Recently the Welsh Labour Government started a consultation where they asked the people of Wales to suggest a new tax. Early examples were a ‘plastics tax’ on plastic bottles and other household plastics, a ‘Sun bed Tax’ to increase the cost of harmful sun beds and a ‘Tourism Levy’ much like Tourism taxes used across the European Continent.
Whilst many of these taxes are designed to discourage activities which have negative social impacts or are potentially damaging to health, the question is do they go far enough? Are they revolutionary enough to fund our public services at a time when the average worker is both struggling to make ends meet and is tired of tax? The answer, unfortunately, is probably not.
A recent report from PWC stated that 30% of the workforce could lose their jobs within 15 years. The economic impact of which would be catastrophic, not only in terms of increased welfare payments and decreased consumer spending but most importantly for our public services, a tax black hole. The argument against this proposition in the past has always been that workers will retrain, that there will always be work out there if you look hard enough.
Though we are right to question if this work exists, if there is funding available for retraining, will the jobs pay the same? Will it plug our revenue black hole? Shop-workers, builders, Delivery drivers, Data-analysts, Doctors and Lawyers alike, the robots are coming for your jobs. I have written previously on what can be done to plug the income gap caused by automation, but what happens to the public purse when the jobs dry out? Is our tax system set up to take the strain?
Income Tax is the most likely casualty of increasing automation. The IFS put income tax revenue at £182 Billion or more bluntly 25.4% of our overall tax revenue. If we could potentially lose 30% of our workforce what would the effect be to the public purse? Recent arguments have been put forward for 100% inheritance taxes. I disagree with such a move for many reasons but also because such a move will not plug the gap that is coming. Inheritance tax is currently 0.7% of our tax revenue. Even if we saw a tenfold increase it wouldn’t be enough.
Yes, we could raise more corporation tax, but that’s only 6% of revenue currently. What is the limit we can charge in corporation tax before business starts to run? This, by the way, is not an argument against taxation, nor is it an argument for packing up our bags and admitting the state and public services have lost and we all need to march happily into private health care and fee paying schools. Quite the opposite. We need to be innovative and start to question whether our tax system is fit for purpose, are we analogue in a digital age? It is not enough to simply put up tax rates in our existing taxes, though that realistically must play a part.
Asking the average person what new taxes they want to pay is often about as popular as asking them which Coldplay album they’d like to have as their only Desert Island Disk? Or whether they’d rather be stuck for eternity in a small room with Bono from U2 singing from one of their recent albums or Iain Duncan Smith reciting all his Conservative Party Conference speeches? It’s not going to be an easy conversation, but it is one we must start to have.
I, for one, would argue that companies that mechanise their workforce should have to pay a tax on the profit made on goods sold or services rendered when said job is done by a machine. What do you think? What tax would you like to talk about?