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Dear Jeremy, a robot tax isn’t going to work and here’s why

Jeremy Corbyn has declared that there will be a tax on companies using technology to replace workers. He said so yesterday at the Labour Party Conference and it was widely trailed in the Telegraph and elsewhere. As a policy it has a lot to recommend it on a surface reading. The only difficulty is that it misses the very nature of robotics as outsourcing professionals understand it. And it won’t work.

First let’s look at the positives. The Labour Party is, its name suggests, supposed to represent the labour force. Employers, rightly or wrongly, will use automation to reduce costs so there is a powerful argument that suggests reducing the financial incentives to make staffing cuts will keep people in work. Employers would expect to pay a contribution to an employee’s tax so why not tax them on robotic employees too? The proverbial playing field starts to even itself up almost immediately. It just unevens itself elsewhere.

If this week has taught us anything in economics then it’s that any “special relationship” between the UK and the US is malleable, particularly when it comes to supply chains. America is imposing tariffs on aircraft manufacturer Bombardier. This followed a complaint from Boeing about a contract in which it didn’t even bid. The idea that the US and others are waiting to award the UK or anybody else, indeed, massive contracts and that Brexit will make Britain a bigger winner than anybody else is starting to look a little shallow. This matters in the world of robotics.

It matters because if Britain imposes a tax regime on robotic employees and America doesn’t, the evenness of the playing field is eliminated. America, and any territory also not following Britain’s lead, becomes a more appealing place to do business. However, we have to grant that Corbyn isn’t a great fan of the free market and has never claimed to be. This is where the other problem occurs, though.

What exactly is a robot?

A couple of months in to the post of editing the magazine now known as Intelligent Sourcing, I got chatting to a guy at an event. He specialised in RPA, he said, that’s interesting, I replied, as I casually pretended to respond to a text whilst Googling the initials he’d just used. Robotics, hmm. What exactly do you offer, I asked.

He described his product. Hang on, I said. Isn’t that just a macro in Excel? Yes, he said. That’s what robotics is.

This is obviously an extreme and slightly dated example but it does highlight the problem with the Corbyn dictum. What exactly is a robot and how are you going to arrange the taxes? It may be something physical. Assembly lines are frequently automated and it’s difficult to imagine car manufacturers working without substantial (and existing) robotisation. So what do we do, tax them because they have replaced jobs that used to be done by hand?

On the software front there will be obvious examples in which a robot has replaced a person. Earlier this year, readers might have seen the interview I did with the CEO of Automation Anywhere. He was bullish about the prospects of robots creating jobs or the conditions in which new jobs would flourish, but that’s a side point. His offerings would definitely replace employees in repetitive jobs, at least initially. But what about my contact from the event?

In fact let’s take it further back. Why are there no typing pools any more? The answer is that automation has allowed executives to do their own typing and eliminate the errors. Do we now have to tax every employer that buys a computer for an employee? And if someone classifies a macro as a piece of robotics and it eliminates enough drudgery so that a task takes a day rather than two days, is that also taxable because productivity has increased?

There are many concerns about robotisation. Change management needs to be handled sensitively and carefully. Applying tax incentives to keep human employees where economically possible may be a useful part of an over-arching policy on how to adjust to these changes. Three months into a new government there’s arguably no need for an opposition leader to spell out detail anyway, at this stage it’s all about setting the mood music and grabbing the headlines.

There’d better be more detail soon, though. It all sounds very eloquent but at the moment nothing practicable is on the table.

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