This year, two significant music markets – France and Canada – have slapped new taxes on the revenues of music streaming services.
The reaction from music streaming companies has been visceral. They decried the Canadian tax as “discriminatory” and hinted at plans to fight the new regulation, while in France, Spotify raised its subscription prices to offset the tax and pulled its funding from two French music festivals.
Within the music industry, the idea of taxing streaming services is somewhat unnerving, given that the music industry as a whole is downstream from the digital service providers who bring music to listeners, and streaming is a low-margin business.
In addition to paying upwards of 60% of revenue in royalties to rights holders, streaming services already pay a value-added tax (VAT) or sales tax in many jurisdictions, and in recent years, many countries have instituted digital service taxes (DSTs).
But while those taxes are broadly applied – to every business that sells, in the case of VAT/sales taxes, and to all digital businesses in the case of DSTs – a tax specifically on music streamers is something of a novelty.
Yet, this past spring, two congressional lawmakers proposed a similar US tax on music streaming — much larger than the Canadian or French taxes.
So is this the beginning of a new wave of taxes targeting music streaming (and by extension, the music business as a whole)?
To answer that question, it helps to examine what France and Canada are doing and the political context in which those taxes are occurring. That can give us some idea of whether or not such taxes are likely to multiply — and where.
