Automation and Workers: Re-Imagining the Income Tax for the Digital Age

Abstract

In the age of automation, more and more workers lose jobs or become gig workers, and the share of labour income in national income is expected to decline further. These developments threaten the sustainability of Canada's 102-year-old income tax as a major source of government revenue and a key instrument for redistributing social income. The authors make the case for re-imagining the income tax to suit the digital age. They propose that all workers should be taxed the same, regardless of the private-law arrangements or technical means used to carry out the work. They call for a reconceptualization of the source of income as human capital, capital, or business. They suggest ways of amending the Income Tax Act to ensure that income from work is not embedded in capital or disguised as active business income that warrants tax subsidies. To ensure the implementation of such re-imagined tax, the authors suggest broadening the scope of withholding tax by taking advantage of technological advances.