The iPod Tax, the iTunes Tax and the Notepad Tax
The Conservative Party of Canada decided to turn a copyright controversy into an election issue. Last week it launched the ipodtax.ca website, slamming the opposition parties’ support of extending the private copying levy to devices such as iPods. The Tories’ claim is not factually accurate, as the Liberals currently oppose such expansion of the levy, and the main point of the campaign does not seem to be genuine concern about copyright. Rather, the issue is mainly an excuse/opportunity for promoting fear about general tax increases (“It’s just the beginning of the Coalition’s high tax agenda”), however, since I’m not a political commentator I won’t stray into these issues. Instead, I want to focus on the choice of the term “iPod Tax” and some of its implications.
Some context: Part VIII of the Copyright Act creates a special mechanism that makes it legal for individuals, under some conditions, to make copies of sound recordings for their own private use. At the same time, the mechanism also permits the Copyright Board to impose a levy on blank audio recording media. The levy is paid by manufacturers and importers of blank audio recording media to the Canadian Private Copying Collective (CPCC), which distributes the money among various other collective societies representing different groups of right holders. The CPCC has tried twice to propose a levy on devices such as iPods (that’s where the $75 figure comes from). The Copyright Board agreed, but the Federal Court of Appeal distinguished between media and devices and ruled that devices cannot be levied.
Another question is whether a blank audio media levy (whether or not extended to devices) is constitutionally valid. One area of constitutional doubt is whether the levy is a “tax” or something else, such as a regulatory charge. The distinction is crucial, because if the levy is a “tax” then it is likely constitutionally invalid by virtue of Sections 53, and 54 of the Constitution Act, 1867, providing that “Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons”, and requiring that such “money bills” be preceded by a “Message of the Governor General” recommending their passage. It is common ground that the private copying levy hasn’t met these requirements. Even if it did, if the levy is a tax there might be a question whether the decision to levy and how much can be delegated to the Copyright Board, and whether a tax can be collected by and distributed to private entities.
In 2004 the Federal Court of Appeal considered some of these question, but found that the blank media levy is not a tax but a regulatory charge and therefore constitutionally valid. The decision, however, is rather confused and confusing, so it is not unlikely that the constitutionality of the levy may have to be determined once again. If the Conservatives form the next government and the constitutional issue arises again, it will be interesting to see whether the Government will stick to its “tax” terminology, which might require it to take the position that the blank media levy is unconstitutional.
Furthermore, if the Tories are really that opposed to the iPod Tax, then there is a long list of other copyright taxes that they should equally oppose to. As a first logical step, they should oppose the current blank media levy, which is currently levied on CDs and other media.
Next, they should oppose to the “iTunes Tax”: the various tariffs that online music services such as iTunes have to pay to various copyright collectives when they sell digital downloads, over and above what they pay after negotiating directly with the record labels, and similar other tariff that probably stifle the entry and growth of many digital services in Canada.
In addition to the iPod, iPad and iTunes taxes, it would also be interesting to hear the Tories’ view about the “Notepad Tax” or the “Education Tax”, the proposed $45 per student that Access Copyright wants to collect academic institutions. The economic wisdom, legality and constitutional validity of this proposed tariff are highly questionable, but I’ll leave that for another post.