Balancing automation and taxation

Money maker: a taxing system for robots need to be developed to maintain societal balances Money maker: a taxing system for robots need to be developed to maintain societal balances

Olaf Merk explains why ports should take the lead in defining how to tax automated industries

One of the biggest political issues of the coming decades is the future of work. Technological advances are such that more than half of the existing jobs could be automated. Automation might create new jobs, but these will very likely not offset the lost jobs. This has far-reaching consequences: uncorrected, automation will erode tax income, welfare state and lead to very unequal income distribution. Some people say that automation requires the introduction of a basic income and a ‘robot tax’.

Curiously enough, these issues are mostly absent from current political debate. Ports have been precursors in automated processes. Could ports now also lead the debate on such innovative policy responses to automation. 

Ports have been pioneers in automation. Long before it became fashionable to speak about automated driving or autonomous trucks, various ports already had their driverless trucks: the automated guided vehicles. These automation processes, like other productivity enhancing developments such as containerisation, brought employment losses that were dealt with more or less satisfactorily. Most of these transitions were facilitated by sustained trade growth or generous early retirement packages for redundant workers.

The concept of innovation is not new, and often innovations that have made workers redundant in the past have liberated the work force to take up other work, sometimes more rewarding. But times might be different now. Trade growth is stagnating and will probably never again reach the levels of the last decades. At the same time, robotisation could make more than half of current jobs disappear quickly. Terminal automation in such circumstances might have very different outcomes than in the previous decades – and result in the redundancy of people that are likely not to find another job again.

Picking up the bill

The business case for automated terminals is facilitated by governments that pick up the bill for the social costs. An important social cost is foregone tax revenues: robots do not pay taxes and do not consume, so they do not create economic growth. But there is a limit to the absorption capacity of the state: who pays public services if the robots have taken over all the work? Who will buy the goods if humans have stopped working? 

The crux here is that most people get income from work and that personal income tax revenues are generally higher than corporate tax revenues. The personal tax income lost due to the replacement of a worker by a machine is in many cases not compensated by higher corporate tax revenues – also due to fiscal optimisation strategies of multinational companies like global terminal operators. 

Not surprisingly, the literature on automation frequently suggests considering the introduction of a universal basic income, to be financed by some sort of tax on robots. A recent example of such a plea has come from no less than Bill Gates. 

Most ports are public bodies, so they should look at job impacts. Local firms expect the port to be productive, local communities expect it to generate jobs. So, any terminal automation project would raise concerns from port authorities, as well as from port-cities and states. Why would it be in their interest to perpetuate a system that favours automation by taxing labour, but not taxing robots? 

The issue is delicate: we do not want to stifle innovation, yet there might be a real problem with acceleration of automation. This discussion has started, but it has not gathered much momentum yet. The European Parliament discussed a tax on robots, but decided not to pursue it. The French presidential candidate Benoit Hamon proposed a universal basic income and a tax on robots, but his proposal hardly received attention – and he suffered a historic loss for a socialist candidate. 

This seems to cry out for a visionary port director willing to consider pilot projects on the taxation of automation in port terminals. Such pilots could help to advance questions such as: what to tax, how to tax, how to link the tax to education and reconversion of workers, should it be a temporary tax and whom to tax, and should there be others than the terminal operators that could contribute to the mitigation of social costs? Ports were at the forefront of automation; could they now be the pioneers in exploring solutions to mitigate the social impacts of automation? 

Olaf Merk is a ports and shipping expert with an international organisation and the author of the Shipping Today (www.shippingtoday.eu) blog.

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