With Brexit negotiations growing more heated and important than ever before, most of the UK’s attention is being diverted towards the ongoing conversations taking place in London and Brussels. An even more important seismic shift in how the UK functions is coming in the form of the 4 th industrial revolution, however, which is presenting serious challenges in regard to how we organize our economy and collect our taxes.
Here’s how UK taxation is dealing with the 4th industrial revolution, and what financial professionals, accountants, and government workers alike should be preparing themselves for.
The dawn of a new era
It can safely be said that the 4th industrial revolution is essentially the dawn of a new era in business. While the 3rd industrial revolution is widely considered to have been the wave of digitization and automation that swept over the globe in past decades, the 4th is coming to be viewed as a massive change in the ways that we view digital technology and industry in an interconnected world. As billions of people connect to the internet and international economies grow vastly more interdependent on one another, an entire new chapter of economic history is opening up before us. This poses many challenges and opportunities alike to the UK.
As the frantic negotiations and manufacturing crises surrounding Brexit have illustrated, for instance, age-old questions surrounding tariff regimes, import restrictions, and how trans-national industries will be governed are resurfacing. Regional disputes between the UK and the EU are likely to continue into the near future, and other negotiations with different countries could heat up as well. If the nation is to survive the 4th industrial revolution intact, it needs to re-examine its taxation system so that it’s flexible enough to endure the forthcoming shocks.
So, what has the UK done so far to modernize its taxation system? Thus far, we’ve failed on virtually every front; our Making Tax Digital plan has stalled as of late, largely due to the political headaches surrounding the modernization of any complicated government system. Though HMRC has been publishing updates and posting new information about Making Tax Digital this year, it’s safe to say that relatively little meaningful progress has been made thus far.
This should serve as a wakeup call to financial professionals in the UK. As the international economy grows more complex and interconnected, a more thorough and fair tax system will be crucial towards the sustained well-being of the UK. If UK accountants and financial professionals don’t start addressing problems associated with the 4th industrial revolution soon, they’ll soon be left behind.
The UK has reformed before
The good news is that the story of the UK is essentially one of continuous reform, both in political and economic matters. The mere idea that the UK isn’t flexible enough to adjust to the 4th industrial revolution is laughable – the only real question is whether there’s enough political will to push through the changes needed to protect the country’s taxation system from forthcoming disruptions. Whether the UK can device systems of taxations for emerging economic trends, like the widespread adoption of robotics, for instance, could be the deciding question as to whether it will thrive in the long-term.
Politicians have already entered the political arena armed to the teeth for a fight against automating technologies. Pledges to “tax robots” and “stymie negative automation” are now fairly commonplace throughout the UK. Turning these taxation ideas into a reality, however, will require intense political bickering and electoral and regulatory victories that don’t come easily nor often. Nonetheless, the 4th industrial revolution is already spreading around the globe like wildfire, and the longer the UK waits to modernize its taxation system the more it
If the UK’s tax scheme is to adequately deal with the 4th industrial revolution, some hard questions must be answered. What is and isn’t an automating technology, a robot, or a piece of “job-stealing” software must all be decided, to name but a few. Whether we’ll tax these technologies (and the rates at which we’ll tax them) will also be contentious debates that will demand the attention of a public not necessarily willing to give it. Similarly, tax breaks will need to be negotiated for innovators, who are essential members of the UK economy that keep it up-to-date and competitive on the international stage.
As the massive conversation surrounding the rapidly encroaching 4 th industrial revolution takes place around the UK, financial professionals and accounting gurus will need to offer their expertise so that the public can make well-reasoned decisions. More introspection surrounding advanced digital technology is desperately needed, and the public needs to start deciding if they’d like to subsidize (or heavily tax) certain emerging industries. UK taxation and regulatory bodies have been slow to embrace the 4th industrial revolution thus far, but pressing questions will soon be demanding everyone’s attention.