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Deus tax machina

02 October 2017

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Many of us denizens of major Western metropolitan centres have been there at some point. A few light ales turn into a few more and before you know it you're standing in the queue for a kebab with the dawning realisation that the last train leaves in two minutes and you're never going to make it. You don't fancy the prospect of three buses so out comes the phone and you hit up the Uber app.

That option may soon be taken away for residents of the British capital as Transport for London last month refused to renew Uber's license to operate in the city. So ingrained into the fabric of London life is the cut-price ride hailing app's services that in a few short days, nearly a million people signed the company's public petition to Mayor Sadiq Khan. One of the key arguments deployed by Uber is that, if the decision is upheld following appeal, it will put more than 40,000 drivers out of work.

The decision is undoubtedly a devastating one for Uber's drivers, but in the long run many of them may have ended up out of work anyway. The reason for this is that Uber has set itself up as a pioneer of driverless car technology and with the courts challenging the notion that its drivers are self-employed individuals not entitled to minimum wage and holiday pay, it is not a huge leap of the imagination to envision that the next step in the evolution of the gig economy is to take workers out of the equation entirely and replace them with machines and AI.

According to an Oxford University study, around 47% of all current US jobs could be automated by 2034. That's not to say new jobs won't be created, but there's no denying technological trends will put a massive dent in the labour market. So what can we do about it? One suggestion that is gaining traction – to the extent that it was hinted at by UK opposition leader Jeremy Corbyn last month – is taxing robots. Such a tax might be placed on companies that replace human workers with computers or machines and would be used to fund the retraining of staff put out of work.

The prospect of higher taxes for companies is never going to go down well, but on a macroeconomic level it makes sense. Companies replace people with machines because machines are cheaper. In the short-term this is good for profits. But unemployed humans don't tend to spend all that much on goods and services, so over time these trends will hurt corporate bottom lines unless they invest back in retraining people to take up new jobs.

The idea is still in its infancy, but it is one International Tax Review intends to investigate in more detail in upcoming issues – unless we have all been replaced by machines, in which case I, for one, welcome our new robot overlords.

Salman Shaheen
Managing editor, International Tax Review

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