The importance of a discussion about robot tax

There is a new record of robots in use, as the data of the International Federation of Robotics shows. In 2022, the number of operational robots in use reached an astonishing 3,500,000 units. Although most of the newly deployed robots „got a job” in Asia, there was a 24% percent increase in the European region, up to 84,302 new units in one year.[1]

Robots belong to the physical type of AIs, while the other category is AIs that do not exist in the physical world, such as virtual assistants, including the recently very popular ChatGPT.

The birth of the idea

In 2017, one of the biggest names in IT, Bill Gates, said that if a robot gets the same job done, we should consider to impose the same tax burden on it as on human labour.[2] Previously, in 2016, Mady Delvaux-Stehres, a Member of the European Parliament proposed a legislation to consider robots „electronic persons”, and so their owners should pay social security for them, and the work they do should be taxed.[3] The EP rejected the legislation in 2017, and even the International Federation of Robotics declared that the robot tax would lead to negative impacts on employment.

Advantages, disadvantages

At first glance, only the advantages of the employment of robots are apparent. These advantages are, among others: the most dangerous and monotonous jobs can be done without human labour, leaving humans free to do more creative work; and in cases when the robots require less time to finish a job, the employer can increase profits and save money for the company, since the robots won’t call in sick, won’t go on a holiday and overall more economic growth can be achieved due to the elimination of labour shortages.

However – as the IFR drew attention to beforehand – there are disadvantages to robot labour. These disadvantages can show us exactly how important the topic of taxation of robots is. I am going to underline the impontance of the topic based on recent Hungarian data to support my opinion that we must either improve the current legislation or create new regulation concerning the taxation of robots, since the share of robots in the workplace is rapidly increasing.

In Hungary, the tax and contribution liabilities on wages and salaries payable by the employee are the following: 15% personal income tax, 10% pension contribution, 7% health insurance contribution and 1.5% labour market contribution. Furthermore, the employer must pay a 13% social contribution tax as well. Based on the data of the Central Bureau of Statistics, the average Hungarian salary is 559,100 HUF (roughly 1450 EUR) gross. Based on the average wage, this means that a worker pays the following per month:

– 83,865 HUF personal income tax,

– 55,910 HUF pension contribution,

– 39,137 HUF health insurance contributions, and

– 8,386 HUF labour market contribution

 to the state coffers, and the employer pays an additional 72,683 HUF as social contribution every month. Thus, the state receives a monthly total of 259,261 HUF per average wage, which amounts to 3,111,132 HUF per year (roughly 8080 EUR).

For comparison, „the annual average salary in Germany was roughly €49,260 before taxes. After taxes (42%), the average salary in Germany in 2022 stood at around €28,570 per annum and €2,380 per month.”[4] If we do the math, the average annual amount of taxes in Germany, the biggest economic power in the EU is 20,690 EUR (roughly 7,965,650 HUF).

With the number of robots in use rapidly increasing, the predictions show that robots could take over 20 million jobs in manufacturing only.[5] Imagine the amount which is missing from the government’s revenues due to the lack of taxation on the work of robots.

Not only will the declining revenues be a factor to consider, but those workers who lost their jobs to robots as well. With taxing the robots, the income could partially be used for retraining those people for other jobs. Optimally though, robots should not take jobs away from humans, and instead, the labour shortage that Europe is currently experiencing could be eliminated through the use of robots, since labour shortages – as stated previously – are barriers of economic growth. For example, in Hungary there were 406,500 job vacancies reported in 2022, meanwhile, in the same year, the number of unemployed people was 188,900.[6] Now, if we consider an idealistic case where all the unemployed people find a job, there would be still roughly 200,000 jobs to fill in Hungary alone. Even if the robots do not take jobs away from people, governments wouldn’t realize any income after the work of robots without the robot tax. Some research shows that roughly 108,000 employees in transportation and 106,600 employees in construction are expected to be highly affected in seven years, in Hungary only.[7]

No taxation without representation

The slogan „no taxation without representation” is familiar to all, since it was one of the major reasons the American Revolution happened. Unlike the colonialists, the robots will not start a revolution to have a say in the national parliaments, but the phrase anticipates the problems arising from the topic.

Although the specific regulations may differ, all legal systems distinguish between natural persons and legal persons. This distinction made possible to create the different types of taxes, and due to taxes, states and societies are able to function. As early as 1776, Adam Smith set out four principles of good taxation: to be transparent and free of arbitrary exemptions, to be fair and free of privileges, to be convenient to complete and to be cheap to collect.[8] At first it seems absolutely feasible to create a solution of taxing the robots, but a new tax category also requires a taxable person[9]. What previous category of persons could a robot fit in? Should it be counted as a natural person? Should it be counted as a legal person, just like a company? If neither, should we create a new type, the electric person? Although it is the most labour-intensive solution, it is only way to approach the subject, due to the limited options caused by the current allocation, and it is exactly why governments should engage more with the question.

If the tax liability of robots is properly defined, we can take the next step and look for the right type of tax which a robot could pay, but for that, the key question is how to define robots, how to create the electric person’s fundamental legal personality, as an individual or as property.

Employment of robots

Three approaches to robot employment can be distinguished. The first is when we count the robots as individuals, so the employer has to pay a wage, just like in case of a human being, so the taxes and contributions would be the same as well. In the case of the other two approaches, the question of ownership also enters the equation. The robot is either the property of the employer, so he would not have to pay anything after its employment, just like a business owner doesn’t have to pay extra after a machine he uses, or it is a property of somebody else, who rents out his property for business owners so that owner doesn’t have to pay a human being to do the job.

The first approach is the best for the governments from a fiscal perspective, since more money comes in due to more „people” working and more economic growth is achieved. The second one is obviously the worst scenario for governments, since most of the employers would switch to non-human workforce as it would make businesses cheaper to operate which equals more profit, meanwhile the unemployment grows. The third one is kind of a win-win-win situation (or lose-lose-lose), since the employer has to pay less, the owner gets an income, and the state gets some money after the tax on personal income.

For these reasons, it is essential to define the legal personality of robots, as it is clear that further regulation cannot be decided without it.


Without the intention of creating a comprehensive analysis of the topic, my goal was to draw attention on the topic – as it is becoming more and more urgent to regulate properly. The need for appropriate regulation arises both from the importance of the subject and from the theoretical difficulties of the future regulation. No one doubts that artificial intelligence is becoming a part of our daily life, and as a part of it, it should be satisfactorily regulated. As it can be seen from the above, not only will it be a part of our life, but in certain cases robots will be a competitor for some – if not all – of us in the labour market.

Author: Sebestyén Márk Pella, law student, University of Debrecen Faculty of Law

The present paper was supported by the ÚNKP-23-2 New National Excellence Program of the Ministry for Culture and Innovation from the source of the National Research, Development and Innovation Fund.








[8] Olelakan – Oyedokun: Relevance of Adam Smith canons of taxation to the modern tax system, Journal of Taxation and Economic Development, 2019, pg. 20.

[9] The definition of a taxable person int he VAT Directive: any person or body, who, independently, carries out any place any economic activity, whatever the purpose or results