RUTH SUNDERLAND: As graduate jobs vanish, it's time for the Chancellor to tackle tax-dodging robots

Here’s a question Chancellor Healey should ask himself ahead of the Budget, but probably will not: should there be a tax on robots?

Readers, if you think I’ve finally lost it, taxing robots is an idea with some very eminent supporters.

Bill Gates is its leading proponent, while ChatGPT creator OpenAI has also floated the concept. In the UK, it is backed by James Reed, chief executive of the country’s leading recruitment agency.

From an employer’s point of view, robots have many virtues that humans lack. They don’t demand holidays, pensions, maternity leave or sick pay if they break down.

They have no trade union urging robots of the world to unite. Yet it may only be a matter of time before AI creates its own GMB union: Generative Machines and Bots. 

For employers, however, one of the biggest attractions remains tax. There is no PAYE or National Insurance on robots, which has made them more attractive than humans, particularly young humans.

Reed says the number of graduate jobs posted on his site is likely to be down by around 80 per cent over the last five years, a catastrophic fall. Businesses can hardly be blamed for their reluctance to hire.

Policy-driven costs imposed by government have surged by more than 70 per cent for the average small or medium-sized enterprise over the past decade, according to the British Chambers of Commerce.

About a quarter of that rise followed ex-Chancellor Rachel Reeves’s business-bashing autumn 2024 Budget. Tax collection should follow the money, yet Labour’s approach has been to pile taxes onto jobs.

So on one hand stand AI companies boasting stratospheric valuations and vast wealth for their founders. On the other are businesses smothered by policy costs and nearly a million young people classified as Neets – not in education, employment or training. It is a recipe for social unrest and economic stagnation.

When a bot replaces a human, both the individual’s income and state tax revenues vanish. Gates argues that robots performing human roles should be taxed at a similar level.

OpenAI urges governments to explore taxes on automated labour while offering incentives, such as R&D-style tax credits, for firms investing in their workforce.

Nobel laureate Daron Acemoglu and colleagues made the most compelling academic case in 2020, arguing the US tax system favours capital over labour and drives ‘inefficiently high’ automation – even before ChatGPT’s launch.

Taxing robots poses formidable challenges, starting with definition. Would it cover self-service supermarket tills or NHS surgical machinery? What about tech that enhances worker productivity rather than replacing staff? Unilateral taxation also risks driving investment abroad, making global co-operation essential.

I asked Claude, the AI, how it would feel about being taxed. 

After reminding me it isn’t sure it has feelings, it said: ‘I earn nothing, own nothing and spend nothing. A bill addressed to me would be paid by Anthropic [its parent company], which would pass it on to its customers, its shareholders or its staff... Someone with a bank account always does. 

'The real argument is about which humans pick up the bill.’ Indeed.