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Formalization prospects versus bear hug logic in taxing film, music

17th June 2012
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Finance Minister William Mgimwa

In his Budget presentation, Finance Minister William Mgimwa moved to introduce excise duty on music and film products, chiefly DVD, VCD, video tape and audio tape, with explanation that the measure is aimed at assisting operators in this sub-sector to formalize their business, prevent piracy of the artistic works and enable (artists) to benefit from their works.

The minister elaborated that the Tanzania Revenue Authority will issue stamps for the products in order to control production and earn revenue to both the government and operators (by which is meant artists?). The measure will formally start being applied early next year, “to allow time for the review of the relevant laws and regulations,” he specified.

It would be apparent that the minister is addressing the issue at two levels, namely that there is need for the government to obtain revenue from the production and sale of artistic works, which is fair enough, and then there is an idea that this move is also good for artists.

The speech says the measure shall introduce a sort of frame of reference as to what the producer has put into the market and what the artiste has obtained, where taxation doesn’t just come in and have a price impact in one way or another, but also brings a measure of discipline.

The minister is suggesting that artists will gain by that move, as each item of a particular product shall only be sold with a TRA stamp, an assurance of royalty.

What is interesting to examine or rather to ascertain is whether this narrative by the minister shall be equally straightforward in practice, that is, in terms of how the market reacts or take it up, or it could turn out to be a bear hug – which the one being hugged could happily do without.

That is where the shoe might prick, if the minister was targeting film millionaires who may not having been paying tax, and perhaps quite a few in the music industry have cash to spare, not just ‘day workers’ helping to fill the stage for a certain song, without being a proper stakeholder. Chances that the narrative shall come out in precisely the same way, all is smooth for all involved via a tax measure look non-suspicious, unawares.

For one thing, it is undisputable that music and film have sufficient value added to do their bit for revenue, and it is also true that there is a sort of chaos reigning in the production and distribution of music in particular, and COSOTA, the artists’ union, has (as its name suggests) labored a lot to have the piracy and short-changing ended.

Nor again is it evident from the name, that it was likely to reach any appreciable success or achievement in that context, as a poor artiste faces a ‘take it or leave it’ situation with a producer or a marketer, or the two rolled into one, and thus takes anything offered. When TRA puts a stamp, COSOTA could track amounts sold and impute amounts liable to be paid to artists, simply.

There is a lingering fear though, that music and film products become slightly more expensive on account of a tax liability. But assuming there is competition in the sub-sector, there are chances that usurious profits of unethical producers be cut down to size, and that they are compelled to pay artistes accordingly, when market tracking can ascertain what was produced and sold. So it is fine to worry if adding a tax slap on music and film is good for everyone or it may price a few artistes out, like tightening the quality control on what works are taken up, etc. But it may not finally be a bear hug but real benefit.

SOURCE: GUARDIAN ON SUNDAY
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