The prospect of new fees or taxes on Internet services is not the only digital tax proposal aimed at technology use (previous digital tax policy posts on digital sales tax, Netflix tax, ISP tax). For the past year, the music industry has engaged in a campaign to expand the existing tax on blank CDs to all digital devices, including smart phones. The groups argue that while the government is sorting out the details of its new digital device tax, it should provide a $40 million annual handout to the industry to compensate for consumer copying. It has proposed a four year commitment at a public cost of $160 million.

The demand is striking for several reasons. First, private copying of music has gradually diminished as Canadians gravitate to subscription services such as Spotify or ad-based streaming services that remove the need for private copying. Indeed, a government memo on the issue notes that “a functional, fully-licensed music streaming marketplace reduces the practice of unlicensed copying by consumers.” Second, the government also notes in the preparatory materials that private copying revenues are declining in many countries including Japan, Poland, and Portugal, which recognize the diminishing relevance of music copying in a subscription-based world.

The issue arose before committee earlier this year with industry lead lobbyist Graham Henderson struggling to answer questions of consumer fairness and a digital device tax:

Baylis: I’m going to talk, then, about private copying. I think, Ms. McAllister and Mr. Henderson, you brought that up. When we used cassettes, discs, and blank CDs, there was a levy put on them. That doesn’t exist, I believe you said, due to a court case. It doesn’t exist, let’s say, when iPod came out, or my phone that has music. Do I understand and maybe you could elaborate that you’d like to see it applied to these mediums, and what amounts? Do you have any amounts that you’re thinking of? How would you see that being distributed among the artists? I’ll ask both of you.



Henderson: What’s being asked by the community, and I think we’ve all aligned on this, is not to 
impose a levy on consumers but to seek a fund, a temporary four-year fund. The number that has come up is about $40 million per year. That is, therefore, not a levy. It becomes something that comes out of Treasury, and it’s a decision that the Government of Canada will have to make as to whether it feels it’s important enough to remunerate artists and others for private copying, which, by the way, is what happens elsewhere in the world, often through levies. But that’s not our proposal.

After Henderson called it temporary and another witness reiterated that the fund would be a short term measure as the government developed new legislation to apply the tax to all devices, MP Dane Lloyd questioned the fairness of a broad based device tax:

Lloyd: If it’s just a blanket levy on a device, wouldn’t you admit that there are people who could buy these devices who won’t be infringing on any copyright?



Henderson: I think the important thing is if you were to go the fund route, then we’re not worried
about impacting consumers.



Lloyd: That’s the short-term route.



Henderson: Yes, but it could be the long term. The point would be that the government is recognizing the importance of performers and others getting paid for this type of copying.

In other words, despite having said it was a temporary measure minutes earlier, Henderson switched gears to argue it could be long-term. In fact, as Lloyd continued, Henderson acknowledged that he opposes a levy on devices:

Lloyd: So in my last 30 seconds, you would say there’s no better way that you can think of to implement a levy than to put a levy on devices?



Henderson: Well, I personally think it should be a fund.

The inconsistent messaging is unsurprising given how hard it is to justify a new tax on devices or a government handout to support largely non-existent copying. The brazen demand for a tax on all digital devices – or a $40 million annual handout – at a time when the industry has shifted away from private copying toward subscription based services is little more than a digital tax cash grab that should be rejected by parties from across the political spectrum.