Does the UK need a robot tax?

Does the UK need a robot tax?

Reports of the world’s first robot tax are slightly exaggerated, but the underlying problem is real and the UK will need to act soon.

Colin Ben-Nathan


KPMG in the UK


Also on

robots and tax

Last week it was reported that South Korea had introduced the world’s first robot tax. Cue pictures of robots standing beside tax returns, piles of currency and question marks.

In reality, the change was less to do with taxing robots and more a response to the pressures that automation will bring to bear on human labour and the associated tax receipts.

What was announced?

What is being reported as the world’s first robot tax is not actually a tax at all. According to the Korea Times, South Korea provides a corporation tax deduction for investment in “industry automation equipment” which was due to expire later this year. The South Korean government, it reports, has now decided to extend the incentive until 2019 but at a reduced rate. 


Why is it being called a robot tax?

The reduction in the rate of the incentive is being attributed to fears that human labour will soon be supplanted by robotics and artificial intelligence (AI). This policy is therefore being interpreted as either an attempt to remove some of the fiscal incentives towards automation or a revenue raising measure to fund increased social security spending due to future increased unemployment. In practice, it is likely to do both.

What is the UK’s position?

Fundamentally, the issues being faced by South Korea are being faced by the UK and the rest of the world alike: will increased automation/AI lead to increased unemployment, lower tax receipts and increased social security spending? And if so, are there incentives in the tax system which need to be removed to slow the direction of travel? And, are there taxes which need to be reformulated now to anticipate the impending shift?

We wrote about one aspect of these issues in Tax Journal during the run up to the publication of the Taylor Review on Modern Working Practices.

In summary, our article said employer’s NIC is a payroll tax that unfortunately incentivises business away from the traditional employer/employee operating model - be it by moving to a self-employment model, offshoring or automating.

Our concern, we said, was that while employer’s NIC could be driving self-employment trends now, it could also end up driving unemployment trends in the future, as it will surely act as an added incentive for business to opt out of human labour entirely, as more sophisticated automation comes online.

But, employer’s NIC generates about £65 billion per annum so it cannot simply be abolished. The question we posed was whether employer’s NIC could be reformulated to still deliver the same revenue to the Exchequer but without the downward pressure on employment.

The potential solution we proposed, being one of many, was to decouple employer’s NIC altogether from the employer/employee relationship. We suggested that it could be reformulated to be calculated with reference to the operating costs of a business as a whole, as opposed to being limited purely to employee costs.

It would then be immaterial whether a business engages employees or the self-employed, offshores or, importantly, automates. Reference to ‘employer’s NIC’ would become a misnomer; so it could be called something like ‘business social contributions’ or ‘BSCs’.

The genesis of the article was really about debate. In light of the impending publication of the Taylor Review, we felt, and continue to feel, that the time was ripe for an honest and open debate about how we tax work and employer’s NIC in particular.

We are now currently waiting to see what action the UK Government will take in response to the Taylor Review (our comments on the Taylor Review are here). We were told in July by the Prime Minister that “[the Government] will take this agenda forward in the months ahead”. As South Korea’s move shows, other countries are starting to contemplate what the future will mean for their tax receipts and social security spending. And the UK needs to do so too.

However the Government chooses to move forward with the recommendations of the Taylor Review, we believe it must include the publication of an overarching roadmap for the taxation of labour, which also deals with the longer term structural issues arising from increasing automation and the like.

Next Steps

If you have any queries, please do not hesitate to get in touch with your normal contact or e-mail

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.

Sign up today