Taxing your gigabytes

As reported on Slashdot:

An anonymous reader writes “The Register is reporting that in a few short months a proposal to tax all MP3 players in the Netherlands will become law. The levy taxes 3.28 euros ($4.30 US) for every gigabyte of capacity. This means a 60GB iPod Photo will be hit for an additional 196 euros ($258), all of it going to the record industry’s copyright collection agencies. And they call file sharers thieves?”

In the U.S., about 13 million MP3 players were sold in 2004. (Over 5 million of those were Apple iPods.) If you assume the average iPod held 4GB (a conservative estimate, considering the iPod Mini’s smallest capacity is 4GB), and the average non-iPod held 1GB (again a very conservative estimate), that’s 30.1 million gigabytes of MP3 storage sold in 2004. If you applied the Dutch tax of $4.30 per GB to those conservative estimates, it would amount to about $130 million to record companies — money gained on the sales of products which may or may not be used to store copyrighted material which the bearer has no rights to own.

Such a law would never make it in the United States — at least, not without some heavy legal wrangling. There’s simply too many loopholes. An equivalent strategy would be to tax computer hard drives because they “may or may not be used to store copies of illegal software, movies, or music.” Or, taxing blank paper and photocopiers because they can be used to “make illegal copies of copyrighted materials.”

Well, don’t be so sure. The Audio Home Recording Act of 1992 required that manufacturers of digital audio recording devices (originally perceived as DAT players, but could be easily transfered to include CDs, DVDs, and digital hard drives) must pay “royalty taxes.” The money goes to the U.S. Copyright Office, which then distributes it as it sees fit (after, of course, paying for the additional bureacracy to manage this legislation). It is this legislation that ensured you can’t make “copies of copies” of DAT tapes with the government-mandated creation of what became the Serial Copy Management System. Of course, this system has been extended to cover CDs and DVDs.

How much are these royalty taxes? Apparently, about $3.5 million, at least in 2003, according to the U.S. Copyright Office’s Annual Report for 2003 (PDF). In other words: Why? Is all this legislation, processing, tax collection, tax redistribution, copy protection, and consumer frustration worth $3.5 million to an industry that has revenue of over $30 billion a year? No, it isn’t. But it’s here, and it’ll likely be here to stay, and it is there to open the door for more in the future — like a tax on MP3 player gigabytes.

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