Future taxation systems: financing the state revenue during the change of the labour market
Robots, networking systems and artificial intelligence are taking over the work force by storm. While we can see the economy drifting away from human labour as its main basis, the state revenue is still mainly comprised of its taxation. This could have detrimental effects on economic sustainability. We therefore want to implement new taxation models that complement the digital economy of the future. The taxation of two focal points of this economy, energy and data, can help us to support technological progress while maintaining economic efficiency and sustainability.
We live in the middle of a rapidly changing economy. The taxi driver who you might have seen down the street the other day might lose his job to an autonomous car in five or ten years. Factory robots are already being replaced by robots and networking systems on a large scale. With jobless workers comes a higher need for social security, which naturally results in the state that now must provide for those workers especially during the change of the labour market having to rely on a higher income which is primarily comprised of taxes. With the current taxation system being centred around the taxation of wages, the adaptation towards an economy that won’t rely on human labour anymore is severely hindered and the protection of the people affected by it endangered.
In order to adapt our taxation system to the economy of the future, we believe that it is crucial to focus on what that economy centres around. The more digitalised the industry gets, the more significant the importance of energy and data becomes. While there is already an energy tax, it is only on some types of energy and especially compared to the income tax doesn’t generate a lot of money right now. Moving the focus of taxation towards energy could not only create a more efficient taxation system but also behavioural incentives to use energy responsibly.
Another promising approach is the data tax. Data of high economic value is currently largely disregarded by most taxation systems. Taxing big companies for stored data or the provision of services with high data flow would especially be a possibility to tax global players in the digital world more efficiently, since, contrary to company revenue, data flow is a lot easier to track and control. Therefore, loopholes which currently result in many big companies paying virtually no taxes at all could be avoided.
Regardless of what approaches we choose, it is crucial to take steps now to support the shift towards the economy of the future with a complementary taxation system. Changes like this can’t happen overnight, which is why we must implement measures now to prevent future negative repercussions, seize opportunities and ensure the success of the digital economy for which we are responsible for.
“In this world, nothing can be said to be certain, except death and taxes.” This is what Benjamin Franklin wrote in a letter in 1789. Yet, is this still a certainty in a globalised world? Revelations like the “Panama Papers” or about the tricks football players like Christiano Ronaldo and others used to evade taxes let us have doubts. Yet, taxes are indispensable to provide public goods and services like schools, hospitals and roads. For modern welfare states, taxes are the primary instrument to redistribute income and to ensure that those in need are provided with essential supplies.
You can continue to read more about the YES! 2017 topic Modern Tax Policy.
The project Modern Tax Policy was proposed by our academic partner Centre for European Economic Research (ZEW) in Mannheim and the researchers Paul Hufe and Carina Woodage.
This topic has been selected to work on by the YES! team of the Albert-Einstein-Gymnasium Ulm.