Is C-11 consistent with a "low-tax plan for jobs and growth"?

I often joke that copyright policy is as complex, understood, and as exciting, as tax policy. Most Canadians would prefer not to talk of either, and those of us who find either exciting are in a small minority Holidays I reflect on this oddity, given my favorite topics are some of the least interesting for most people I would visit.

I thought it would be interesting to start 2012 with a discussion of other ways in which there are similarities between tax and copyright policy, and look at how politicians and other people treat each.

What isn't copyright?

In this discussion I separate Paracopyright from copyright policy. I discuss elsewhere what we are talking about when discussing "technological protection measures" (TPM) in bill C-11. For each type of TPM we have a scenario which should either be regulated in some other law (paywalls protected in provincial eCommerce law), or which should be prohibited in law (Copyright holders should not be able to impose brands of access technology on audiences. Device manufacturers should not be able to deny keys to locks on information technology from owners). These are policy questions I believe are outside of copyright law, and can't easily be compared to tax policy.

What is copyright?

While copyright is often called a form of intellectual property, there are less similarities to traditional notions of property than this title would suggest. While it is true that copyrights can be bought and sold, that is one of the few similarities. You get a more accurate sense of copyright to recognize it as a temporary government granted monopoly. This government intervention in the marketplace has a public policy purpose, and to be effective we need to always be aware of that purpose.

While the copyright monopoly enables many business models, the most common is the collection of monopoly rents: otherwise known as royalties. It is this business model which is the most comparable to taxes: the government imposes a policy which causes a flow of money from one group in society to another for a defined public policy purpose.

Different types of tax policies

For the comparison to seem more reasonable, we need to recognize that there are different types of tax policies which are treated very different in society.

The most scrutinized type of government program is where money is collected by the government, flows through the government with overhead for administration, and then is redistributed to others in society. This can be in the form of welfare, grants, or other direct subsidies to business or individuals. Related to copyright is various municipal, provincial and federal subsidies to artists (and various intermediaries) which are often critical to the livelihoods of artists.

Inadequately scrutinized by the public or politicians, but should be considered equivalent, are tax expenditures such as exemptions, deductions, or credits offered to select groups or specific activities for some public policy purpose.

Tax expenditures are money that would normally be collected and then redistributed, but there are efficiencies to manage this within the tax collection system if the money would be flowing back to the same people. It is unfortunate how these two very similar policy mechanisms are treated differently. Money refunded as a tax expenditures are treated as "my money", while many would be offended if a welfare or grant recipient said the same thing.

Different types of monopoly rent policies

Copyright rent seeking also has variations like tax policy. In the form of copyright we are most familiar with a copyright holder will condition permission to use their copyrighted work on the payment of a monopoly rent. This is the form of rent seeking that also has the "my money" feelings associated with it. Emotions rise to to the level of people considering any scenario where the rent may be reduced or ignored being elevated by the loaded rhetorical term "theft".

While not as often discussed, there is another rent seeking form where permission is not required, and money flows from society to copyright holders through a government created intermediary called a collective society. Scenarios where permission is not required, and where the payment rate is imposed by the government, are called compulsory licenses. This policy is far more common than people realize.

Collective societies collect and redistribute money both in permission based scenarios where there is choice for both the copyright holder and the paying audience, as well as in scenarios which are mandated by government on both parties.

The closest comparison between monopoly rents and taxes

The scenario where the policies are the closest is compulsory licenses and where government collects taxes and redistributes in the form of direct subsidies or welfare. In this scenario the collective society is taking on a role similar to a government agency administrating government grants.

It is interesting, but many of the complaints I hear about collective societies originate in the ways in which collectives are different than grant administrators. In the case of collectives it is the recipients of the funds that theoretically set the policy, while with government agencies it is theoretically the taxpayer. I say theoretically, as both of these types of agencies have people who are critical of the level of transparency and accountability.

While some may argue otherwise, I believe it will be easier to force transparency and accountability from government. We all recognize that a secretive government hiding how it is spending tax money is a bad thing. We don't yet have that same feeling for money flowing through collective societies, and some are abusing this lack of scrutiny. I think if people looked more closely at the Access Copyright Foundation they would see the problems. Is this a form of taxation without representation of an agency that lacks basic accountability and transparency to the public which it taxes?

As a general policy theme I believe we can arrive at something that a larger portion of society would consider fair by moving away from collective societies administrating compulsory licenses towards more robustly funded granting agencies. I consider the Public Lending Right to be an ideal model to replace many of the compulsory licenses that already exist in Canada, as well as an alternative proposal to those who wish to impose more compulsory licenses. I've already suggested replacing both the existing private copyright regime, as well as any extensions such as the so-called "iPod tax", with such a scheme.

General policy directions

The idea I'm suggesting is to recognize the similarities between tax and copyright policies. We need to look at scenarios where efficiencies, greater accountability/transparency, or other policy goals can be achieved by choosing the appropriate regime for a given scenario.

We should take this idea further than the closest comparisons. There is a desire from some to have copyright regulate more and more activities. I believe in order to grow respect for copyright we need to get copyright out of the bedrooms of the nation. Copyright should only be regulating commercial and/or public activities. This isn't to say we shouldn't compensate creators for their valuable contributions in private or non-commercial scenarios, but that monopoly rent seeking is the wrong way to achieve this policy goal compared to a government grant agency.

We must also stop thinking that "if some copyright is good, more is better". While increasing monopoly rents may benefit recipients of these rents, monopoly rents have a similar impact on the overall economy as taxes. We would never say "if some taxes are necessary, more is better", and most people recognize that there is both too much and too little taxation. The same is true of copyright: too much copyright harms the economy just as too little would.

Is C-11 consistent with a "low-tax plan for jobs and growth"?

The copyright part of C-11 is a mixed bag, where some private activities are carved out of copyright while new activities are added. Overall C-11 represents more copyright and more monopoly rent seeking, not less.

I believe the rhetoric from government MPs is telling, given they nearly always speak as if blindly increasing monopoly rent seeking will improve Canada's economy. They speak as if there is a rent seeking deficit in a country that already has stronger copyright policy than most of our trading partners, something I suggest is as wrong as if we were talking about a tax collection deficit if we were one of the highest taxed countries. We would never look at increasing government revenue as an inherently good thing which must be increased at all costs, so we should never do the same thing for monopoly rent seeking.

What do other people think? As you think of the bundle of policies we see in C-11, do you see consistency or inconsistency in how the same politicians would treat similar tax policy?