Former Reserve Bank of India (RBI) Governor Raghuram Rajan has proposed levying a targeted tax on corporate AI usage—specifically on AI tokens—to mitigate potential large-scale job displacements and generate revenue for public coffers. Writing in an article titled “How Corporations Can Mitigate an AI Jobocalypse,” Rajan urged governments to level the economic playing field between human labor and automated systems.
Key Proposals & Observations:
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Addressing Cost Imbalances: Rajan highlighted that when a company hires a human employee, it incurs social security contributions and other statutory obligations. Replacing workers with AI eliminates these extra costs, making automation financially attractive even when broader socio-economic costs are higher.
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Gradual Implementation: The proposal suggests starting with a low, conservative tax rate on corporate AI token usage to avoid stalling technological deployment. The tax could then be gradually scaled up as governments gain a clearer understanding of AI’s actual impact on employment across different sectors.
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Incentives for Retraining: Tax revenue collected from AI usage should be funneled into incentivizing corporations to retain, upskill, and retrain employees rather than resorting to immediate layoffs.
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Inclusion of Foreign Providers: Recognizing the global nature of cloud-based AI technology, Rajan stressed that foreign AI service providers must also be integrated into the tax net alongside domestic providers to prevent tax arbitrage.
According to Rajan, while corporate adoption of AI is driven by competitive pressures, managing the transition phase through sensible policy intervention will be crucial to avoiding widespread labor market disruptions.
