Japanese Government Mulls ‘iPod Tax’

by Mary Swire, Tax-News.com, Hong Kong

12 October 2005

According to a New York Times report, a Japanese governmental committee is currently considering a proposal from the country's powerful music industry lobby to impose an additional royalty fee on the sale of portable digital music players to compensate for declining fee revenue from the sale of compact discs, which, the industry argues, is a direct result of the rise in music downloading.

The industry is calling on the government to charge a royalty on top of the retail price of portable digital players that store data on internal hard-disk drives and flash memory computer chips, such as Apple's popular iPod player. The proceeds of the levy, which would likely be charged at a rate between 2% and 5%, would go to record companies, songwriters and artists to compensate for the loss of income caused by home copying of music.

The country's recording industry is arguing that currently, royalties cover only downloads from online music stores such as Apple's iTunes to the user's personal computer, and do not extend to the copying of music from a PC to a portable player. Opponents of the proposal contend that consumers will effectively be taxed twice when transferring music from iTunes to their iPod.

The powerful music industry lobby is eventually expected to get its own way; a 2% royalty is already charged on recording devices using older technology, such as compact discs and mini discs. However, the proposal is currently bogged down before a governmental committee under the Agency for Cultural Affairs.

Japan is not the only territory where pressure is mounting from the music industry to tax iPods and MP3 players at the point of sale; the Canadian Recording Industry Association has accused supporters of unauthorised file sharing of "misleadingly" using the Private Copying Levy to justify illegitimate file sharing. However, in July, The Supreme Court stated that it would not hear a dispute involving the imposition of an additional tax on the purchase of portable digital music players, which was initially imposed in 2003, but was put aside by an appeals court last year.

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