31 What has been done so far Many Essay

3.1. What has been done so far

Many countries in the European Union have been “bragging” lately about the ratio of robots they have to human workers. Take Germany for instance, the statistics show that there are 292 items for every 10,100 workers. Are these numbers about to decrease?, seeing as EU is considering issuing a new tax policy, which would levy a special tax, on what’s called “an electronic person”.

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As previously mentioned, the European Union raised the issue of robot taxation several times.

On the 31st of May, the EP’s committee on Legal Affairs (JURI) issued a draft report on “Civil Law Rules on Robotics with recommendations to the EC”. The report requests for the “establishment of committees on robot ethics in hospitals and other health care institutions tasked with considering and assisting in resolving unusual, complicated ethical problems involving issues that affect the care and treatment of patient”. It focuses on robotics and how these are autonomous vehicles and suggests that they need to be controlled by being subject to some sort of legal regulation.

This move suggests that EU embarks on a proactive approach towards robot taxation.

Mady Delvaux, the EP member who was the rapporteur for this initiative, considered that it very important to define a robot legally. If there is not a clear definition of what is a “robot” from a legal point of view, then how could one speak about its liability such as paying a tax? This was why they decided to focus on a robot’s characteristics by creating the following framework: a smart robot 1. acquired its autonomy through sensors and/or by exchanging data with its environment (interconnectivity) and the trading and analysis of those data, 2. self-learns from experience and by interaction, 3. can support itself physically, 4. can adapt itself to the environment, 5. has no life in biological sense.

The items are referred to as being “smart autonomous robots” which directly influence the workforce by creating challenges for human workers. By challenges it is meant that the inventions require advancement in digital skills and in this way they create a competition for normal workers. It is implied that robots can perform a bigger amount of workload within a shorted time limit compared to persons, and therefore they prove to be more efficient and save costs. As a consequence to this, the draft calls for implementation of employment forecast mechanisms to monitor job trends. It also suggests refocusing on the educational systems to train and equip persons with necessary skills. Alongside, it mentions a new taxation system, which would make up for the created inequality seeing as automation can decrease tax revenues (less tax payers employed).

Another important point mentioned in the report is the creation of the “European Agency for Robotics and AI” which would consist of regulators and external technical and ethical experts who’s duty would be monitoring artificial intelligence and robotics-based trends and recommend the best practice and regulation of the matter striving for best consumer protection and security. The agency would advice the EU and its MS consequently on how to deal with these technologies’ potential and how to mitigate possible risks. The EU would have to provide for a registration system for all the smart robots.

The draft recognizes the need for a change at the EU level in order to adapt to the new developments and to avoid the fragmentation of standards in the single market. Moreover, it calls for new rules in the area of intellectual property law in order to keep up with evolution of science and its effect on the economy and EU citizens’ lives. The committee suggests that the EU Commission should focus on the assessment of the possible legal tools in order to regulate primarily on liability issues concerning smart robots.

All in all, the draft represents a combination of hard and soft laws to guard against potential damage caused by the robotics participating actively in the job market.

The legal basis for the proposal is to be considered art 114 TFEU . Also, in accordance with art 5(4) of the Treaty , which establishes that the Union is compelled to act only by subsidiarity principle, meaning only in cases when the goal pursued cannot be sufficiently achieved on a national level by the MS. It is argued that the robotics industry is currently developing Union wide and each state tries to regulate it on their own enacting different laws or regulatory measures. These differences, can potentially become an obstacle for the development of trade in-between states and consequently hinder the functioning of one of the core values of the union which is a prosper single market.

3.2. EU’s current approach to robot taxation:

Despite all the efforts and mediatization of the topic, in February 2017, the proposal to impose the robot tax got rejected. The robotics industry welcomed the rejection saying that it would stunt innovation. The International Federation of Robotics (IFR), based in Frankfurt, issued a statement saying that they believe that the introduction of a robot tax would have had a negative impact on competiveness and employment. Opposing the argument that robots would “steal” jobs from human workers, they believe that on the contrary, robots will create new jobs by increasing productivity and therefore they point to a correlation between robot density and employment in advanced industrial nations (for example self-driving car industry in Germany).

The author of the report expressed her disappointment in MEP’s failure to recognize the need for this new tax policy and how the lack of which can have negative effects on the job market. She argued that MEPs refuse to take into consideration EU citizen’s needs in current circumstances and therefore, manifest ignorance.

Following these voting results, even though the enactment of a tax policy was denied, people who remained in favor of the reform were still a considerable number. Therefore, negotiations continued, until very recently (to the time that I am writing this paper).

On the 30th of January, the rapporteur Ashley Foxx, in the name of the Committee on Industry, Research and Energy, issued another report on “A comprehensive European industrial policy on artificial intelligence and robotics” in which under subsection 1.5 mentions that a society supported by artificial intelligence and robotics is in need of redesigning labor market policies, social security schemes and taxation in order to keep a “delicate balance” between the owners and workers. Consequently, the reports continue to show that some MEP are strongly in favor and keep pushing for a change or better to speak, an adaptation of the EU legislation to the current developments, even though reaching an agreement is still very much a dreamy scenario.

Nevertheless, one may wonder, if this issue is to be approached on a more practical level, how would this taxation actually work? What would be the options for implementing these reforms in practice? How would robots actually be able to pay taxes?

3.3. Future perspective: options on how to tax robots:

In his article about robot taxation, the Swiss tax law professor Xavier Oberson mentions several sound arguments as to what are the practical effects of taxation of robots.

He speaks about associating a robot with an enterprise. The rationale for doing this is rather simple: back in the days, enterprises did not have what now it’s called a “legal personality”, nowadays they do. Based on this, they can be held liable and can be subject to taxes. If one follows the same logic with robotics, then the answer would be that, yes indeed, robots can be granted legal personality.

The concept of “legal personality” first appeared in the UK with the purpose to grant legal remedy against insolvent companies with limited liability. In an well known case of Salomon v. A Salomon & Co Ltd (1897) , the Upper House of the Parliament, (entitled with judicial competences at the time), unanimously upheld the doctrine of legal personality, under the UK Companies Act of 1862, and stated that creditors could not sue the entity’s shareholders. Therefore, a company was proven to have an autonomous legal personality from its owner’s identity. Consequently, an enterprise became capable of having debts, property, concluding contracts and so on. Following this rationale, it is clear that robots are in principle qualified for being granted a legal personality.

As robots would be recognized as legal subjects and as there a different types of taxes, the question that arises is: to what type of tax would then they be subject to? Logical answer would be, to a tax according to a legal position of the robot at stake. For instance, a robot is employed by a company. As initially said, they would replace humans, which would have paid taxes as employees. Therefore, robots would need to pay a tax on the imputed hypothetical salary that they would receive from the equivalent work done by persons. This practice would resemble a contractual relationship between an employer company and an employee.

Another scenario would be if a smart robot is owned by a company or by an individual and acts under the conditions of a contract of services (moral support, advising, entertainment). Then, the imputed income would correspond to the economic advantage gained from the usage of robots instead of human force or services. The same rationale would follow. The activity performed by the robot as a replacement for what a human could’ve done for economic remuneration.

In principle, most robots would be owned by corporations. The downside however of such practice would be that if a tax would be levied on the income attributable to robots’ activities, the issue of “double economic taxation” might appear. This concept means that two different taxpayers (in this case, a company that owns a robot and the robot itself) would have to pay a tax with respect to the same income or capital. This is a clear economic disadvantage for the enterprise.

But even to this problem a solution could be found. If one compares a human worker to a robot and allocates their theoretical salary corresponding to the work done, this salary should consequently be deducted as a cost at the company level, so double taxation would not happen. As the concept would be that robots replace humans, then indeed the salary paid to a robot should be recognized as deductible business expense in the same way as it happens for persons. Moreover, in order to collect the tax on the income, which is attributable to the activities of robots, a system of taxation could be introduced at the level of the employer, meaning that the owner of the company, which employs robots, would have to pay taxes for it.

Assuming that robots would be subject to taxes, the next logical step would be that the income attributable to robots’ activities would be subject to social security contributions. This idea has already been brought up by the Spanish workers’ union called UGT (Union General de Trabajadores). The association proposed to introduce a charge for social security on the enterprises that own robots, which perform activities instead of humans.

Last but certainly not least, as this paper focuses on the European Union arena, the question is, whether it would be possible to make robots subject to VAT?

If the possibility to impose a tax on robots exists, logically it follows that the possibility to make its activities subject to a VAT is also realizable. As previously stated, if robots replace human activities, for which taxes are collected, these activities could fall under the mechanism of taxation of goods and services in the EU, namely the Value Added Tax. But before giving a clear answer whether this is possible or not, one should consider 3 aspects.

First, it should be assessed whether in perspective a robot could be seen as an enterprise, which would be subject to VAT. Second, the characterization of robots’ activities should be given a clear definition. Third, the place of supply of these transfers should be defined too.

It is relevant to mention the EU VAT Directive (2006/112), and specifically art 2(1)(a) which states that any activity which is exercised independently, in return for remuneration, may be subject to VAT. However, the question is: to what extent a robot can be considered independent enough to become subject to VAT? , After all, it is a machine that is in a certain way controlled by humans. Therefore, the independence principle that is mentioned in the Directive should be referred to a robot’s definition of autonomy (which has been discussed previously in section 3.1. about the EU proposal).

Up to this date, in the EU final report, the definition of a robot’s autonomy is said to be “the ability to take and implement decisions in the outside world, independently of external control or influence”.

In order to add more certainty, a definition of “independence” and how it applies to things like smart robots could be added in the Directive. Consequently, a robot would be very much like a human worker acting in the company – employed and controlled or supervised by the owner/employer. So there would be no problem to make it subject to VAT.

Taking into account all the points made above, it follows that the possibility to make robots subject to taxation in the EU is very realistic, however the current legislation does lack important features to make this happen.


The purpose of this paper was to analyze whether robots’ activities as a workforce should be subject to taxation with a specific focus on the European Union’s involvement in approaching this issue.

As human workers are substituted by automation these days, the follow-on effects are that people lose jobs, cannot keep up with science developments and this obviously directly affects their lives. These however are not the only effects that happen around the world. Due to lack of taxation of robots, governments lose revenues and cannot control budgets and therefore inequality rises and systems of governance encounter economical problems. Even though automation comes with great advantages, all the above mentioned proves that a mechanism of taxation is indeed needed in order to keep a fair, well functioning system for the society.

As discussed previously, granting robots a legal personality would make it possible for them to be taxed. For this to happen, it was established that a certain degree of autonomy (independence) is needed. So far, only at the EU level this issue has been touched upon so specifically. As stated above, the EU bill established a framework with regards to what is a “smart robot”, emphasizing the importance of their “autonomy” and therefore narrowed down the number of possible things that fall into this category. However, as it can be seen from the discussion, certain aspects are still lacking, such as a definition of “independence” per se and how would it be applicable to what according to the EU is a smart robot.

Even with all this, EU remains pretty much the only actor that managed to keep its position in favor up to this day (despite the previous rejection of the bill) and the only one to have already developed rules of “civil law” with regards to robotics.

Future holds some gaps in the legislation and challenges to overcome for the EU to finalize what they started and enact legislation on robot taxation however first, it is fair to say that robots need to be made in a way to be tax compliant. The reason for this is simple: what if we do manage to establish a well functioning tax policy for robotics, but they simple become so “independent” that they refuse to pay taxes one day?

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