A UK think tank has proposed an international tax on AI output that would target the tokens it produces to bridge feared gaps in government revenue.
The report author, Oxford professor Ben Ansell, argues that, for a variety of reasons – mainly domestic ageing but also the structure of the economy – reform of Britain’s tax system is increasingly unavoidable.
The Institute for Public Policy Research, which is close to the new Prime Minister Andy Burnham's leadership team, has said the UK's current tax system has become too skewed in favour of age and wealth.
One of the main long-term changes would be to promote an international token tax for jobs lost to AI. “An AI token tax, to directly trap a portion of the value created by AI models,” Prof Ansell writes. “Given that this would require consistent auditing of AI companies, it would likely rely on international co-operation.”
Given the political obstacles in Washington and elsewhere to achieving this backing, the report considers other domestic changes. In the short term, the report said equalisation of capital gains tax with marginal rates of income tax would help offset the divide between old and young. It also raises a tax on personal behaviours that are “speculative”, including gambling and crypto investing.
These moves could bridge the gap if AI starts to eat into revenue from payroll levies. IPPR's findings would require AI companies to audit their token production process and pay on any resulting revenue.
International co-operation would hold the key to a workable tax regime on AI. “If the UK were alone in implementing a token tax, it potentially faces competitiveness issues as high-value service sector AI app users in the UK pay taxes not faced by rival firms abroad,” the IPPR report, out overnight, said.
“Moreover, with frontier AI models largely based in the US and China, Britain would face the difficulty of asking foreign companies to engage in continuous auditing for British fiscal needs.”
Population ageing will account for almost 80 per cent of the additional fiscal pressure facing the UK by 2075, according to a new paper published by IPPR, which argues Britain needs a new fiscal settlement that shifts taxes away from young people and work and instead towards property as well as older people and wealth.
The ageing of the UK population will drive tax changes over the rest of the decade. The proportion of the population aged over 65 is expected to rise from 18 per cent in 2024 to 27 per cent by 2075. The state pension and higher health and social care costs could mean ageing adds almost 10 per cent of GDP to fiscal pressures by 2075.
Marginal taxes on a pensioner can reach as high as 60 per cent, but on a younger graduate they rise to 71 per cent. It also proposes a valuation tax on property across the board, set at a recommended rate of 0.65 per cent of the valuation.
Outrage over new powers for an official valuation squad to inspect homes was reported this week, as a wealth tax on £2m homes comes into effect next year.
If the token tax idea fails, Prof Ansell says redistribution via an “AI unearned rents tax” could be needed to sustain consumption across the economy.
