BY ROHIT TALWAR
Unfettered automation could have a seismic impact on jobs in the food industry, and hence unemployment, tax revenues, and the provision of public services. Most do not want to stop innovation or the pursuit of business efficiency. But a growing number – such as leaders in Silicon Valley – also understand that, if the robots are doing the farming and manufacturing, cooking the meals, and serving the drinks, then the money must come from somewhere for former employees to buy what they’re making. One idea is using robot taxes to fund the cost of unemployment benefits or guaranteed income schemes – some form of additional tax on businesses that replace people with AI, robots, and other advanced technologies.
Here, we look at four key questions to help food and beverage industry leaders explore the subject of taxing the bots – something that could well be front and centre of the business agenda faster than we think.
Will governments actually tax automation?
South Korea has made a start by reducing tax breaks for those investing in job-replacing automation. Skip ahead a little 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 – South Korea, Japan, and Singapore in particular – might be among the first to implement some form of ‘automation tax’. China has the capacity to enact policy rapidly, should the need arise. The 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. While many in Silicon Valley argue in favour of robot taxes, the US is likely to face strong resistance. In the UK, the governing Conservative party believes that the problem will be resolved through market growth.
This is one of those topics where momentum could build quickly, just as AI and driverless vehicles have come out from the shadows and now feature at the centre of government innovation agendas. As the impacts on employment become more apparent, so the debate about robot taxes may also rise up the priority ranking.
How would a robot tax work?
We need to evolve a more flexible approach to creating government income to fund future public services. Government internal revenue systems would have the potential to apply AI to large multi-variable datasets to establish a firm’s tax liability based on the sector, revenues or profits per employee, the number of people employed, and geographic location of its business. The algorithms could also take account, for instance, expenditure on training and retraining current and former employees, the support given by firms to start-ups, employment created further down the value chain, and the amount of tax paid by the firm’s employees. Perhaps evaluation of a business’ broader impact on society could also be factored into determining the level of taxation applied to its profits. Hence the tax paid would be based on the total national benefit and outcomes of a business’ operation across a range of different domains. In short, the taxation system could become far more complex.
It is possible that, for food and beverage companies, the value of the work they do in feeding the population, improving its health and life expectancy would be a consideration in the extent to which industry automation could be taxed. 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.
What are the potential risks and drawbacks?
At the operational level, it could be costly and complex to implement robot taxes, and opponents will look for any shortcomings to cast it off as a failure. The prevailing corporate mindset 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, a product crosses multiple jurisdictions en route to the end-consumer, and these markets may have different approaches to robot taxes.
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. While 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 for 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 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, the most obvious requirement for a profitable food and beverage business is the willingness of customers willing to buy its products! To keep people coming back, we need to ensure that they have the financial means to buy the goods being made by the robots. In a world where many of the jobs have been automated, robot taxes are one of the few policy instruments being explored as a means of putting spending money in the hands of customers.
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 consequences of technological disruption and ensure a very human future for all.
© FoodBev Media Ltd 2024