Why Chicago needs Robin Hood!

When Federal Treasurer Joe Hockey said in his Budget speech he was going to put the GST onto Netflix, we all gasped in horror.

Well, it appears Joe isn’t the only pollie who wants to tax the media, somehow seeing a pot of gold at the end of the rainbow.

It seems the City of Chicago is so cash-strapped through years of mismanagement, that the only way out of the mire is to start raising taxes on the oppressed masses.

You’re right. There’s something very evil King John and Robin Hood about all this!

However, what, on the surface, looks like another ‘kick in the wallet’, could actually turn out to be quite beneficial for Chicago’s radio stations.

The Mayor of Chicago is now President Obama’s former right hand man, Rahm Emanuel.

The ‘Rahm with the Plan’ says any digital delivery that is being billed to subscribers in the Chicago area will be charged a ‘Cloud Tax’, starting in September.

Mayor Emanuel is planning to charge a 9% impost on Netflix, Spotify, Pandora, and, the newly-launched Apple Music for the right to have access to his city and entertain his constituents.

Yep, sure sounds like old-fashioned Chicago style protection, with a new cloak of legitimacy.

In fact, this Cloud Tax will apply to any company that offers to store digital content or stream it, if they send bills for those services to anyone living within the Chicago city limits.

What may look like a puny amount per month is expected to raise over $12-million dollars for the city during the course of the year, proving that Al Capone’s legacy lives on in the windy city, it just moved from the speak-easies in the thirties to City Hall eighty years later.

Despite the rising anger of digital subscribers, Mayor Emanuel is far from repentant.

He says it’s not a new tax, it’s just a clarification of the city’s ‘amusement and personal property lease transaction’ taxes.

Of course, it is!

The upside for our industry is that it’s likely to see free-to-air broadcasters becoming a more attractive choice for the city’s residents and commuters, at a time when radio really needs a win.

Unfortunately, it’s not going to be such a boost that it’s worth dancing in the streets over.

However, it is a positive, albeit at the expense of some less fortunate Chicagoans not being able to afford King Rahm’s ‘Cloud Tax’.

As much fun as we can have drawing tongue-in-cheek parallels with Chicago gangster past and the days of Robin Hood over this mean-spirited tax, the reality is that this Cloud Tax could well become a precedent not only in the US, but throughout the developed world and it has the potential to stifle technological growth.

For years, governments have sat by in frustration trying to work out how they could possibly benefit financially from the internet.

Not being able to work out new ways to get their hands on your money generally causes politicians a great deal of angst and sleepless nights.

When suggestions were raised 15 years ago about charging for emails, internet users rose up and governments around the World backed down.

Since then, the Net has been pretty much ‘hands-off’ as a source of extra government revenue.

In countries with the equivalent of a GST, like Australia, governments do recover consumer taxes on the supply of the internet from locally based ISPs, but, additional international subscription services often slip in under the radar, tax-free.

In most instances, this includes many of those cloud storage services.

Across the US, internet subscribers are now bracing themselves for other local and state governments warming to the Chicago tax and becoming more aggressive in grabbing a bigger slice of the internet pie.

Those subscribers know that, one way or another, sooner or later, it’s going to cost them a whole lot more.

Back here in Australia, Treasurer Joe says Netflix is his first digital target, but I suspect if he’s ultimately looking for the illusive pot at the end of the rainbow in the form of other digital subscription services, he may only find Fool’s Gold that costs more to mine than he’ll ever recover.

Regardless of what happens with any future internet tax grab here in Australia, it’s unlikely to have a significant impact on the commercial radio sector, largely because the Net and broadcasting are already so closely entwined.

About The Author:

Brad SMART has been a journalist, consultant, author, broadcaster, film director and was the former owner of the Smart Radio Network throughout Queensland. Brad can be contacted on email here.