Economic Chronicle: the day AI pays its taxes

On that day, we will be able to say that artificial intelligence has acquired legal personality. Because those who promote the idea of ​​taxing AI (as they have constantly suggested for robots) and go so far as to imagine giving the various applications which use it with their own identity, those – this will have won out the skeptics, for whom the algorithms which define AI are nothing other than sequences of logical instructions devoid of anything that could resemble, closely or remotely, taxable subjects.

It can obviously be argued that one does not necessarily have to be made up of flesh and blood to become a taxpayer: the different forms of legal persons, whether under private law (public limited companies, cooperatives, associations, foundations) or public law (certain establishments), were also made tax subjects. But we had never before imagined what sleight of hand tools, mathematical constructions or simple computer applications could become.

It is clear that technological progress, including that which gives rise to and exponentially develops the performance of AI, threatens salaried work. It is above all this threat, that of making a good number of jobs disappear, which fuels the thoughts of those, such as the Genevan tax professor and lawyer Xavier Oberson, who campaign in favor of taxing artificial intelligence, and imagine various ways of subjecting it to tax. Reflection less legal and more focused on the economic aspects – in the theoretical sense – of the question leads us to consider it from the angle of the efficiency of tax systems.

If we indeed consider the way in which these are constructed, we see that most of the tax revenue comes from the taxation of labor income. However, given that companies, constantly looking for ways to reduce their salary and tax costs, are therefore encouraged to rationalize their processes and therefore to replace work with machines, software, applications based on AI , etc., in other words through capital, the product of income tax necessarily tends to decrease. So that the State’s budgetary resources are reduced, while at the same time the expenditure on assistance to laid-off employees and public aid for their return to employment continues to increase*.

The temptation is therefore great to completely reverse the tax base and reduce the weight of the tax on labor to increase that of the tax on capital. Problem, if capital is taxed more, companies will be dissuaded from ‘invest and the slowdown in investment spending, a significant component of gross domestic product (26% in the case of Switzerland), as well as the loss of efficiency gains that will result for the entire economy, will weigh in turn on growth.

Which leads many experts, including tax administration officials, to consider that “taxing robots is not a good idea”**. The debate, for sure, is not likely to last long.

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