Tariff Tax Quips Flip Tory Slings Into Opposition Arrows

It’s the Conservatives’ turn to face accusations of creating an 'iPod tax' and a ‘tax on everything'
April 24, 2013 9:12 pm Last Updated: April 25, 2013 12:58 am

PARLIAMENT HILL—The so-called iPod tax is the bacon maple donut of politics. It is delicious political fodder made up of, at first glance, an odd mix of ingredients: iPods and taxes.

The Conservatives loved to accuse the NDP wanting an iPod tax when the NDP was calling for a levy to be added to the price of digital media devices. 

A current levy on blank CDs compensates recording artists not paid when their work is copied. But as CDs fade away, so do levy revenues. The NDP wanted to extend the levy to the digital devices that have replaced CDs.

The Conservatives pounced, finding ready allies among retailers and device makers. The levy would raise prices for consumers, it was an iPod tax, they claimed. The NDP argued it was not a tax—it was administered by a non-governmental organization and went toward compensating content creators for their work rather than filling government coffers.

Now the NDP and Liberals have made an energetic effort to frame the government’s decision to normalize tariffs on goods from China and other countries as a new iPod tax. This time around the meaning is slightly more accurate because tariffs are taxes, though the debate has also confused aspects of the change.

For example, the NDP and Liberals have decried a 75 to 80 percent increase on tariffs for goods from 72 countries, saying it will raise the price of all consumer goods. Like the Tories did then, the opposition has found allies among retailers and foreign manufacturers. Sony Canada has said the change will raise the price of its MP3 players by 5 to 6 percent.

The problem with the figures according to Canadian Manufacturers and Exporters president Jayson Myers is the tariffs apply to the import value of the goods while critics suggest they apply to the final price consumers pay. Since the price for many items at the border is one fifth the final retail price, the increase in the tariffs should hardly be noticeable.

Of course, the more expensive the item and the slimmer the margins, the more likely consumers will notice the impact of the tariff. 

Sony, which will see the tariff for its music players increase from nothing to 5-6 percent, has suggested it will be forced to apply the entire tariff to its retail prices. So if Sony imports an MP3 player for $100 from a subsidiary in China and the tariff adds $5, Sony would have effectively doubled the tariff if it applied a 5 percent increase to a final retail price of $200.

Given that retailers regularly apply 100 percent markups to cover overhead costs like retail space, shipping and advertising, the scenario is not unlikely. (Sony redirected late afternoon calls for clarification on this point to two different spokespeople but was unable to respond by press time.)

‘A tax on everything’

For opposition parties, the main issue is that the government is increasing the final price of consumer goods. It’s “a tax on everything.” Here again a favourite Conservative refrain has been turned around as fair play.

The Tories have decried a proposed NDP cap-and-trade system as a carbon tax—”a tax on everything”—and have made it a default comeback during question period. It’s been a bitter point for some NDP MPs that the Conservatives had also proposed a cap-and-trade scheme in previous election platforms and are now maligning the NDPs similar policy as a carbon tax. 

For the NDP, the impact on consumers is the main point, and the party used one of its opposition days in the House of Commons to hammer the government on the tariff changes for hours at a time.

For the government, it is an issue of revenues and not giving countries like China a better deal than, say, Australia. The government is essentially normalizing discounted tariffs meant to spur economic development in once poor nations. With an economy almost five times the size of Canada’s, China no longer needs a preferential tariff, argue the Tories.

The Conservatives have since shifted their counterattack on the “iPod tax” from raising the spectre of the NDP’s carbon tax to alleging the official opposition would rather help Chinese than Canadian workers.

It’s an unusual point for the Tories to make. The party has made lowering tariffs through free trade deals a cornerstone of its trade agenda, frequently citing the benefit to business and consumers.

It’s also a move some argue has come too late. Manufacturers that would have once welcomed the move have already been hard hit by cheap Chinese imports, with many moving manufacturing overseas.

The move will add $333 million to government revenues annually by 2015-2016.