Piracy To Cost Governments Billions In Tax, Study Claims

by Robin Pilgrim, LawAndTax-News.com, London

24 January 2008

The United States and United Kingdom can expect to lose out on billions in tax revenues and tens of thousands of new jobs if no action is taken by their governments to crack down on software piracy, according to a new report.

The study, commissioned by the Business Software Association (BSA) and conducted independently by International Data Corporation (IDC), calculates that reducing software piracy in the United States by just 10% over the next four years could generate more than 32,000 new jobs, USD41 billion in economic growth, and USD7 billion in tax revenues above current projections.

The study notes that the information technology (IT) industry is already a major contributor to the American economy. In 2007, the United States spent nearly USD458 billion on IT goods and services including computers, peripherals, network equipment, packaged software and IT services. That spending accounted for 3.4% of gross domestic product (GDP), supported more than 314,000 IT companies with 2.9 million IT industry employees, and helped generate USD485 billion in IT-related taxes.

Yet the IT sector’s contribution to the US economy would be even greater if America’s 21% PC software piracy rate could be lowered to 11% by 2011, the study revealed. Such an improvement would add highly skilled jobs to the work force, support the creation of new companies, lower business risks, and fund government services without a tax increase.

Moreover, reducing software piracy has a “multiplier effect”. According to IDC, for every USD1 spent on legitimate packaged software, an additional USD1.25 is spent on related services from local vendors such as installing the software, training personnel, and providing maintenance services.

“When countries take steps to reduce software piracy, everyone benefits,” noted Robert Holleyman, president and CEO of BSA. “With more and better job opportunities, a stronger, more secure business environment, and greater economic contributions from the already robust IT sector, reducing software piracy would deliver tangible benefits for governments and local economies."

Similarly, in the UK a 10% reduction in software piracy (currently standing at 27%) over the same time frame, could, according to the study, generate 13,220 new high paying jobs, and GBP1.08 billion (USD2.12 billion) in tax revenues, and contribute GBP4.46 billion to the UK’s economy.

The research highlighted that the IT sector is also a major contributor to the UK economy, and it is estimated that by 2011, the industry will be worth GBP52.1 billion, supporting nearly 638,000 jobs, and generating GBP32.5 billion in tax revenues each year. However, the report concluded that these numbers could be seriously improved if piracy is adequately addressed.

The findings come shortly after the launch of a consultation on proposed changes to copyright legislation opened by the UK government's Minister for Intellectual Property, Lord Triesman. The consultation, a result of the Gowers’ review conducted in 2006, aims to ensure that the UK’s intellectual property laws are fit for purpose in the digital age.

“When countries take bold steps to reduce software piracy, everyone stands to benefit,” observed Julie Strawson, chair of the BSA UK member committee. “The UK industry has shown itself to be resilient under pressure; however, economists are predicting a difficult 2008. We must be stringent about protecting a robust IT sector and this study shows there is a compelling reason to do so: reducing software piracy delivers tangible benefits for governments and local economies.”

IDC research released by BSA in May 2007 estimated that 27% of PC software installed on personal computers (PC) in the United Kingdom in 2006 was unlicensed. This has remained unchanged for three years, despite efforts by the BSA and others to build awareness among small & medium-sized enterprises (SMEs) about the risks and legal consequences of using unlicensed PC software.

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