Chapter 1: General introduction
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Chapter 1 is a general introduction to the topic. It shows when and why the ideas of the taxation of robots have emerged. It all started to be discussed by some experts, notably in early 2016, and was further analyzed in a Report of the EU Parliament on civil law rules on robotics, in February 2017. It then became widely public by the declaration of Bill Gates, of February 2017, who showed support to this idea.

The development of AI and robots in particular is on the way to modify completely our society, our economy and our life. As the EU Parliament, in its report of 16 February 2017, describes this development as follows:

[…] humankind stands on the threshold of an era when ever more sophisticated robots, bots, androids and other manifestations of artificial intelligence (AI) seem to be poised to unleash a new industrial revolution, which is likely to leave no stratum of society untouched […].1

This process is also part of the fourth industrial revolution,2 which will have tremendous consequences on all sectors of the economy. In particular, the potential impact of the widespread use of robots on human jobs is subject to controversial forecast. In addition, the growing use of robotics in everyday life raises new legal and ethical issues. As a consequence, the debate over the possible introduction of a legal personality to robots has started. Thus, notably in view of the potential negative financial and human consequences of the use of robots on the labor market, the search for new solutions has started.

Indeed, in parallel to the discussions at the EU level on the introduction of a legal personality to robots,3 politicians, entrepreneurs and scholars have started to develop various visions to mitigate the potential negative impact on the implementation of robots on a broad scale. For instance, as of June 2016, we have published various articles suggesting the introduction of a robot tax,4 as a consequence of a new form of electronic ability to pay.5 During the French presidency campaign of 2017, Benoit Hamon promoted the idea of a minimum unconditional income, which could, partly, be financed by a robot tax.6

Proposals to tax robots have also been developed at the EU level. In a draft report of 2016, the Commission on legal affairs of the EU Parliament issued some recommendations to analyze the impact of AI and robotics on employment and the effect of that development on taxation and social security. The draft report reads as follows:

Bearing in mind the effects that the development and deployment of robotics and AI might have on employment and, consequently, on the viability of the social security systems of the Member States, consideration should be given to the possible need to introduce corporate reporting requirements on the extent and proportion of the contribution of robotics and AI to the economic results of a company for the purpose of taxation and social security contributions; takes the view that in the light of the possible effects on the labor market of robotics and AI a general basic income should be seriously considered, and invites all Member States to do so.7

On 16 February 2017, the EU Parliament finally rejected the idea of introducing a system of taxation of robots as electronic persons.8 However, the next day the idea to tax robots had been endorsed by Bill Gates. Indeed, in an interview with QUARTZ TV on 17 February 2017, Bill Gates mentioned:

Right now, the human worker who does, say, 50,000 dollars’ worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we'd tax the robot at a similar level … Exactly how you’d do it, measure it, you know, it’s interesting for people to start talking about now.

In April 2017, Jaen Kim, member of the board of supervisors of San Francisco, following Bill Gates’s declaration, also launched a working group to analyze the feasibility of a payroll tax on enterprises that replace human employees with robots.9

Such an idea has immediately triggered a lot of attention. Yet, it remains highly controversial. There are in principle two opposite camps. On one side, some reactions have been quite negative. For example, The Economist insisted that a tax on robots was not a good idea; worse in that the long-term workers would be the losers.10 In a report, Economiesuisse, a leading lobbyist group for the Swiss Economy, also disapproved such idea, characterizing it as “visionary” only in appearance, but in reality, as a hindrance to innovation and a factor of competitive distortions.11 In the same vein, many commentators also disapproved this concept, which could not only distort innovation but would create new highly complex issues, which would simply be impossible to implement.12 On the other side, however, introducing a taxation of robots also received favorable comments. Apart from Bill Gates, Robert J. Shiller, a Nobel prize-winning economist, argued that, at least as an interim measure, such tax could be justified in order to help the transition towards a more digitalized economy.13

In our view, the introduction of a tax on robots should be carefully analyzed and discussed today. Indeed, as we will demonstrate below, the development of AI and robots is likely to have a huge impact on the labor market for humans and on the tax system as a whole.

Despite opposite views on such a project, it appears necessary to consider it seriously. Indeed, considerable time is required to reach a consensus, both domestically and internationally, on such new tax rules. The numerous issues raised by a potential tax on robots require immediate and careful attention. The purpose of this book is therefore to show, why and how a system of taxation of robots could be designed and implemented. We argue that a taxation of robots, or the use of robots, represents a powerful and interesting alternative solution to a potential crucial issue: the decline, or at least the complete change, of labor market and the distributional implications on persons of the growing use of automation.

We will start with a brief description of the development of AI and robotics and its potential impact on the economy and the labor market in particular (Chapter 2). From there, we will then try to identify the essential features of robots, in order to propose a practicable and appropriate definition for tax purposes (Chapter 3). Then, we will analyze whether robots, like corporations in the past, could eventually be recognized as a new form of legal entity, as well as the potential consequences of such characterization for taxation of robots (Chapter 4). This will then lead us to demonstrate to what extent a taxation of robots, or of the use of robots, could be justified both from an economic and legal standpoint (Chapter 5). We will also describe how the use of robots is already subject to income or profit tax as part of the production factors of an enterprise (Chapter 6). In the same vein, the recent discussions and alternatives on the taxation of the digital economy will also be covered, since they reflect – albeit partially – some of the issues related to the taxation of the use of robots; indeed, corporations active in the digital economy use automation extensively (Chapter 7). We will also analyze the current VAT tax treatment of automated activities with enterprises subject to VAT; robots are in fact already providing taxable supplies of goods and/or services within enterprises subject to VAT (Chapter 8). Then, the book will suggest various alternatives to design robot taxes on: (i) the use of robots and (ii) robots as such (Chapter 9). We will also examine how the rules of international tax law apply to these new types of taxes on robots (Chapter 10). Finally, we will open the discussion on possible allocation by states of the revenues collected from robot taxes or taxes on the use on robots, and notably address the possibility of introducing a uniform basic income (Chapter 11). The last Chapter will summarize the main findings and conclude (Chapter 12).

1   European Parliament 2014–2019, P8_TA-PROV (2017)0051, Civil Law Rules on Robotics, European Parliament Resolution of 15 February 2017 with recommendations to the Commission on Civil Law Rules on Robotics (2015/2103 (INL)) (hereafter, EU Parliament Resolution 2017).

2   Schwab Klaus, The Fourth Industrial Revolution, World Economic Forum, Crown, New York 2016, p. 6 ff.

3   EU Parliament Resolution 2017, p. 17.

4   See Oberson Xavier, Taxer les robots?, Bilan, 6 July 2016; same author, “un jour les robots refuseront de payer leurs impôts”, Le Temps, 17 October 2016.

5   Oberson Xavier, Taxing Robots? From the emergence of an Electronic Ability to Pay to a Tax on Robots or the Use of Robots, 9 World Tax Journal 2017, p. 252 ff.

6   Marie Théobald, Taxe sur les robots, revenu universel, énergie … Benoit Hamon détaille son programme économique, Le Figaro économique, 3 March 2017.

7   See Commission on Legal Affairs, Draft Report with Recommendations to the Commission on Civil Law Rules on Robotics, N02015/2103(INL) of the EU Parliament, May 2016, n. 23.

8   See Shiller Robert J., Robotization Without Taxation? Project Syndicate, 22 March 2017, p. A7; Mazur Orly, Taxing the Robots, 46 Pepperdine Law Review 2018, p. 19.

9   Mela Robinson, San Francisco is considering an ounce unthinkable measure to offset the threat of job-killing robots, Business Insider, 2 May 2017.

10 The Economist, Why taxing robots is not a good idea, 25 February 2017.

11 Economie Suisse, Rapport sur l’économie digitale, 22 August 2017.

12 See, for example, Isaac A./Wallace T., Return of the Luddites: Why a robot tax could never work, The Telegraph, 27 September 2017; Müller Jürg, Eine Robotersteuer ist Unsinn, Neue Zürcher Zeitung (NZZ), 23 August 2017, p. 11; Kovacev Robert, Don’t tax the robots, San Francisco Chronicle, 21 January 2018.

13 See Shiller (2017), p. A7.