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a blog from young economists at Nova SBE

“Private Copy Law”: A “public” problem

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Is being discussed in Portugal the implementation of a tax on digital devices that allow the storage of files, called “Lei da Cópia Privada”. This fee is intended to compensate the authors for legal copies of their works as musics or books.With this policy, the government will impose a tax of up to 15 euros (except for printers that can reach 20 euros) on each electronic device.

If we assume that the sales forecast of 2.54 million smartphones in 2014 are right, considering a tax rate of €0.12 per gigabyte and an avarage of 4 gigabytes per smartphone (and consider that only smartphones will be taxed), it will lead to a 1,22 M€ on tax revenue that could cover the prejudice of legal copies made ​​by consumers .

On another hand, according to a study by GfK, were sold in Portugal about € 16.5 million last year in music sector. Of these 70% were on physical media such as CD’s or DVD’s, and the rest in digital format such as download, legally.

Using the studies of International Survey on Private Copying Law & Practice, 2013, the World Organization of Intellectual Property, that says that the rates of private copying earned 11 cents per capita in Portugal last year. We can obtain that If these values ​​are considered for after the implementation the tax it was a total tax revenue of 1,1 millions of euros.

There are one problem with this new law that is not contempling the remote storage in the cloud” because don’t yet exist control mechanisms for those copies.

Theorically, having a increasing in price of digital devices, that stores can do, according  the  theory  of  consumer’s  choices  to maintain a constant utility consumers will have to increase their income or else purchase substitute goods.The implementation of that tax, it is going to lead to a decreasing on purchasing power of consumers so it will cause consumers with the same level of income can opt for mobile phones with fewer features, also hurting the sellers and producers of smartphones and others electronic devices. Furthermore there might be an increase of illegal downloads.

To conclude, if the assumptions above are fulfilled, a comparative static analysis will lead to a decreasing in utility of consumers with the aplication of this tax.

José Maria Vaz Patto

no 732

References:

http://www.jornaldenegocios.pt/economia/detalhe/mercado_de_entretenimento_em_portugal_encolheu_12_em_2013.html

http://www.pcmanias.com/copia-privada-uma-estimativa-do-prejuizo/

http://www.jn.pt/PaginaInicial/Tecnologia/interior.aspx?content_id=4114579&page=-1

http://expresso.sapo.pt/tudo-o-precisa-de-saber-sobre-copia-privada-que-nao-e-o-mesmo-que-pirataria=f889833 – ixzz3E9T63wn3

http://www.publico.pt/culturaipsilon/noticia/taxa-maxima-sobre-dispositivos-digitais-sera-de-15-euros-1667314

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Author: studentnovasbe

Master student in Nova Sbe

2 thoughts on ““Private Copy Law”: A “public” problem

  1. what about incentives to create to the authors? if they receive less they will create less, which decreases utility of consumers, is this effect relevant?

  2. When I wrote this text, I though that the creation by the autors are only based on their inspiration, this means, only their mood is related to the creation. But you could be right! If we consider that each author receive a money compensation for each work made, they have the incentive to produce more but at the same time it can lead to a decrease in quality of the musics or books, so the consumers can opt t not purchase those new works. So if the utility of consumers is affected by how many works they could “consume”, it will decrease. But if their utility is related to the quality of the works it doesn´t matter because the consumers won’t buy this new musics or books.