Taxing the Smartphone

On Monday a report was released in France that contained the suggestion that a tax should be levied on Internet devices in order to raise money to promote and protect French cultural production.

A Tax Paid Phone

A Tax Paid Phone

For several years France has had a policy of taxing broadcasters and spending the money on supporting its own film and entertainment industries, but revenues are falling. The problem seems to be that many more people are accessing their entertainment via the Internet and therefore not contributing to its production cost.

The Lescure report as it is known suggests a tax of between 1 and 4% on any Internet capable devices (smartphones, eBook readers and games consoles included), but as we might imagine many of the producers of these devices are not happy about the proposal.

Money has to be raised to maintain the entertainment industries, but many of the companies that provide access to this entertainment are not based in France and do not contribute. They probably don’t want to either, and so we come across the same problem that I wrote about last week, collecting national taxes from international corporations based in another state is never easy, and borders are porous.

The proposed tax would replace one already in existence upon storage devices. Currently tax is levied on blank CD’s and memory sticks as well as computers with hard discs.

The manufacturers complain that the price of the devices would rise leading to fewer sales, although the author of the report argues that such a small percentage increase would make little difference, and would not even effect the home job market because most of these devices are assembled overseas. A 1% tax would raise something of the order of 90 million Euro a year.

The problem remains though. As our sources of entertainment move away from pay TV, publicity funded channels and national subscription systems such as the BBC, money is taken away from the producers and associations that represent and fund these industries. Some see the fact that Google and Apple amongst others are operating outside the tax system and are not contributing to the industries that they make their money from as unfair, and hope that this change in tax law will go some way to evening out the field.

The Wall Street Journal goes into a little more depth on the matter in its free online edition.

I wonder if France takes this step if others in the EU will follow. There are many different ways of making money through so called free downloads as we all know, but the money ends up in the pockets of the provider and not the producer and the industries involved are feeling the pinch. Maybe this needs to change.

Taxes on Internet shopping

Here in the US the Senate just passed the Marketplace Fairness Act, and it is causing a great deal of debate on all sides.

I want you to pay taxes

Pay more taxes on your online goods

In the USA each state can levy its own sales tax. The rate is not equal across the states, for example here in Massachusetts I pay 6.25% sales tax on my new fridge, but if I drive to New Hampshire I do not pay anything. You can check out the differences on this interactive tax map.

The legislation described above aims to make Internet sellers collect the taxes due to the buyer’s state, something they are not currently required to do. At the moment I order my fridge from a New Hampshire based Internet retailer and I don’t pay any tax. In theory I should go and pay the state myself, but with online sales worth billions there is no enforcement and no queues (lines) outside the tax office.

Retail outlets argue that this gives online sellers an unfair advantage, but they in turn argue that the collecting and payment of state taxes under the new proposed regime would be expensive and extremely complicated. If they sell me the fridge here it costs a certain amount, they have to collect the tax and pay it to Massachusetts, but my friend in Florida pays a different amount and the tax is paid to the state there. Now this might not be too complicated a system for Amazon to manage, but a small Internet based retailer might not have the technical expertise or personnel to carry it out.

The proposed bill does exclude traders who sell under a million dollars of goods, but in today’s world that could still be a very small organization.

The technical difficulties of collecting the taxes through any other means seem insurmountable though, and the problem is very much related to the idea that borders can be controlled. States have different laws about selling many things, but if these things can be bought on the Internet and shipped to an individual house I cannot see how these rules can be adequately enforced. Is it a form of smuggling to buy something that you cannot get in your own state?

The result of the bill (if it passes although it does have bi-partisan support) will be that local sales tax will be levied at source and so the fridge will cost more. Maybe this is just and fair, maybe it will choke some smaller businesses, who knows?

What do you think?

Augmented Reality Art

A couple of weeks ago I crossed Grand Island in New York State, a rather desolate place at this time of year near the border with Canada. I was interested in a virtual art installation involving augmented reality, and quite a find it was too.

It turns out that in In September 1825, Major Mordecai Noah founded a city state called Ararat on Grand Island, “a city of refuge for the Jews”. His idea was to create a Jewish homeland. Noah’s dream never came to fruition, until that is a group of academics and artists decided to create a virtual tour of how the city might look today had it been constructed.

Ararat Virtual Monument

Ararat Virtual Monument

The tour involves downloading an app into your smartphone, and travelling to specific areas on the island. When you look through the camera of the phone various structures appear in the view that are not present in reality. There is a copy of a memorial that was designed but has fallen into decay, a synagogue, school, a theme park and various other typical structures. The group also produced postcards, stamps and money, as well as other objects in everyday use in any nation state. There is in fact only one original artefact from that period surviving today, a cornerstone that tells the story of the city’s foundation.

People who would like to take the tour have to download the mobile app Layar, and aim their devices’ cameras at the landscape. The application uses geolocation software to superimpose virtual objects at precise GPS coordinates, enabling the public to see the objects integrated into the physical location as if they existed in the real world.

Money from Ararat

Money from Ararat

Then you just take the photo and the object appears as if in real life, with your friends next to it if you like. The Mapping Arrarat website explains everything, and hosts a short video that demonstrates the installation in practice. There are also lots of photos of the various structures that show people interacting with a virtual landscape.

Although the computer graphics aren’t entirely convincing I am sure they will very quickly improve and get to the point of looking absolutely real, very much in the way that games have developed in recent years. And an installation of this type looks like a fantastic educational tool to me. Objects can be placed on the landscape and presumably old photos and plans could be used to re-make places and events. Wouldn’t it be interesting to go the the Great fire of London, or walk through antique Rome and come back with a few shots to show the family?