It is already clear that automation will reshape the industrial landscape, change the nature of work as we know it and drive up the number of people facing permanent unemployment.

This means we need to fund either a higher total unemployment benefit bill or the provision of some form of guaranteed basic income and / or guaranteed basic services. Fewer people working means they are likely to be paying less overall income tax, which means we have to fund the revenue shortfall somehow - assuming we want to maintain the current level of public service provision whilst also covering the higher unemployment costs.

The UK position?

The Conservative Party is loath to acknowledge the possibility of rising unemployment due to automation. By encouraging free markets and lower corporate tax rates they hope that this will drive business growth and employment, which in turn will meet the shortfall through revenues from corporate and individual taxes coupled with VAT.

The Labour Party, in contrast, with its rising number of young members concerned about the impact on their future, and spurred on by already high levels of youth and graduate unemployment, are keen to ensure Britain doesn't go into the kind of decline we saw with Greece and Spain. In response, Labour has been mooting the idea of "robot taxes" to finance the cost of adult retraining, education transformation and unemployment provisions. The argument is that robots should be taxed because they will be considered as something that creates value for the owner, like property, and if firms are cutting headcounts, then they are likely to be making higher profits. Furthermore, the belief is that those who will receive the benefits will spend that money with the firms who paid the robot taxes. 

The timeline?

It seems unlikely that any government would introduce these taxes within the next 2-5 years, but 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.

China is saying little right now, but it has the capacity to enact policy rapidly should the need arise. Whereas, India is likely to be a late adopter due to the overt and hidden political power of the super-corporates.

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 US is likely to face strong resistance to such changes. Indeed, it could well be among the last to go down this route and might conceivably not do so at all without a fundamental change in its governance and electoral systems. 

The practicalities?

The going in point here should be to evolve a more flexible approach to creating income to fund future public services. The basis of corporate taxation could become even more complex with systems applying AI to large multi-variable data sets to establish a tax liability based on the sector, revenues / profits per employee, the number of people employed, and geographic location.

The algorithms could also take account 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 factor into the level of taxation applied to its profits - such as the actual level of human employment, local and national social responsibility, environmental impact - so that tax paid is based on the outcomes of a business's operation across a range of different domains.   

Some measure of net added value could also be considered. For example, a firm may train its employees so well that they go on to higher paying jobs elsewhere or to generate employment and tax revenues by starting their own business. How might their taxation be assessed relative to a firm who invests little in people development and whose staff cannot find jobs elsewhere when made redundant. In the UK, the PAYE system is a government mechanism by which employers collect tax from employees and transfer it to the tax authorities. This could be used to calculate credits for application against a business's corporation tax liability.

An interesting scenario to explore would be the possibility that AI could create the opportunity for governments to recover public spending commitments pro-rata from every tax payer and corporation in the country - purely based on individual incomes or business revenues. In the worst-case scenario this could mean firms posting a loss because they failed to make a profit after paying their fair share for running the country.

The key here is modelling a variety of different approaches to see which produces the fairest and most transparent system. This may well evolve over time as the controlling AI algorithm learns about what behaviours it engenders in firms to try and reduce their tax bill. 

The potential risks?

Whilst there will be supporters of the idea, this is going to be hugely controversial and unpopular with a lot of politicians, businesses, commentators, accountancy firms, certain news media and economists. It is already being cast as unbridled socialism, communism or Marxism by many proponents of low taxes and free markets. However, at present, no viable alternatives are being put on the table.

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.

The potential benefits?

A solution will be required if unemployment does rise and government revenues decline because of lower personal tax and VAT income. 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 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. Perhaps the fully automated corporation or Decentralised Autonomous Organisation (DAO) of the future may see its prime directive to serve humanity as a whole and maximise its contribution to society.

The first steps?

We don't know yet what robot taxes might look like in practice because no one has really tried. Thus, the first stage must be to run some serious computer simulations of different scenarios for the pace of automation and the impacts on employment in different countries around the world. These could be used as input to the development of economic models to explore the funding requirements of different public service strategies and how they might be met. If there's a shortfall between what's required and what could be collected under the current taxation regime, then the potential for different robot tax models (and any alternatives) could be evaluated and the likely implications assessed.

Artificial intelligence 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.