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Robots, Jobs, and Social Impact – A Taxing Question

By Rohit Talwar
Who should pay for the social costs when food and beverage businesses boost their profits by replacing people with robots and AI?

Every day, restaurants everywhere across the planet prepare for the lunch rush. Those who have been in the industry for some while are prepared – they have an intuitive sense or historic records of the most popular menu items, the time it takes from ordering to serving, the flow and cadence of seating, and how long the lunch rush will last. Armed with such preparatory knowledge, veteran employees have a strategy and minimize surprises. New workers, on the other hand, can stumble until they figure out the patterns or someone tells them.

Now imagine the lunch rush handled by artificial intelligence (AI). Diners might be recognized by facial recognition built into the restaurant’s décor, such as the robotic fish that swim in the aquarium in the Dubai airport – capturing biometric identification data as patrons gaze at the tranquil movements in the fish tank. Once identified, the customer’s preferences and dining history could be accessed instantly. With software powering smart or even super intelligent machines and robots, every aspect of the food and beverage industry could be impacted. Though the planning and strategizing might still require a human touch, the challenge of dealing with a lunch crowd takes on a wholly different flavour: rather than keep up with the orders, the business would instead be in the position to foster relationships with regulars, and come up with new ways of pleasing their palates. The focus becomes driving and growing the business, not surviving the lunch rush.

Faster and More Disruptive Change

So, this seems like a great opportunity and an obvious choice, but what’s the catch? Well, the next automation wave is poised to sweep through and reshape the industrial landscape, change the nature of work as we know it, replace humans with machines at every skill level, and potentially drive up the number of people facing permanent unemployment. Technologies such as AI, blockchain, big data, cloud computing, hyperconnectivity, 3D/ 4D printing, smart materials, and synthetic biology are developing at an exponential rate. Individually, they can disrupt entire industries such as food and beverages. When combined, they will have an even greater effect. The impacts already range from smart farm management and robo-bartenders to fully automated restaurants and even the diagnosis of Alzheimer’s disease ten years before the symptoms show – don’t wait for the revolution – it’s already happening.

However, we don’t know how far and how fast AI and these other disruptive technologies will spread. Furthermore, we don’t know how many jobs they will take out, how society will respond, and the extent to which firms will retain people when they automate. Equally, we don’t really know how fast the newer industry sectors like vertical farming and laboratory grown food will grow, or how many new jobs they will create. In practice we are in a state of heightened cluelessness – which is only to be expected given the scale and pace of the changes taking place.

Taxing the Robots?

Unfettered automation could have a potentially seismic impact on jobs and hence unemployment, government tax revenues, and the provision of public services. The world is waking up to the issue, and the conversation has started about how to deal with the consequences. Most do not want to stop innovation or the pursuit of business efficiency. However, a growing number – such as the leaders in Silicon Valley – also understand that if the robots are doing the farming, cooking the meals, and serving the drinks, then the money must come from somewhere for our former employees to buy what we’re selling. Enter the notion of using robot taxes to fund the cost of unemployment benefits or guaranteed income schemes. The basic idea is to impose some form of additional tax on businesses that replace people with AI, robots, and other advanced technologies. Clearly, this is not an idea that will meet with instant and universal approval.

Even those advocating robot taxes are not necessarily seeing them as a long-term solution. One school of thought is that eventually AI and its super-intelligent cousins will replace almost all jobs performed by humans. The argument is that the technology will be so much more productive and efficient than humans that it will create true abundance. Humans might never need to look for paid employment again and the notion of salaried jobs will all but disappear. In this scenario, the benefits of automation will be distributed more equitably across society, and we as individuals will be free to pursue infinite leisure time – investing it in personal development, self-enrichment pastimes, and deepening our connection with our friends, family, and communities. Whilst a fascinating and potentially inconceivable possibility, most would say that this is a long long long way off, and we need a more immediate solution for the practical challenges on the near-horizon. Hence the robot tax debate.

Here, we look at five key questions to help food and beverage industry leaders explore the subject of taxing the ‘bots – something that could well be front and centre on the business agenda faster than we think.

1. What would robot taxes pay for?

Clearly, the primary purpose of robot taxes would be to address the societal consequences of job automation. So, the most obvious application would be to fund unemployment benefits or guaranteed incomes and services. However, it is difficult to believe that any tax raised could be permanently and transparently ring-fenced by government for one use or another. There is also a concern that higher unemployment would probably mean less revenue from income taxes and sales taxes – which might not be offset by higher corporation taxes.

Hence, there is a view that robot taxes might also be required to help fill any governmental revenue gap. Education is seen as a critical way out of the problem in the longer term. So, alongside unemployment costs, there is a strong argument that a significant proportion of the revenue from robot taxes should be channelled directly into public education. The objective would be to equip young people and adults to take up future waves of job opportunities or create their own. The underlying principle is that we should use the value of automation to benefit society and prevent future problems.

For the food and beverage industry, this might mean a higher overall tax rate – akin to putting a certain percentage of profits aside like tips in a restaurant, but this time as a gratuity to society. In some countries it might be possible to choose where your robo-tax payments are directed – e.g. the school or job retraining centre you would like to fund directly – possibly because it has some links with your organisation. For those that retain jobs in the food sector, employee morale might be boosted if they know their favourite charity or school (or even ex-colleague) is getting to share some of the profits the company enjoys.

2. What is the likelihood of governments around the world introducing a robot tax on companies that replace humans with smart machines?

South Korea has made a start by reducing the tax breaks for those investing in job-replacing automation. However, it seems unlikely that any government would introduce these kinds of direct taxation measures within the next two to five years. Skip ahead a little further, and by 2030, the possible pace of change means they could well be commonplace in many industrial nations. Countries that are embracing automation and the digital era in all its forms – such as South Korea, Japan, and Singapore – might be among the first to implement some form of automation taxation mechanism.

Whilst China is saying little right now, it has the capacity to enact policy rapidly should the need arise. The overt and hidden political power of its super-corporates means that India would probably be a very late adopter. In Europe, nations such as Estonia, Finland, Sweden, Denmark, Iceland, and Germany are likely to be among the first to revamp their tax systems in this way. Whilst many in Silicon Valley argue in favour of robot taxes, the USA is likely to face strong resistance to such changes.

In the UK, the ruling Conservative Party believes that the problem will be resolved through market growth. Indeed, the Chancellor Philip Hammond, argued on a recent BBC TV interview that there have been stark but unfulfilled warnings about automation’s impact in the past, and declared that “there are no unemployed people” – which may come as a shock to the 1.42 million on the UK’s official unemployment register. In contrast, the opposition Labour Party has been courting the youth vote, and openly discussing this most contentious of ideas as it is believed to have strong support among younger voters.

This is one of those topics where momentum could build quite quickly, much in the same way as AI and driverless vehicles have come out from the shadows and now feature at the centre of government innovation agendas. Once the consequences of those investments and their impacts on employment become more apparent, so the debate about robot taxes may also rise up the priority ranking.

Even in cities and nations where no robot tax policies are enacted, food and beverage companies might still encounter it indirectly, perhaps via global supply chains. It seems inevitable that at some point they would interact with companies in some countries that are responsible for paying tax on automation. It may serve as a business deterrent in some locations, but on the other hand, some businesses may be able to use it to their benefit – extracting the maximum value from automation in a guilt-free manner.

3. How might such taxes work in practice?

The starting point here should be to evolve a more flexible approach to creating government income to fund future public services. The basis of corporate taxation could become even more complex. Government internal revenue systems would have the potential to apply AI to large multi-variable data sets to establish a firm’s tax liability based on the sector, revenues / profits per employee, the number of people employed, and geographic location of its business. The algorithms could also take account of factors such as expenditure on training and retraining current and former employees, the support given by firms to start-ups, the level of employment created further down the value chain, and the amount of tax paid by the firm’s employees.

Perhaps evaluation of a business’s broader impact on society could also be factored into determining the level of taxation applied to its profits – such as the actual level of human employment, local and national social responsibility, and environmental impact. Hence the tax paid would be based on the total national benefit and outcomes of a business’s operation across a range of different domains. In short, the taxation system could become far more complex.

It is also possible that for food and beverage companies, the value of the work they do in feeding the population and improving its health and life expectancy would be a consideration in terms of the extent to which industry automation could be taxed. Clearly, curbing food costs are in the public’s best interest, so even if workforces are cut, but the cost of a basic need declines as a result, there may be a net zero overall impact. Furthermore, If the industry could demonstrate that automation helps produce healthier food at a lower, more accessible price, this might count in its favour. Indeed, if this in turn reduced total national healthcare and health insurance costs and reduced the number of days lost by business to ill health – then such holistic national benefits might well be factored into the calculation of food and beverage sector taxes – one day.

On the other hand, could food itself, as a basic necessity, become a currency in which robot taxes could be paid? If large numbers of people become technologically unemployed, some of the government benefits they receive could include food funded or provided by players across the industry value chain. Indeed, we might see a range of goods and services forming part of a universal basic provision – mandated and co-ordinated by governments and delivered by the private sector.

4. What potential risks and drawbacks are there?

This is going to be hugely controversial and unpopular with a lot of politicians, businesses, commentators, accountancy firms, certain news media, and many economists. However, there will also be supporters of the idea, and no viable alternatives have been put on the table yet.

At the operational level, it could be costly and complex to implement, and opponents will look for any shortcomings to cast it off as a failure. The prevailing corporate mind-set is often to base multinational operations in lower tax markets, so competition for the hosting of multinational organisations could intensify without global agreements. Inevitably, many will look for ways to minimise their tax payments and a range of advisory services and schemes will spring up to help firms do so. Failure to implement a viable system or a workable alternative could have disastrous consequences for governments, leading to potential reductions in public service provision and even the failure of some economies.

In the food and beverage sector, where AI is such a natural fit, there could be several conflicts and challenges that arise around robot taxes given the complex supply chains involved. For example, the different jurisdictions crossed by a product on route to the end-consumer market may have varying approaches to – and treatment of – robot taxes for the sector. Furthermore, the importing and exporting of food and drink might eventually require new designations like “robot free” or “human made,” similar to today’s “cruelty free” and “sustainably sourced” labels.

5. What are the potential benefits?

A solution will be required if unemployment does rise and government revenues decline because of lower personal and sales tax receipts. Whilst robot taxes may not be the ultimate answer, and better solutions might emerge, it is the only clear policy idea that is even being mooted today for what is becoming an increasingly pressing societal issue. Ultimately, the notion of taxation based on automation could prove to be a catalyst for more socially responsible “carrot and stick” approaches to corporate tax. Maybe the application of increasingly sophisticated AI could be the critical enabling technology to providing a fair and transparent system with no potential for avoidance or manipulation by individual firms. Indeed, AI could one day give us even smarter tax systems that none of us can even imagine today.

Job automation, social stability, and consistent provision of public services all provide significant benefits to food and beverage businesses. One could argue that a high-quality workforce, good roads, public order, and consistent food standards, are as important to profitability as operational efficiency and process automation. However, perhaps the most immediately obvious requirement for a profitable food and beverage sector business is the presence of customers willing to buy our offerings. To keep people coming back, we may need to ensure that they have the financial means to buy the goods and services being made by the robots. In a world where many of the jobs have been automated away, at present, robot taxes are one of the few policy instruments being explored as a means of putting spending money in the hands of customer.

The reality is that AI is creating the tools that are driving the pace of automation and the prospect of increased unemployment. Equally, AI tools could also be used to design and develop new approaches to taxation that could help us address the societal consequences of technological disruption and ensure a very human future for all.

 

  • What are the critical questions and concerns we need to explore in the design of robot tax experiments?
  • If companies could allocate the money collected from robot taxes, what might be the most popular options for how it is spent and why?
  • What alternative mechanisms to robot taxes might we adopt to provide and fund public services and social protection?

 

Image: https://pixabay.com/illustrations/digitization-null-one-binary-system-2170799/

 

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