A private copying levy (also known as blank media tax or levy) is a government-mandated scheme in which a special tax or levy (additional to any general sales tax) is charged on purchases of recordable media. Such taxes are in place in various countries and the income is typically allocated to the developers of "content". (A distinction is sometimes made between "tax" and "levy" based on the recipient of the accumulated funds; taxes are received by a government, while levies are received by a private body, such as a copyright collective.)
Levy system may operate in principle as a system of collectivisation, partially replacing a property approach of sale of individual units.
History
Such levies were first introduced in Germany in the 1960s.WIPO, International Survey on Private Copying - Law & Practice 2013 (23rd ed.) p.4: "A levy was first introduced in Germany in 1966."; Also see in general Karapapa, S., (2012). Private Copying: The Scope of User Freedom in EU Digital Copyright. Routledge. With the advent of the audio cassette, legislators were persuaded that cassette recorders would decimate sales of records as friend after friend would then make copies of only one purchased album. Levies today are assessed on recordable compact discs, a form of media that did not exist when levies were first conceived. Although the bulk of unrecorded compact discs are actually used in the computing industry, they are still "taxed" to provide a revenue stream to the recording industry.
A common misconception is that levies are compensation for illegal copying such as file sharing. This is incorrect, however, levies are only intended to compensate for private copying that is legally allowed in many jurisdictions. For example, uploading a purchased CD on to another personal device such as a laptop or MP3 player. Generally, legislators allow private copies for two reasons: firstly, because otherwise, the enforcement would be unfeasible for private reasons, and secondly, because the administrative burden would be disproportionate.
European Union review
In the European Union, the legal basis for levies is the 2001 InfoSoc Directive. It mandates that EU countries must put in place a compensation scheme to compensate rightsholders for harm caused where there is a private copy exemption.
In 2015, the European Parliament approved a non-binding resolution (Reda Report) asking a review of the levy in the European Union, building on previous resolutions and studies.António Vitorino's recommendations of 31 January 2013 resulting from the latest mediation process conducted by the Commission in respect of private copying and reprography levies. However, there has been no change in the EU legal framework since. Industry players continue to lobby for reform of the system which they argue is outdated and does not reflect the rise in streaming services which has caused a drop in private copying.
Questions on fairness A difficulty that arises is devising a mechanism for distributing the proceeds to copyright holders that is considered "fair" by all copyright holders and consumers. Fairer methods should involve extensive sampling of users to determine actual copying behaviour, or alternatively paying all musicians at a simple flat-rate.
While the main aim of levy systems is to compensate authors for losses due to private copying, some part of the collected money is also used for general cultural funding purposes. In Germany this is required by law. This funding is usually distributed by the same entities (collecting societies) that distribute the levies to individual authors.
A further problem is to find a proper tariff base for levies. Conceivably the levy may be a percentage of storage media sales price (e.g. 3% in the US). The implication of such a scheme is however that the author gets less as technology becomes less expensive. But a fixed price based on storage capacity is not fair either, as for instance a smartphone can be used to store copyrighted content such as films or music, but also large of non-copyrighted content, such as personal photos.
An implementation question that arises is whether the tax applies to any type of copyrighted work or is restricted to a limited field such as music. If it is restricted then the issue arises of how to collect the tax on media which can also be used for other purposes. The options include:
Collecting the tax on all media, regardless of the end use, and ignoring the injustice to purchasers with non-covered uses. Allowing taxed and untaxed media to be sold, but with only the taxed media providing the copyright-relaxation benefits. Collecting the tax on all media but allowing purchasers to claim a refund for media applied to non-covered uses.
Contrary Fairness arguments Although these complexities make the systems of levies are far from perfect they do have some advantages related to fairness in that since there is compensation for private copying whereas in countries where there is no levies, there is a substantial amount of copying taking place without any due compensation being made. With respect to fairness in countries with the levy everyone is shares in the financial burden caused by the levy. In countries that do not have the levy, many people are copying music and never receive any reprimands while others are made an example and prosecuted. This is the similar argument that non-proponents to the levy system use to show fault. They advocate that if the levy cannot be precisely applied to the people that are private copying, it is a faulty system. Likewise, if one cannot reprimand all people that are copying illegally and not compensating the music industry, this is also a faulty system. One system over subscribes, the other undersubscribes, both have faults. Finally, those countries that do not have private copying laws are in fact making many of their citizens criminals. A law which makes potentially more than 50% of the population criminals does not seem to be a fair business practice. Lawyers rather than artists may well be the greatest beneficiaries in non-private copying countries. This argument assumes that private copying can only be allowed with a levy.
Legal effects It is theorized that such levy may be linked to a corresponding relaxation of copyright law, by permitting the recording of copyrighted works on media for which the tax has been paid. However, there is little evidence to support this theory. On the contrary, lobbyists representing publishers and copyright holders have increased pressures to implement more restrictive laws, even on countries that have implemented private copying levy. In 2007, it was reported that International Intellectual Property Alliance put 23 of the world's 30 most populous countries into Priority Watch List, even though the United States, which was not in the list, has laws that are more liberal than the laws from the countries within the list.
Even when restricting levy system to devices that primarily play music, this itself creates loopholes that prevents collecting levies from cellphones, PDAs, and other all-in-one portable electronic devices. As a result, copyright holders will have to rely on even more laws to collect levy, and to increase rates of already levied product to recover perceived losses, which run against the political trends toward eliminating levy systems.
Regulations Examples of countries operating such schemes:
Australia
Australia had a public levy on cassette tapes. The legislation establishing the levy was passed in 1989, challenged in the High Court of Australia in Australian Tape Manufacturers Association Ltd v Commonwealth. The court found the tax legal even though it went to private sources because it served a public purpose.
Copyright Amendment Act 1989 (Cth) introduced the Levy on blank tapes but was later repealed by Copyright Amendment (Re-Enactment) Act 1993 following the "blank tapes levy case" in the HCA in 1993.
Belgium In Belgium a fee is charged on both blank media and recording equipment which is passed on to "Auvibel", which is in charge of distributing the funds. As of 1 February 2010, these fees are applicable for the following:
Equipment with integrated carrier: MP3/MP4 player, cellphone with MP3/MP4 functionality: capacity is less or equal to 2GB: €1.00 capacity is higher than 2GB and less or equal to 16GB: €2.50 capacity is higher than 16GB: €3.00 TV, Hi-Fi, combined DVD writer and videorecorder, multifunctional DVD home cinema, set top box, multimediacenter: capacity is less or equal to 256GB: €3.30 capacity is higher than 256GB and less or equal to 1TB: €10.75 capacity is higher than 1TB: €13.00 Non-integrated equipment with integrated carrier: DVD recorder, DVD reader, CD writer, videorecorder, DVD home cinema: capacity is less or equal to 256GB: €3.30 capacity is higher than 256GB and less or equal to 1TB: €10.75 capacity is higher than 1TB: €13.00 For the following equipment, without integrated carrier, that are not integrate-able in a computer and work standalone, have a fee of €2.00: Hi-Fi with radio-cassette-CD Combined DVD writer and videorecorder Combined DVD reader and videorecorder Portable radio-cassette recorder Combined portable radio-cassette-CD TV and combined DVD writer DVD recorder Cassette deck Videorecorder CD writer MiniDisc writer CD audio to MiniDisc writer Digital carriers: Memorystick, memorycard: capacity is less or equal to 2GB: €0.15 capacity is higher than 2GB and less or equal to 16GB: €0.50 capacity is higher than 16GB: €1.35 External hard drive: capacity is less or equal to 256GB: €1.30 capacity is higher than 256GB and less or equal to 1TB: €6.75 capacity is higher than 1TB: €9.00 blank CD-R/RW, MiniCD-R/RW, MiniDVD-R/RW, MiniDisc, audiocassette DAT: €0.12/disc blank DVD+/-R/RW: €0.40/disc Analogue carriers: audiocassette, audiotape, videocassette 8mm: €0.12 videocassette: €0.40
Canada
A blank media levy was introduced in Canada in 1997, by the addition of Part VIII, "Private Copying", to the Canadian Copyright Act. The power to set rates and to set the distribution allocation is vested in the Copyright Board of Canada. The Copyright Board has handed the task of collecting and distributing the funds to the Canadian Private Copying Collective, which is a non-profit private organization.
In Canada:
The levy applies to "blank audio recording media", such as CD-Rs. The levy is paid by importers and manufacturers of such media sold within Canada (and typically passed on to the retailer, and passed on to the purchaser). With the exception of the zero-rating exemption, the levy is collected regardless of the purchaser's end use of the media. The private copying levy, less CPCC operating costs, is distributed as per the Copyright Board's allocation as: 58.2% to eligible authors and publishers, 23.8% to eligible performers and 18.0% to eligible record companies. The Canadian Private Copying Collective has developed a method by which the proceeds are distributed to rights holders based on commercial radio airplay and commercial sales samples, ignoring radio/college airplay and independent record sales not logged by Soundscan. This method has been criticised as favouring major-label artists at the expense of the long-tail. As of September 7, 2007 over one hundred million dollars has been distributed. In conjunction with the levy, the Copyright Act allows individuals to make copies of sound recordings for their own private, non-commercial use. They may not distribute the copy.