Tuesday, March 16, 2010

Is a Canadian iPod "Tax" "Nonsensical"?

Charlie Angus, MP from Timmins and copyright critic for the NDP, who is normally very constructive on copyright matters, has introduced a private members bill C-499 to put a "tax" on iPods, cell phones, Blackberries and who knows what else unless it is exempted by regulation, and we all know how easy it is to get regulations enacted. Not.

The most succinct and immediate comment was from the Hon. James Moore, very hip, young and cool Minister of Canadian Heritage who loves his gadgets almost as much as he loves U2 and is a terrific exponent of culture, both of the Canadian and U2 variety.

This was the Hon. Minister’s own Tweet earlier today:

I am against the NDP's new proposed tax on ipods/blackberries/iphones/laptops/MP3 players. Consumers deserve lower, not higher taxes
(emphasis added)

Then, the Hon. Tony Clement, Minister of Industry, followed up with this quote in the Toronto Sun, which reported as follows:
Industry Minister Tony Clement says the government will oppose the bill.
"It's totally nonsensical. We cannot have a strategy of greater access to internet and to have a better digital economy in this country and at the same time have this NDP plan to tax iPods and to tax BlackBerries."
(emphasis added)

Now I can already hear the groans and imagine the expensive spin control underway (being paid for by the current “tax” of $0.29 on each CD) to tell the Ministers that its not a “tax” but a “levy”. And I know that the Copyright Board and the Federal Court of Appeal have said that the levy is not a tax. I ought to know because I got very close to persuading the Federal Court of Appeal that it is - but in this case, “close was no cigar.”

But who am I to question the wording of not one but both responsible Ministers who refer to the levy as a “tax”, along with virtually every Canadian who has ever paid an extra $29.00 for a stack of 100 blank CDs to store their baby’s pictures or back up their accounting data? And who don’t want to pay an extra $75 for their next iPod or be forced to buy it online from an American e-commerce store. BTW, those CDs which cost over $0.50 each in Canada because of the “tax” can be easily bought for as little as $0.12 each retail in the USA, which is levy free.

Where we did quite clearly succeed in the Courts was in convincing the Federal Court of Appeal to tell the Copyright Board - not once but twice because neither the CPCC nor the Board would listen the first time - that “the Copyright Board has no legal authority to certify a tariff on digital audio recorders or on the memory permanently embedded in digital audio recorders.” The Supreme Court of Canada refused to give the CPCC leave to appeal the first time, and the second time the CPCC wisely, didn’t even try.

So, regarding the iPod "tax", the CPCC has two strong strikes against it from the Federal Court of Appeal. It looks like they will get a third strike from the Government. Ministers Clement and Moore could not have not have been more explicit - or decisive.

BTW, here from the frankly incredible press release of the CPCC today, which still doesn’t “get it” after all these years, is the following gem:
The amendment proposed by Mr. Angus does not change the original intention of Part VIII of the Copyright Act which was to provide compensation to rights holders for private copies of music made by Canadians. The amendment is designed to rectify a semantic problem, which was unforeseeable in 1997. It simply allows for the levy to be pplied to digital audio devices.
“Semantic problem”? Really!

“Unforeseeable in 1997"? Really!

I guess that these folks had not heard in 1997 of something called “the internet”, something called “Moores’ Law”, something long before that called the “celestial juke box” and above all, the old adage “be careful what you wish for.”

The legislative history was clear then and is clear now. This levy - or tax - or whatever it is - was never meant to cover devices. Nor should it do so. We don’t need a tax on technology to prop up a moribund collective that was obsolete when it was started more than a decade ago and was very lucky to get as far as it did by taking in around $300 million so far, much if not most of it from countless Canadians who simply don’t use blank CDs or cassettes (remember them?) to copy music.

By the way, the CPCC’s average payout to the ultimate beneficiaries has been at most about $160 per year for those who actually receive cheques and likely much less in the case of actual individual artists. The cost of running the collective, most of which goes to lawyers, consultants and employees of this comparatively small organization, has been about $25,000,000 to date.

Sorry, Charlie, I have the feeling that this dog won't hunt. Even though Michael Geist is reporting some support amongst your fellow Heritage Committee members, including the Chair, it is unlikely that this will sneak through as a private member’s bill. Here, for Parliamentary Procedure Geeks is the road map.

If the two responsible Ministers and presumably the Government are so strongly opposed, passage is very unlikely.

Speaking personally, I don’t see the consumer electronics industry generally, including such giants as RIM, Apple, and Nokia and retailers who hope to sell these products in Canada welcoming this bill with flowers.

Besides, if for some unforeseen reason this becomes law, it will surely prevent WIPO treaty ratification for reasons well known to the government and those immediately concerned. In a nutshell, ratification of the WIPO Treaties would double the levy amount - and the extra money - likely in the hundreds of millions - would flow straight south. Not a very attractive scenario for any Canadian government.

And the prospect of another court challenge may cross the minds of some creative counsel. As they say, tomorrow is another day.


March 17, 2010
PS - here's the Retail Council of Canada press release and here's Jennifer Ditchburn of Canadian press quoting Hon. James Moore further:
"This is a very serious hit to consumers that could impact them, and if the NDP are as committed to raising taxes this week as they always have been, then this is a real threat," Heritage Minister James Moore said Wednesday.


A new levy is just not on, he said.
"It's not in the interest of the music industry to make it more expensive to buy the devices on which they're listening to Canadian content," he said. "It doesn't serve the Canadian cultural community."


  1. Insightful as always - I'm not sure enacting WIPO will double the levy. Do you mean because of double dipping for making available?

  2. Thank you for this well thought out and reasoned summary/critique.

    I'd been ruminating over this since the news broke and you've read my mind.

    Long time listener, first time caller. Thanks Howard.

  3. Michael Geist points out the problems with administration of the current levy, and those are reasons to fix it or abolish it. But it is also worth pointing out the real benefit of it: Canadians haven't been successfully sued for personal copying of music the way Americans have, because the levy supports the private copying right.

    The current version of the levy is clearly obsolete: who uses cassette tapes or burns music to CDRs these days? Those aren't the main way to duplicate music any more. The main way is to duplicate it on the disk or flash memory of a dedicated device like an iPod, or on a general purpose disk of a PC. So those people get the protection of the private copying right, but they don't compensate the copyright holders for it.

    I don't know if there's a way to set a levy or tax in a fair way, but I don't want to give up my private copying right. So I support Charlie Angus and the other members of the committee who want to find a way to extend it to other devices.