A number of countries have imposed "copyright levies" on the purchase prices of computer technology which contributes to copyright "piracy" (i.e. unauthorized copying of digital information). Specifically this includes taxes on blank recordable media, MP3 players and even computers. For example:
The moral justification of such taxes seems simple enough: purchasers of computer hardware use that hardware to infringe upon the intellectual property of copyright-holders, therefore they should be made to compensate those copyright-holders for the resultant losses. It is a tale of "theft", loss and compensation.
But there is something strange about levying a "tax" to compensate the victims of a supposed "crime". A taxpayer is "liable" to pay a tax on account of whatever it is they own or they have done which makes them so liable, but they are not "guilty" of anything just by virtue of being a taxpayer.
In at least some of the countries that have a copyright levy on blank recording media, there has been a corresponding legalisation of the corresponding act of "theft". In particular, in Canada, it is legal to make a copy of a copyrighted music item "for your own use", even though the copy is made from someone else's commercial audio CD.
However, there is uncertainty as to whether this type of concession is enough to justify the imposition of copyright levies, and whether more questions need to be asked about the relationship between who pays the tax and who decides how the tax is allocated.
To help clarify these issues, I am going to start by analysing a "straw man", in particular I will analyse the situation where a copyright tax is charged on users of computers, blank disks and computer networks, but no permission is given to for copying of copyrighted material.
Firstly I will summarise the situation before a copyright tax is applied:
As a result of the unauthorised copying:
Into this situation is introduced a copyright tax. The tax is imposed on the mechanisms of unauthorised copying, which include computers, blank disks and Internet usage (appliances for enjoying copied content, such as MP3 players, may also be taxed). The tax is distributed, by some means, to those content creators who are deemed to be suffering losses of income as a result of unauthorised copying.
As a result of the tax being imposed, the situation is now as follows:
Who exactly are the winners and losers in this situation? It might seem that the primary beneficiaries are the content creators, because they are the ones who directly receive the proceeds of the tax. But they are only receiving this tax in lieu of payments they would receive from dishonest consumers if those consumers were actually honest. The major beneficiaries are the dishonest consumers, who continue to receive free content via unauthorised copying. The major losers are the taxpayers, who pay the tax, and do not receive any benefit in return, unless they are also dishonest consumers who pirate content. If you are a taxpayer and an honest consumer, then you pay twice: once for the content, and a second time for the tax. If you are a taxpayer and a dishonest consumer, then you pay less: once for the tax, and nothing for the free content.
It might be argued that there is some general benefit to society from content creators creating their content, and that taxpayers benefit from the fact that the tax keeps the content creators in business. For example, we all benefit from the production of music, because in the normal course of our daily lives, we get to hear a lot of music that we never directly pay for.
However there is a fallacy in this argument, as it ignores the specific intent of intellectual property laws, which is to take something that could be of general benefit to society at large, and ensure that it is in fact the private property of the person or organisation deemed to be responsible for creating that benefit.
Thus the benefit to society from a musician who creates copyrighted music consists entirely of the enjoyment of the music by two categories of music listener:
If the only category of listener was the first category, then there would be no justification at all for considering musicians to be benefactors to society as a whole. The only reason for considering them to be benefactors to society (and to the "public good", which I will discuss in more detail soon), is the enjoyment that dishonest consumers of their music derive from listening to that music.
As I already mentioned, we often hear and enjoy music that we have not directly paid for. We might hear music on a television program or on a radio station. But all of this music has been "paid for". Music only appears on the radio because the radio station sells advertising, and we must suffer a certain amount of time listening to the advertising if we want to hear the music. (There are ways of avoiding advertising, but if these become too effective, the radio stations will cease to have a viable business model.) Similarly for television programmes, which firstly must pay for the right to play music, and which secondly are either paid for by advertising or are paid for by subscription (e.g. for cable television).
The real purpose of paying taxes is to pay for public goods. In a general sense public goods can be understood to mean "something for the benefit of the general public". For a more theoretical economic point of view, there are three major defining properties of public goods:
These three properties can be understood as arguments in favour of provision paid for by taxes rather than provision by private production and sale. The relevant arguments are:
When we attempt to apply this analysis to payment for a copyright levy, where there is no corresponding permission to make copies of content not expressly permitted by the content creator, we find that the only "public good" being funded by the copyright tax is the ability to illegally pirate content. If we consider the three defining properties of a public good, we find the following:
The major moral objection to a copyright tax imposed without any corresponding to "pirate" content is the last observation, that the "public good" provided by the tax consists of the provision of content for criminal pirates.
One possible counter-argument to this objection is that "we are all criminals", i.e. we all pirate content, therefore we all benefit from pirated content (present company excepted of course). Even if this is the case, it still does not properly justify the imposition of a tax that funds a benefit only received by criminals.
The only way to avoid the unfairness of a copyright tax that funds benefits for criminals is to decriminalise the benefit, and make "piracy" legal for everyone. The public good provided by the tax then corresponds to the provision of free content for everyone. This roughly corresponds to the right to copy for "private use" which is provided in the Canadian case (this information from the above-mentioned FAQ, which is dated December 15, 2003).
However, decriminalisation only solves half of the universality problem. The second problem is the simple issue that any particular item of content only benefits some consumers. The problem reduces to an equivalent problem of deciding how much payment should be made to which content creators.
Because the political pressure to apply copyright taxes currently comes from the copyright-holders themselves, the tendency has been to allow them to define the methods for distribution the proceeds of copyright taxes. However, as I have just shown, copyright holders are not the payers of the tax, and they are not the major beneficiaries of the tax. Therefore they should not be the ones to determine the allocation of the proceeds of the tax.
The idea that copyright holders should determine allocation is supported by the "victim" story (which as I have shown is based on the fallacy that payment of copyright-holders is itself the "public good" paid for by copyright tax).
In practice the allocation of copyright tax is being based on records of non-pirated sales. Non-pirated sales do seem like a good estimate of the value that specific content provides to the general public, as measured in by the proportion of the population that enjoys that content and to the amount they are willing to pay for it. But there are two objections to using non-pirated sales as an allocation system in the long run:
The major alternative to any sort of measurement-based alternative compensation system is voted compensation, and I give a more detailed justification of this type of system in Published Digital Information is a Public Good: The Case for Voted Compensation.