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.