Sunak Eyes Tax Overhaul for AI Economy

Former UK Prime Minister Rishi Sunak has called for abolishing National Insurance contributions, arguing that the change could help cushion the labour-market effects of artificial intelligence as more tasks are automated. In an interview with the BBC, Sunak said removing the levy would lower the cost of employing people and could make human hiring more attractive as companies expand their use of AI tools.

Sunak linked the proposal to concerns that AI adoption may reduce the tax take tied directly to employment. He said governments may need to rethink how they raise revenue if fewer jobs, or fewer hours worked, translate into weaker receipts from payroll-linked taxes. He also argued that the current wave of AI could be materially different from earlier technology cycles, and that policy should adjust in advance rather than react after disruptions are entrenched.

To offset the revenue that would be lost by ending National Insurance contributions, Sunak suggested shifting the burden toward higher taxes on corporate profits. He said AI-driven productivity gains and efficiency improvements could lift profitability, creating a larger base for profit-related taxation. In his framing, the tax system would be rebalanced away from labour and toward capital returns that may rise as AI becomes more embedded across the economy.

Sunak pointed to anxiety among graduates about the availability of entry-level roles, particularly in fields such as law, accounting, and creative industries. He said these areas are increasingly exposed to AI systems that can perform tasks previously handled by junior staff, raising questions about early-career pathways and how firms structure training and progression.

His comments positioned the tax proposal as one lever to keep human employment comparatively attractive even as AI capabilities expand.

Sunak is currently an adviser to AI firm Anthropic and Microsoft, and he made his remarks shortly after Anthropic announced a new AI model, Claude Mythos. The company said the model outperforms humans in certain cybersecurity tasks, underscoring both the commercial potential of advanced AI and the policy challenges that can follow from rapid capability gains.

While Sunak set out a broad direction for tax reform, key uncertainties remain from his remarks, including the scale of revenue that would be foregone by abolishing National Insurance and how quickly profit growth would materialise to compensate.

The proposal also sits within a wider international debate over how countries should adapt tax systems if AI adoption changes the balance between labour income and corporate earnings, with implications for competitiveness, investment decisions, and the distribution of the tax burden.