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Tax on equipment: business urges to establish an Anti-Crisis Working Group to build a transparent system of сopyright fees

19/ 06/ 2020

Businesses emphasize the need to set up a working group to build a truly fair system for paying copyright fees that protect the interests of authors while not forcing legal business to move to the shadow market and creating a burden on consumers, and. This was discussed on June 18 at a round table of the European Business Association, to which the Ministry for Development of Economy, Trade and Agriculture of Ukraine was invited.

As a result of the meeting, business representatives stressed the need to implement several key points discussed as soon as possible. First, it is necessary to create a working group at the Ministry with the involvement of representatives of various authorities, equipment manufacturers and an expanded range of copyright organizations in order to develop real changes in the copyright protection system taking into account new realities – digitalization of content and direct communication technologies for authors and consumers. Secondly, it is important to actively involve the Ministry in the negotiation process as an active moderator and independent arbiter and set a new start date for negotiations with the Ukrainian Music Alliance. According to business, it would be a good solution to postpone the provisions of the law until the end of the year to comprehensively study the issue and come to the most balanced solution.

In turn, Mr. Dmytro Romanovych, Deputy Minister for Development of Economy, thanked the participants for thorough presentations and assured the openness of the Ministry to dialogue and support the idea to meet with all stakeholders and discuss the creation of a civilized royalty market in Ukraine. Also, Mr. Romanovych noted that after signing the recently adopted draft law No.3377 on the support of creative industries, the Cabinet of Ministers should abolish all temporary tariffs and suggested professionally discussing the list of equipment to be charged with the copyright fee.

The GfK has presented to the Deputy Minister the results of its study on the analysis of user behavior in Ukraine for May 2020 regarding the digital copyrighted content offered by the importers as a tool to calculate the fees. In particular, the company’s representative Tetyana Sytnyk emphasized: “Storing files on physical media is a thing of the past: for example, among 54 % of laptop owners who have ever used the recording function – only 20% stored files on CDs. For TV owners with the ability to record copyrighted works, this figure is 17%. Also, it is very rare for consumers who read books on the Internet to print books on a home printer, namely 15%, according to the results of the study. ” Thus, according to GfK, consumer preferences are switching to the online environment, thus the probability of using devices for download and storage does not reach 100%. “Accordingly, when only 64% of smartphone owners use them to save downloaded files and at the current level of the shadow market, where every third smartphone is illegally imported, it is not correct to calculate the fees assuming that all 100% of smartphone owners use their devices for private copying. This will lead to even greater distortion of competition and threatens to increase the share of the “gray market”, “said Ms. Tetyana.

Lawyers in the field of intellectual property also took part in the expert discussion. In particular, Dmytro Terzeman, Terzeman & Partners Law Firm, noted that the problems of unregulated calculation, distribution, and payment of deductions still need to be resolved, which leads to numerous lawsuits related to the collection of inflated and economically justified fees. Solving such problems is the task of the Government, not a matter of agreement between market participants. Dmytro stressed that the main thing now is to resolve all problematic issues and create favorable conditions for all market participants, and only then to negotiate tariffs, not vice versa, as is done now. “Firstly, it is necessary to temporarily, for a certain period, suspend the law on the mandatory payment of fees for private copying and reprography, and secondly – to bring all participants to the negotiating table with the Ministry of Economy which must act as a decisive arbiter whose position will play a crucial role. Thirdly is to put such tariffs into effect only after coordinating its objectivity and reasonableness, taking into account the economic benefits of using copyright objects and most importantly the financial and economic indicators of the market in which these objects are used “, – says Mr. Terzeman.

“We fully support the idea of non-interference of the state in the relations between different businesses, and as the Deputy Minister rightly noted, the relations between different business entities should be settled on a market basis. However, in this case, the state has already intervened in the relationship between rights holders and equipment manufacturers by adopting a law on effective copyright management “- says Oleksandr Mamunia, law firm Aequo.

Industry representatives also expressed their views on the draft proposed tariffs. In particular, Hennadii Smozhevskyi, Chairman of the APITU Intellectual Property Committee, stressed that Collective Management Organizations (CSOs) that want to collect these deductions have made no effort to economically justify tariff rates, although, as accredited organizations, they are obliged to do it. “In previous years, due to the unregulated system, the CSOs collected no more than the 5th part of the possible fees, and constantly had lawsuits. Tariff rates for private copying at a level not higher than 0.15%, which were offered by the industry, form deductions 3 times higher than in previous years, and correspond to the real development of Ukraine’s economy. Therefore, according to Hennadii, the position of the CSOs on raising tariff rates negates the purpose of developing the copyright, creative industries, and the cultural industry of Ukraine.

Alla Idobayeva, Chair of the Consumer Electronics Committee noted that the draft tariffs for reprographic reproduction of almost 5% will increase the difference between the cost of official and illegal equipment, which, unfortunately, has been sold in Ukraine for years without taxes. and customs deductions. This, in turn, could have catastrophic consequences for legal importers. ”The printing market is having a hard time. In addition to a serious drop in sales during the quarantine period, manufacturers are struggling with “unofficial deliveries”, which reach 30-50% depending on the product group. The quarantine has impoverished Ukrainian consumers: wage reductions, unpaid vacations, dismissal, closure of the business during the quarantine period. Therefore, today the Ukrainian consumer is especially sensitive to the price. He is looking for the cheapest price for the selected product. The cheapest price is often on the Internet, which is flooded with “gray” supplies. The difference in price between the official and “gray” goods reaches 30%. To support legal sales and compete with price offers for unofficially imported goods, all market players have long been working at a minimum margin. Increasing the cost of printing equipment by almost 5% will make the difference in cost between official and unofficial goods even more noticeable. Therefore, it will lead to increasing the “gray” market, decreasing state budget revenues, and worsening the situation with consumer protection, etc. “

The representative of Konica Minolta – Yevhen Shyliaiev pointed out that it is important to separate equipment for professional printing and machines for office printing. “It is quite unusual for someone to print a book downloaded from the Internet with an office MFP. First, the most common in Ukraine office MFPs print quite slowly – no more than 25 pages per minute. Secondly, printing on such machines is quite expensive, and the cost of one print does not allow you to use the resulting printouts for commercial purposes. For the digital printing industry, the introduction of additional fees of 4.71% on the printing press and 1.95% on paper will have very serious consequences. For example, paper amounts to 70% of the cost of printing. Thus, the new deduction will affect all types of finished products in Ukraine: ordinary advertising materials, transaction products, as well as labels and packaging. In addition, according to the company, the volume of digital copying during quarantine decreased by 70%. Some suffered more, some less, but print volumes fell significantly overall. The introduction of new tariffs will significantly increase the cost of finished products and slow down the return of the industry to pre-crisis conditions. The same problem applies to Ukrainian printing houses, where the cost of printing equipment and paper can increase significantly in price. The country has invested in the development of literature for many years, and the introduction of a tax on paper cuts these investments to the root.”

Ellina Lebedeva, Head of Mobile Appliances at Samsung Electronics Ukraine, stressed that the company fully supports the legal distribution and legal sale of goods and services, including visual and audio content. “We are open to cooperation with all service providers involved in the distribution of legal content. As the use of digital content distribution tools grows with each day, we believe the old royalty collection system is not entirely applicable in the digital world. To support content owners and the creative industry, we need to work with government agencies to provide full support and development to legitimate content distribution platforms, promote them, and train and encourage consumers to use them. At the same time, prevent the unofficial distribution of content by blocking illegal websites and services that distribute pirated content. “ Therefore, the company proposes to start a broad discussion on royalty payments to develop a solution that takes into account the input of all stakeholders: the legislature, the Ministry of Culture, the Ministry of Economy, content creators, content distributors, and equipment suppliers. The aim of the working group will be to create a legal framework to support the distribution of legal content and the collection of royalties, as well as to limit the circulation of pirated content. We hope that the voice of legal business will be heard, and effective dialogue will continue.

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