Music firms hit pause button over new tax

The new tax is anything but music to the ears of iPod distributors Keystone

Producers and distributors of MP3 players and iPods have challenged the introduction of a new tax on digital music players, due to come into force on March 1.

This content was published on February 1, 2006 - 13:10

They have written to the Federal Court asking for a postponement so they can contest the new tariffs for authors' rights, which they claim are "astronomically high".

The tax will affect three different product categories: digital music players with flash memory (MP3s); hard drive-based music players (iPods); and audio/video recorders with a built-in hard drive.

The decision to introduce the new tax was taken by a federal arbitration commission on January 17, responding to a demand by a group of collecting societies including Suisa, the organisation responsible for administering music rights.

But the tariffs were only announced last week, which led to the uproar.

Spearheading the opposition is the Swiss Association for Information, Communications and Organization Technology (Swico), which has asked for a postponement of 60 days to prepare its case.

"There are many things that we intend to attack. For example, we feel the tariffs are astronomically high," Swico President Jürg Stutz told swissinfo.

"Discrimination"

Swico, whose 400 members include Apple, IBM and Sony, is also unhappy with what it calls "discrimination" between players with flash memory and those with a hard drive.

The tax on a four-gigabyte MP3 player with flash memory will be almost SFr19 ($15), while that on a four-gigabyte iPod will be around SFr2. A 400-gigabyte DVD recorder will incur an extra SFr138 charge.

"The manufacturers certainly can't cover this. With the margins they have today, they cannot absorb the extra cost," said Stutz, adding that the tax could lead to price rises of up to 20 per cent on certain items.

Swico says consumers will effectively be hit three times for authors' rights if the latest tax comes into force.

According to Stutz, they already pay a levy when they download music from the internet and another one when they buy a blank CD.

Rudolf Strahm, the federal price regulator, made it clear in a recent interview with Le Temps newspaper that he too is unhappy with the situation.

Playing fair

Suisa denies that customers are getting a raw deal.

It says musicians are entitled to remuneration for every copy made of their work, whether it is on a blank CD, downloaded onto a computer's hard drive or transferred onto an iPod or MP3 player.

"It is set down in the law that every copy has to be paid for, even if it's a private copy," Andreas Wegelin, senior licensing manager, told swissinfo.

Wegerlin said the tariffs were structured according to price. He added that same was true of existing tariffs on blank DVDs and CDs, which came into force in 2002.

Suisa, which represents the interests of over 20,000 composers, writers and music publishers in Switzerland and Liechtenstein, estimates that the new tax will bring in around SFr2.5 million a year.

swissinfo, Adam Beaumont

In brief

Introduction of the new tax follows a request by Suisa, Suissimage, Swissperform, Prolitteris and the Swiss Authors' Society.

They have been negotiating with the Swiss authorities since 2001 for tariffs on digital music players and video recorders with a hard drive.

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Key facts

The first "blank tape levy" on audio and videocassettes came into force in Switzerland in 1993.
A similar tax was imposed on blank CDs and DVDs in 2002.
A federal arbitration commission and the federal price regulator supervise the tariffs.
Suisa collected SFr112 million in 2004 from licensing and authors' rights.

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