CATA counters CD levy Alliance doesn

The CATA Alliance is launching an advocacy campaign against a new levy on blank CDs, which it says imposes an unfair financial burden on Canada’s software industry.

The fee, which came into effect Jan. 1, 1999, results from an amendment to the Copyright Act which provides for a levy on “blank audio recording media” to be collected by manufacturers and importers and paid to collective societies representing musicians.

“It’s basically to create a fund that will support music industry performers to compensate for supposed losses they have with people illegally recording their content,” said John Reid, president of the CATA Alliance.

“They flatly ruled against this in the U.S. which is the largest entertainment industry in the world, so we’re again creating another price differential between Canada and the U.S. Any time you cause a discussion to happen showing the difference in cost structure between Canada and the U.S., you immediately motivate people to locate production or think about investment outside of Canada.”

The levy will not be set by the Copyright Board until hearings in May, and the decision not issued until the fall. The Canadian Private Copying Collective (CPCC) has agreed to delay collecting the levy until the Board renders its decision or until Dec. 31, 1999, whichever comes first. One recommended scale would apply a levy of $2.50 to a standard CD.

According to Reid, the problem is “if you start at $2.50, that’s sort of a recommended scale, and where does it stop? Two years from now, do you increase that to $3.50? It’s a bad precedent to take in terms of public policy.”

In CATA’s view, it is wrong to charge the IT industry, in the form of software producers and distributors, in order to support the entertainment industry. “More importantly, we seriously question this type of tax strategy…you take the Copyright Act to create a hidden tax so are we going to take all the Acts in Canada as part of paying the bills?”

Irene David, a partner with Toronto, Ont.-based Ernst & Young who directs the sales tax practice, agrees. David described the levy as a “very ill thought out measure.

“I think it’s too broad a measure to deal with a limited problem,” she said. “(And) what does the software industry have to do with the music industry?”

That’s exactly what John Anhang, vice-president and CFO of Changepoint Corp. in Richmond Hill, Ont., would like to know. “The whole point behind the tax or the levy is…supposedly to compensate entertainers for the recording of their …music and we’re not doing that so it doesn’t really apply to us.”

The solution, Reid said, is to rescind the levy, or at least remove it from the software industry.

Anhang concurred. “It’s their challenge to figure out a solution to it without penalizing people who clearly aren’t making copies of their music.”

Reid said the irony of the situation lies in the fact that the Canadian government encourages Canadians to be more technology literate, “but in this case you’re saying you’re going to tax digital media of the software companies that are designing and developing the products that are going to make that objective reachable.”