Tax Policy Considerations for a Robot Tax in South Africa

Enhancements in automation brings with it several benefits to workplace efficiencies but also places funding risks to the fiscus. This has potential for creating fiscal shortfall as payroll taxes decrease, thus a need to protect the erosion of the tax base. Should this labour displacement exponentially increase and is left uncurbed, it has potential for negative societal effects for the displaced workers and society at large. Balancing the benefits of automation with the potential revenue implications poses a challenge for policymakers. Addressing the taxation of robots in South Africa requires a comprehensive understanding of the economic, social, and technological dynamics at play. This desktop literature review qualitative study applies the principles of the Theory of Optimal Taxation and Laffer Curve Theory to explore the option of a tax on robots. The study concludes that current tax legislation favours automation (capital tax) as compared to human labour tax (payroll tax) and a change in policy to achieve tax neutrality between the two is imperative to avoid arbitrary. The article suggests a range of mechanisms and associated fiscal policy reforms that can be inextricably adopted.