From Large Language Models to Large Tax Models: Why Gen AI should pay Its dues

Most of us have experienced Gen AI first-hand and can easily see the critical role it will play in driving efficiency, productivity, and creativity. However, GEN AI also brings the reality of possible job displacements, especially in roles involving repetitive tasks. While many argue that AI will create new jobs, the relentless pursuit of perpetual growth and profits arguably points more in the direction of job losses at least in the short term.

Jumping onto the GEN AI bandwagon combined with competitive benchmarking may also contribute to premature job losses. We already see several companies, out of fear of being left behind, under immense pressure to be seen adopting Gen AI to improve operational KPIs and remain competitive.

Historically, many technological advancements do cause similar disruptions, so this is certainly not new (steam trains, cars, robotics, self-checkout & self-service facilities to name a few). However, Gen AI is unique because of its ability to execute complex cognitive tasks and therefore its potential to impact both white-collar and blue-collar workers equally. A recent survey by Adecco found that 41% of senior executives expect their workforces to shrink due to Gen AI adoption over the next five years. Clearly many organisations are looking at reskilling and upskilling?but this will be moving at snail’s pace compared to GEN AI exponential innovation speed.

So why single out Gen AI?

• Intellectual Property: Gen AI vendors are mostly using intellectual property without consent or compensation on an unprecedented scale
• Training data: A significant portion of the essential and high quality data for Gen AI is sourced from research and educational institutions funded by public money and taxpayer contributions.
• Economic Inequality: Technological advancements often increase economic inequality, a significant concern in today’s increasingly volatile economic and political climate.

Now, we clearly cannot put the genie back in the bottle, especially with the GEN AI market projected to reach between $96-$280 billion in the next five years and with marginal costs near zero for established players. There is however a compelling argument for higher and globally uniform taxation on Gen AI businesses. This approach can help redistribute wealth and offset possible government revenue losses due to job displacement. This is especially critical for Europe, where excluding the COVID period, EU governments spending edges towards 50% of GDP on average compared to mid-thirties in the US and where most Gen AI vendors are based.

As with any tax system, it is often a case of give and take. Here, reinvestment in educational institutions could accelerate the production of high-quality data and content to fuel and sustain the Gen AI revolution. Let's not forget that Gen AI is built upon genuine human knowledge. Extra funding can also be redirected to open-source initiatives and helping governments to experiment and adopt Gen AI to transform public services for the greater good.

Finally, I recognize the highly complex nature of the topic and apologies for the vast oversimplification, but I’d love to hear your perspectives.