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I have heard rumours that the Canadian Government plans to tax blank CD-Rs - is this true?No, there is no tax, but yes, there may be a levy (see the difference below). A series of wild rumours began circulating in mid 1998 about the upcoming levy to be imposed on blank audio recording media. Dozens of people on news://ott.forsale.computing and news://alt.comp.periphs.cdr suggested that starting January 1, 1999, the price of blank CD-Rs would increase by $2.50 each. Since such media has recently sold for as little as $1.70 per disk (retail), a $2.50 increase, if it were to take place, would more than double the cost of CD-Rs. These rumours, some of which were repeated by otherwise reputable news outlets, resulted in "runs" on any retailer (Costco/Price Club was often cited) with CD-Rs at a reasonable price. In some cases it individuals bought entire skid loads (1000s) of CD-Rs at one time. The rumours also caused some sellers to attempt to gouge customers based on the supposed shortage. One persistent poster on news://ott.forsale.computing offered CD-Rs at $8.00 each, despite the fact that there were lots of CD-Rs available (although not necessarily all brands) at an average price of $2.00. If the rumors about a tax aren't true, what is?On March 19, 1998, new federal copyright legislation came into force. Among other things, the legislation provides for a levy to be collected on blank audio recording media. It is called a levy (and not a tax) because it is not collected by any level of government, it is collected by a group representing the recording industry. In a letter to the Copyright Board of Canada released Monday, January 18, 1999, the five collectives that filed tariffs for a proposed levy on blank audio recording media announced the creation of the Canadian Private Copying Collective (CPCC). The Copyright Board must decide on the amount of the levy and what media it applies to. The recording industry has submitted its proposed levies and the Copyright Board was scheduled to hold hearings at the end of May 1999 to hear objections to the proposals. The objections were filed prior to August 12, 1998. The Copyright Board probably will not rule on this subject before the end of 1999, however, their ruling could be retroactive to January 1, 1999, since the period covered spans 1999 to 2000 inclusive. However, the CPCC letter mentioned above also advised the Copyright Board that all members of the CPCC agreed to delay collecting the levy on blank audio recording media until the Board rendered its decision on the proposed levy or until December 31, 1999, whichever was earlier. Is there a government website that explains all this?Sometime on or before Wednesday, January 20, 1999, the Department of Canadian Heritage added a page to their website titled:
It answers many common questions such as why there is a levy, who benefits from it, and so on. The also have a link to the CPCC newswire press release . The Copyright Board does not have a website which is part of the reason for this page. There is some information about the Copyright Board at this government site. What does the Copyright Board have to say about this?I contacted the Copyright Board by phone in late 1998 and had a very informative conversation with Mr. Mario Bouchard, General Counsel to the Copyright Board. He was kind enough to send me the equivalent of a FAQ via email. I have formatted it in HTML and placed it on this website. I contacted Mr. Mario Bouchard again on July 23, 1999 to get an update on the progress of the hearings. I contacted Mr. Mario Bouchard again on November 10, 1999 to get an update on the progress of the hearings. What are these references to Bill C-32 ?Bill C-32 is the enabling legislation. It is an amendment to the Copyright Act (Bill C-32). You can find a copy at:
which says in sub-section 82:
When does this become law?It is law already (what most people want to know is when will the levy start?). I found a progress report on Bill C-32 at: Which says in part:
Who sets the levy?The levy has to be set by the Copyright Board. The amended act (Bill C-32) contains lots of legalese about how long the levy remains in force and how far in advance it must be published in the Canada Gazette. On this page: I found:
There is some information about the Copyright Board at this government site. What are the proposed levies and where are they documented?The Copyright Board does not have a website which is part of the reason for this page.
The proposals from the recording industry were published in the Canada Gazette (Part 1) on June 13, 1998. These proposals contain the famous formula of $0.50 per 15 minutes of digital audio recording time.Note that these are proposals or requests from the industry, not the ruling of the Board. There are five 15-minute periods on a CD (74/15=4.93). Multiplying the $0.50 requested levy by 5 gives a $2,50 requested levy per CD-R. Even some normally reputable news outlets have stated that the levy "will be" $2.50 per CD-R despite the fact that the Board has not ruled on this issue or even had the hearings that must preceed the ruling. To find the appropriate Gazette, go to: which is the homepage of the Canada Gazette (Part 1). Published every Saturday, Canada Gazette, Part I contains all formal public notices, official appointments, miscellaneous notices and proposed regulations from the government and private sectors that are required to be published by a federal statute or a regulation. Don't get lost in Parts 2 or 3 like I did. The link to the relevant issue is part way down the page (Saturday, June 13, 1998, Vol. 132, No. 24) and it points to:
which is a 1674K PDF file. The Copyright Board material concerning the levies begins on page 119 of the PDF (it is a supplement with its own internal page numbers). Here is the English text from page 3:
Rather than wading through the recording industry wish list, you may want to read the letter from the Copyright Board. Note that it has email links to industry spokespersons. Who will appear at the hearings and when will they start?The list of hearing participants has its own page. It was supplied by the Copyright board. It has a limited number of links to other sites. The hearings were originally scheduled to start in May 1999, but they were delayed for various reasons. (One of the objectors filed an application for a stay of proceedings that was heard by the Federal Court of Appeal on August 12, 1999. The court rejected the application.) The hearings did start on August 24, 1999 and they finished on September 24, 1999. The matter is currently under consideration. The Board has stated repeatedly that it wants a decision in time for the tariff to be in place by the end of the year (1999). When will the levy start?Members of the CPCC agreed to delay collecting the levy on blank audio recording media until the Board rendered its decision on the proposed levy or until December 31, 1999, whichever was earlier. It now appears that the Board will not rule any sooner than December 31, 1999. Note that the amount of the levy on CD-Rs could be set to any amount, including zero. How can I avoid the levy?First of all, there may be no levy at all on CD-Rs intended for recording data. There are, in fact, special CD-Rs called "blank audio CDs" made for use in home recording units that allow the users to copy audio CDs. these CD-Rs include a specially embossed section on the disk that is read by "consumer" CD recorders such as the Phillips CDR560S. You cannot use regular CD-Rs in these recorders.One can only hope that the Board will rule that the levy should only apply to the blank audio CDs. For more info see:
At the last URL you will find this paragraph: Kodak audio discs carry a special ATIP code that identifies the disc as compatible with audio CD recorders. To protect the copyright of professional artists and music publishers, the CD recorders also contain a Serial Copy Management System (SCMS) code that allows users to record only from an original pre-recorded CD, preventing them from making copies of a custom-recorded CD. Even if the levy does apply to CD-Rs. if you buy the CD-Rs outside Canada and use them yourself they will not be subject to the levy. Why? Because YOU are the importer and you are not selling blank media. It is the sale of blank media by the importer or manufacturer that triggers the levy. If you want to take the "suvivalist" approach, you could stock up on blank media before the levy is applied. Remember that a lot of people did this in December 1998 anticipating a January 1999 levy. Many of them ended up with a large stock of very expensive CD-Rs. Will CD-R prices go up?Some retailers will take advantage of the artificial shortage cased by panic buying to raise their prices. None of the price rise will be passed on to the intended beneficiaries of the levy (recording artists, etc.). Some retailers mistakenly believe that they need to raise their prices just in case there is a retroactive levy. However, the levy is not applied at the retail level, it is applied to importers and manufacturers. None of this "just-in-case" retail price rise will be owed to or passed on to the intended beneficiaries of the levy (recording artists, etc.). The retailers will pocket it all. (Note that a special case exists where the retailer is directly importing the media, because they are both the importer and the retailer.) Importers and manufacturers may raise their prices to cover an anticipated levy. Since the final levy is unknown, they will have to guess at what an appropriate amount is. If they collect too little, they will have to make up the difference. If they collect too much, they can pocket the difference. None of the excess will be passed on to the intended beneficiaries of the levy (recording artists, etc.). Will CD-R prices not go up?The Copyright Board won't be setting the levy before the end of 1999 and there is no certainty that the proposed rates will be accepted or even applied to CD-Rs. If the levy turns out to be very low or non-existant, lots of irate customers will be demanding refunds from retailers who charged a premium in anticipation of the levy. Those retailers in turn will demand refunds from their importers. Prices won't go up if many people stockpile CD-Rs (as they did in 1998) in anticipation of a large levy. After the stockpiling is over, the demand for CD-Rs may drop significantly. Lack of demand will force prices down. The levy is triggered by the sale of blank media by the importer. So if an individual imports CD-Rs into Canada and they are the end user (that is, they will record something on the blanks) they do not have to pay the levy at all. This means that Canadian retailers won't be able to raise their prices too far above US mail-order prices, Who is Neil Herber?Neil Herber works for Eton Systems, a technical publishing company that creates, writes, edits, and publishes reference and marketing material for clients in the high-tech, scientific, and engineering communities. More details are available on the Eton Systems corporate website. Disclaimer:
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