Automation and taxation

• Published in: Oxford economic papers Vol. 76; no. 4; pp. 945 - 969
• Main Authors: Hötte, Kerstin, Theodorakopoulos, Angelos, Koutroumpis, Pantelis
• Format: Journal Article
• Language: English
• Published: Oxford Oxford University Press 01-10-2024; Oxford Publishing Limited (England)
• Subjects: Automation; Budgets; Communications technology; Information technology; Sales; Tax revenues; Taxation; E20; fiscal revenues; H20; technological change; ICT; robots; O30; labor
• ISSN: 0030-7653; 1464-3812
• DOI: 10.1093/oep/gpae006

Abstract
Do automation-induced changes in labour and capital income undermine public revenues? Decomposing taxes by source (labour, capital, sales), we analyse the impact of automation on tax revenues and the structure of taxation in nineteen EU countries during 1995–2016. Before 2008 robot diffusion was associated with a decline in total tax revenues and taxes from capital, along with decreasing labour and capital income and output. After 2007, the negative effects diminish. Information and Communication Technologies show a weak negative but persistent effect on total tax revenues and taxes on goods for the full period, and an increase in capital income. Overall, the impact of automation on production and taxation varies over time. Whether automation erodes taxation depends on the technology and stage of diffusion. Concerns about public budgets appear myopic when focusing on the short run and ignoring relevant technological trends.