Heritage Canada minister Sheila Copps

No Joke - MP3 Tax

FTLComm - Tisdale - Tuesday, April 2, 2002


Yesterday we ran a story that explained the background and possible real reason the government is proposing some extensive and potentially crippling taxes on digital recording media. Ostensibly, the issue is to gain some revenue for artists, composers and music recording companies who expect to lose income because of copying of songs using the MP3 digital compression technology.




Readers who noted that yesterday's story was published on April first considered the issue so extreme and preposterous that they considered the story to be a joke. One reader wrote in pointing out the clearly silly extreme noted in the Toronto Star reference written by Linwood Barclay and thought this too was part of the joke. Sadly, Barclay's comments were just a parody that pointed out how downright silly this new tax is.




Ms. Copps, Heritage Minister is not kidding around and as pointed out in yesterday's story it is suspected that to prevent the Americans from further incursions into areas of Canadian culture she and her department have dreamed up this tax to show the folks down South that Canadians will respect American copyright laws with cold hard cash.




These taxes will come into affect in January of 2003 but are only an upgrade to the fees already hidden in the cost of record able media. The warning of the coming tax was issued on March 9, 2002 so that any one, or any group wishing to present a case against this tax can do so in May hearings scheduled for Toronto. It is important to understand that a whole set of taxes paid by manufacturers and importers is already in the cost of the products we are presently buying and this new proposed change just moves the price up to around double the present tax.




Every audio cassette is presently carrying a 21¢ tax and this new increase will move that up to 60¢. CD-R and CD-RW blanks are currently taxed 77¢ each and this will increase to $1.23. With the present retail price of a CD-R at $1.29 this means we are already seeing a 148% tax on blank CDs and the new tax will make that 237% tax. I can understand why some readers thought this was an April Fool's joke but these are the facts.




No tax is presently levied on record able DVDs or the handy dandy little memory cards we all use in our digital cameras. The new tax will be $2.56 on the price of a DVD and 2.1¢ per megabyte on memory cards. The lowest size of these little memory cards is now 32 megabytes so this is a $2.56 tax on the price of a typical memory card.




The reality check here is that a huge number of CDs, DVDs, memory cards and hard drives are not purchased for recording downloaded music but there would be no way to know what the use these things are intended for so all will have the same tax included in their price by the importer or manufacturer.




Hard drives are the most difficult part of this equation. The 2.1¢ tax per megabyte applies and since the standard hard drive people add to their computer systems is a 40 gigabyte this would mean $840 tax on the price of a $140 hard drive. Please think over a tax of 600%.



IT world

The stated claim by Ms. Copps folks is that this is to fairly compensate the owners and creators of the music that some consider being pirated. But the effect of this will effectively drive most computer users and definitely developers into a life of crime and I am certain software companies will just leave the country faced with such hostile technological environment since the paper we computer write on is really CDs and electronic storage devices.




The arguments and issues related to this topic are abundant and well written up on dozens of web sites as well as having been discussed here on this site several times as we have explained the nature of the recording industry and how performers and composers earn far more money from downloaded music that their material sold on CDs by recording companies established to rip-off the consumer and the artist alike. Below is a reading list that will let you look at both sides of the issue. But the bottom line is that this is, was and will be no joke.
  Government documents in PDF form spelling out the details
  Government fact sheet that explains their case and reasoning.
  One of many groups opposing the tax
  Wired magazine discusses the Canadian problem
  Independent Canadian Recording Media Coalition
  CSMA - Canadian Storage Media Alliance

A list of some other stories in other publications dealing with the issue: