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Tax policy helps to create a fair and organized society, but what happens when societal changes outpace government policy? Well, policy has to catch up.
For example, let’s consider comparative tax policy in the digital or post-digital era. In economics, the Gini coefficient is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation’s residents – the most commonly used measurement of inequality. A Gini coefficient of 1 (or 100%) expresses maximal inequality among values. In simple terms, policy requires identifying income first and then finding a fair way to collect taxes on it.
In our post-digital world, this process is a bit more complex. Recall my previous post on how a new set of emerging technologies known as DARQ is disrupting the public service sector? DARQ is increasing the speed by which platforms are delivering a new set of services and reshaping the economy in ways never before seen.
The challenges of taxing a DARQ world
In a DARQ world, people are spending more time and money in both a virtual and sharing economy. To compound matters, the basic principle of trust and compliance in a tax system is under increasing pressure to reconcile the fairness of redistribution where it blurs with rapidly changing moral and social values.
DARQ: Distributed ledger technology, Artificial intelligence, extended Reality and Quantum computing
In other words, how do you tax businesses doing business with algorithms instead of employees or people who use their personal vehicles for ridesharing services? This new world is effectively taking away our ability to establish a value on income and thus, risks perpetuating inequality.
New policies for new value streams
So where does policy sit within a DARQ world? Right now, policy is very much reactive. Just think of the challenges the Organisation for Economic Co-operation and Development has faced over the past two decades trying to tax big digital platforms like Amazon and Ebay. These companies have been driving profit for 20 years and still, governments have yet to find a way to fairly tax them.
Proactive policies may be a more effective strategy, but it requires input from specialists that understand the deep social impact of the digital era and can engage policymakers without trying to be too prescriptive. The robot tax – a legislative strategy that calls for robots to be tax-compliant – derived from this awareness. As robots replace the work of humans, some specialists and legislators propose mitigating the potential loss of taxable income (a major source of government funding) by taxing robot owners instead.
A one-size-fits-all solution won’t work, but there are some principles that can help create fairer, more evidence-based policies.
Guiding principles for new policies
- Proactive policy design: Even though it’s hard to really know the impact of new post-digital solutions, it is important to pre-empt any significant social issues. For instance, responsible artificial intelligence (AI) policies must be in place before some groups use the technology in ways that could have damaging side effects.
- Segmentation models for designing and testing policy impacts: Understanding the drivers for various social groups will be a key success factor for policy implementation and, for business tax, a key lever of national competitiveness.
- Multi-disciplinary policy teams: New profiles, like behavioural scientists and AI modellers, will join the ranks of econometrists and others as central players in developing policy.
- Outcome and financial-based models: Balancing a sound financial basis for a policy and the anticipated social outcome requires educating the political sphere on new concepts like economics. It is critical to balance economic competitiveness with social fairness.
- Culture of adaptation to new priorities: As complex questions keep rising, policymakers will need a very agile process to analyse, develop, test and formulate policies.
As you begin your post-digital journey, policy development will inevitably be an important strategic component. That’s why it’s imperative to be DARQ-ready.
When the world moves, move ahead.