Lee Heeseung Leaves ENHYPEN? Today’s world is rapidly changing, and Artificial Intelligence (AI) is at the center of this transformation. In the future, when the way of working will completely transform, a major question will be how the tax system will change. This question is not only important for governments and tax authorities, but also for ordinary citizens, because a large part of government services is funded by taxes. As AI makes its way into industries and companies, the employment structure is also changing, which can directly impact the tax system.
AI and Changing Work Culture
Today’s tax system is primarily based on the employer-employee relationship. When a person works for a company, taxes are deducted from their salary, and this tax constitutes a significant portion of the government’s revenue. However, the advent of AI could transform production and work methods. Many tasks previously performed by humans will now be performed by machines or AI systems. This could change the roles of employees and even lead to job losses in some sectors.
The global labor market is expected to slow down somewhat in 2024 and 2025. Geopolitical tensions, trade barriers, and rapidly advancing automation technologies are considered the main reasons behind this. According to the International Labour Organization (ILO), global employment growth in 2025 is likely to be lower than previously estimated. While employment growth was previously expected to be 1.7%, it is now projected to be around 1.5%. This means that approximately 7 million fewer jobs may be created than previously anticipated.
However, it’s not just about the number of jobs. The real change lies in how the nature of work is changing. Initially, AI was seen solely as automation, meaning that work would be done by machines. But now there’s a growing understanding that in the future, humans and AI will work together. This collaborative model could also pose both new challenges and opportunities for the tax system.
Why Employment Tax is Important
Employment-related taxes constitute a significant portion of government revenue in almost every country around the world. While the percentage may vary from country to country, their importance is universal. On average, employment taxes account for approximately 24% of total tax revenue in countries within the Organization for Economic Cooperation and Development (OECD).
In some countries, this share is even higher. For example, in Japan, Social Security contributions represent approximately 40% of total tax revenue. In France, they reach approximately 37% and in Germany, approximately 35%. In the United States, payroll taxes, which include Social Security and Medicare, account for approximately 32% of federal revenue. In countries like South Africa and Australia, this proportion is relatively lower, but they remain a significant source of government revenue.
The unique feature of employment taxes is that a large portion of them is often earmarked for a specific government program. For example, funds accumulated in the Social Security system are used to fund pensions, healthcare, and other social benefits. In the United States, approximately $1.5 trillion was spent on the Social Security program through 2024, most of which went toward retirement benefits.
Employment Tax as a Policy Tool
Taxes aren’t just about generating revenue for the government. They’re also used to encourage certain behaviors in society. Employment taxes play a key role in such policies.
Many countries offer tax breaks to encourage individuals to save, especially for retirement. For example, the UK offers tax breaks on pension contributions to encourage more savings. Similarly, countries like Australia and Japan offer tax benefits for investing in pension plans.
In addition, governments offer tax incentives to improve the environment. Many countries offer tax breaks or subsidies to promote electric vehicles. Spain offers income tax breaks for purchasing electric cars, while the Netherlands offers significant road tax discounts.
Some countries are also resorting to tax policies to stem the declining birth rate. Countries like Germany, France, and Spain offer tax breaks to families with children to provide financial support.
Future Challenges and Prospects
With the growing influence of AI, the biggest challenge facing governments will be how to adapt their tax systems to the new economic structure. If machines begin to perform more tasks in the future and traditional jobs are reduced, governments will have to consider how to compensate for the revenue previously generated from employment taxes.
This is also a time for businesses to be vigilant. Companies must monitor changes in tax policies and adapt their strategies to flexibility. It is possible that in the future, the tax burden will be placed not only on employees but also on technology, automation, or other economic activities.
Finally, it is clear that the impact of AI will not be limited to technology or industry. It could transform economic policies, employment structures, and tax systems. Therefore, both policymakers and businesses need to prepare for this change now so that the future economy remains balanced and stable.
FAQs
Q. How is AI affecting the nature of work?
A. AI is changing how tasks are performed by automating repetitive work and assisting humans, which can reshape job roles across many industries.
Q. Why are employment taxes important?
A. Employment taxes are a major source of government revenue and often fund social programs like pensions, healthcare, and unemployment benefits.
Q. How could AI impact tax systems in the future?
A. If automation reduces traditional jobs, governments may need to redesign tax systems to collect revenue from new economic activities.
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