing Robots? From the Emergence of an Electronic
The International Federation of Robotics reproduces the ISO Ability to Pay to a Tax on Robots or the Use of Robots,” IBFD World Tax
definition with the intent to regulate safety. Journal (May 2017).

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payment capacity (electronic liquidities, humans. The EU parliamentary report suggests a
capital, etc.). “specific legal status for robots” as persons
“capable of conferring damage,” suggesting the
But even Oberson acknowledges that it would
companies or individuals owning those robots
be difficult at this stage of technological
would escape legal responsibility. This is clearly a
development to tax robots. Even if they can 17
mistake.
perform services and provide labor, they do not
have the financial means to pay taxes. Amid the frenzy in the AI revolution, some
jurisdictions seem to be more excited than others.
Oberson derives his taxation argument from
In October 2016 Saudi Arabia became the first
the EU parliamentary proposition and from Swiss
country to grant citizenship to a robot. It is not
legislative tax fictions in which hypothetical
clear from the public documents exactly what
income is imputed to a person from an event that
citizenship for a robot means, and whether it
could have happened. For example, with the
includes the same rights as humans. Some have
intent to avoid vacant homes, some countries
called it a marketing stunt to promote a
impute rental income to homeowners even if the
technology summit occurring at the time of the
property is not rented. The goal is to avoid rental
announcement.18
price inflation while avoiding shortages in home
offers by making sure wealthy individuals do not There is an additional underlying issue in
just hold vacant property. This is especially true in defining what constitutes a robotic asset, process,
small countries. action, or activity. Determining the time frame for
implementation of change risks being context-
Because robots are essentially still machines,
specific. For example, in Europe the shift from
imposing a tax is akin to imposing an additional
human household help to an appliance
tax every time an employer fires someone. The 19
dishwasher occurred in the 1970s, when
policy objective seems to be to penalize the
dishwashers became affordable in middle-income
employer replacing individuals with a robotic
homes. In many developing countries and
workforce. The taxpayer is the employer,16 and
emerging economies, that transition has not yet
will have to pay the tax on behalf of the robot. In
occurred because labor is still sufficiently cheap
this sense, it is not a tax on the robot but rather a
for families to employ household help.
tax on the use of mechanized (or automated, or
robotic) systems. Does that mean that a dishwasher — an
automated process — will be considered a robot
This policy’s only objective is to slow down
in developing countries and a staple in the
the replacement of the human workforce with
developed world? When is mechanization at a
robotic automation, and to penalize employers for
high enough level to constitute a robot? If a robot
using machines over people.
is akin to human action, then many of the
Following through with this argument, the
appliances a normal household carries now
only thing proposed legislation would need to do
should already be subject to an automation tax.
is define the date on which taxpayers will be
Such a tax, as currently envisaged, would be
required to start paying “redundancy” taxes. Any
levied on automated processes, and not really a
such legislation would need to specify what acts,
robot tax.
activities, or assets qualify for the tax, and the
The speed of automation is a challenge for
imputed value of these activities (tax base). There
required labor market adjustments. Creating tax
is clearly no need to confer legal personality on
the action, activity, or asset itself, because “it” will
never have the ability to pay.
A parallel can be drawn here with the 17
Luciano Floridi, “Roman Law Offers a Better Guide to Robot Rights
discussion on legal liability for damage. Tax Than Sci-Fi,” Financial Times (Feb. 22, 2017).
18
liability and legal liability for damage are James Vincent, “Pretending to Give a Robot Citizenship Helps No
One,” The Verge (Oct. 30, 2017). See also Saudi Arabian Centre for
prerogatives that tend to be conferred only on International Communication, “Saudi Arabia is First Country in the
World to Grant a Robot Citizenship” (Oct. 25, 2017) (official body
confirming declaration of citizenship).
19
16 The dishwasher here is used as an example for all electronic
Id. appliances in a home.

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disincentives to slow down automation and Other measures include increasing public
counter technology’s displacement effect could be investments that may generate a higher demand
22
a suitable policy for some countries, but the effect for low-skilled workers.
might only be temporary. Globalization means
that countries need to keep up with technological Conclusion
development to compete in international markets. “Revolution” is a term employed whenever
Those countries applying a robot tax might there is a moment of severe transformation in
ultimately be the ones left behind. perception, relationship, or opinion in a country
or region or across the world. The term “fourth
Tax on Robot Use — Good Policy?
industrial revolution” denotes that the world is
If the objective of a robot tax is to compensate going through a moment of severe transformation
for revenue loss resulting from job destruction, in the way business is conducted. This is likely to
then there are other measures that could severely affect work relationships.
counterbalance the loss without impairing Tax issues arise almost as a byproduct of
technological progress. commercial relations. Tax is never a determining
20
One familiar option is a carbon tax. A carbon issue in characterizing a relationship, but it
tax would push resource-saving innovation, encourages or discourages certain interactions.
while shifting away from labor-saving Taxation does this by applying or removing
21
innovation. A shift in focus from direct to economic pressure. The risk of revenue loss in one
indirect taxation that generally emphasizes area should therefore not be automatically
environmental taxes, or the expansion of VATs to accompanied by a rush to raise revenues
previously untaxed services, might also help raise elsewhere without first confirming that the feared
tax revenue. This trend is already on course in revenue loss will actually occur.
most developed countries. Because indirect taxes Workers’ jobs will be transformed, robots will
are by nature regressive, policies should be become smarter (but not human), and tax revenue
designed to avoid disproportionately affecting will be collected from the relationships that are
low-wage earners. bound to emerge between humans and robots.
There is no need to make my dishwasher file
taxes. 
20
Tatiana Falcão, “Taking the Environmental Tax Agenda Forward:
How the U.N. Committee of Experts Can Lead the Way,” Tax Notes Int’l,
Mar. 5, 2018, p. 949.
21
Joseph E. Stiglitz and Anton Korinek, “Artificial Intelligence and Its
Implications for Income Distribution and Unemployment,” National 22
Bureau of Economic Research Working Paper 24174 (2017). Id.

TAX NOTES INTERNATIONAL, JUNE 11, 2018 1277

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