Royalties and Tax Treaties: The Challenge of the Digitalisation of Broadcasting
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Royalties and Tax Treaties: The Challenge of the Digitalisation of Broadcasting Australia-Korea Foundation: Seoul Workshop on Tax and Welfare Presented by Associate Professor Celeste M Black The University of Sydney Law School 7 September 2018 The University of Sydney Page 1
Digitalisation and Royalty Withholding Tax
OECD’s Interim Report on Tax Challenges of Digitalisation (2018)
– Digital transformation of many aspects of the economy – pressure on tax
systems: nexus, data and characterisation
– Measures relevant to digitalisation and the nexus issue include expanding the
use of royalty withholding tax to capture revenue not connected to a physical
presence in the source country
– Alt to expansion of PE definition or equalisation levy/excise
– Issue: Are the concepts of royalty withholding tax sufficiently flexible to address
the challenges of digitalisation?
– Focus of this work: Convergence of broadcasting/media and mobile
telecommunications and internet services due to developing transmission
technologies (eg wired/cable/fibre, satellite, wireless broadband)
– With particular focus on live streaming of events
The University of Sydney Page 2Examples to consider…
Would payments for access to these live transmissions be royalties?
– Payment by a local free-to-air television broadcaster for access to the live feed
of sporting competition at the Olympics, Tour de France, etc
– Payment by a telecommunications company for access to the live feed of English
Premier League football matches to be made available live on a subscription
basis to phone customers
– Payment for access to live stream of entertainment event via YouTube Live
– KSI v Logan Paul ‘white collar boxing’ event on 25 August 2018
– [AUD 13.50 for individual to subscribe; 5.4m views according to YouTube]
– Payment for ‘premium’ access to live stream of online video gaming via Twitch
– Value creation through user generate content and user participation
– Digital multi-sided markets
The University of Sydney Page 3Organisation of Analysis
– Traditional formulation of the Royalties Article
– Would these live streams be entitled to copyright protection?
– Extension of Domestic IP Law to protect related rights of Broadcasters
– The link between intellectual property law and tax law
• Australian domestic tax law
• Australian treaty practice
– Tension to between general law and taxation law regarding internet
transmission
The University of Sydney Page 4The Royalties Article – Traditional Formulation
OECD 2017 Model Article 12(2)
– ‘The term “royalties” as used in this Article means payments of any kind received as
consideration for the use of, or the right to use, any copyright of literary, artistic or
scientific work including cinematographic films….’
– Is the live stream of a sports event protected by copyright as an artistic work or
cinematographic film?
– Harmonised minimum IP protections under the Trade-Related Aspects of
Intellectual Property Rights (TRIPS) Agreement
– The sports event itself is not an artistic work
– But the filming of the event may provide sufficient creativity for copyright
– Copyright law requirement of fixation/embodiment
– Seven Network case in Australia – signal from Olympics not fixed
– Domestic law may provide that simultaneous fixation is sufficient
• See US and Canada Copyright Law
The University of Sydney Page 5Royalties and the Neighbouring Rights of Broadcasters
– UN 2011 Model Art 12(3): ‘The term “royalties” as used in this Article means
payments of any kind received as consideration for the use of, or the right to
use, any copyright of literary, artistic or scientific work including cinematographic
films, or films or tapes used for radio or television broadcasting….’
– International Convention for the Protection of Performers, Producers of
Phonographs and Broadcasting Organisations (the Rome Convention) (1961)
– Recognition of sufficient creativity or technical skills to warrant copyright-like
protection
• Rights ‘neighbouring’ or ‘related’ to copyright
• Does not need to meet creativity requirements for general copyright
– This protection for broadcasters’ neighbouring or related rights may be
provided in copyright law but may be provided otherwise
– Broadcasters have the exclusive right to fix, copy and re-broadcast
The University of Sydney Page 6Australia’s evolving domestic tax law
– Rome Convention entered into force in Australia in 1992
– Domestic Tax Law definition of ‘royalty’ amended in 1992 to expand meaning
to include an amount paid as consideration for:
(da) the reception of, or the right to receive, visual images or sounds, or both,
transmitted to the public by:
(i) satellite; or
(ii) cable, optic fibre or similar technology;
(db) the use in connection with television broadcasting or radio broadcasting, or
the right to use in connection with television broadcasting or radio broadcasting,
visual images or sounds, or both, transmitted by:
(i) satellite; or
(ii) cable, optic fibre or similar technology; …
– EM: ‘electronic transmission fees’ in relation to transmission to the public
The University of Sydney Page 7Australia’s evolving tax treaty practice
– Expansion of tax treaty definition in Art 12 as a result of Australia-US Protocol
2001
– Royalty includes payments as consideration for the use or right to use ‘films
or audio or video tapes or disks, or any other means of image or sound
reproduction or transmission for use in connection with television, radio or
other broadcasting’
– EM: Notes of negotiators - this does not include ‘payments made for the
reception of images or sounds for personal use by the payer’
– More recent treaties (eg 2016 Australia-Germany) also include this extension
– EM: includes payments for use of images and sounds in connection with
broadcasting, however transmitted
– EM: ‘any form of broadcasting, such as television, radio or web-casting’
The University of Sydney Page 8Does broadcasting include internet transmission/streaming?
– Trend in IP law is to not extend the concept of broadcasting to internet
transmissions
– Australian Copyright Law: ‘broadcasting services’ defined by reference to
Broadcasting Services Act
• Ministerial Determination in 2000: internet audio or video streaming is
not regarded as a broadcasting service unless the service also delivers
the programming using the broadcasting services bands
– 2014 Australia-Korea Free Trade Agreement: Art 13.13 [re related rights]
• ‘broadcasting… does not include transmissions over computer networks
or any transmissions where the time and place of reception may be
individually chosen by members of the public’
The University of Sydney Page 9Returning to the examples
– Payment by a local free-to-air television broadcaster for access to the live feed of
sporting events such the Olympics
– Covered by extension to payments for use of images/sounds in broadcasting
– Payment by a telecommunications company for access to the live feed of European
league football matches to be made available live on a subscription basis to phone
customers
– Phone service provider may not be a ‘broadcaster’ so may turn on whether
sufficiently creative and fixation requirement satisfied to have copyright
protection as cinematographic film
– Payment for access to live stream of entertainment event via YouTube Live or
‘premium’ access to live stream of online video gaming via Twitch
– YouTube and Twitch are not a ‘broadcasters’ – internet platforms
– Cinematographic films status fact dependent
– Exclusion of payments for individual personal use in any event?
• Apply VAT instead?
The University of Sydney Page 10Tension between tax law and general law
– Copyright law may extend rights to broadcasters that are related to copyright
but these rights are linked to the regulation of broadcasting services
– General law regulation of telecommunication (phone and internet) services is
distinct from regulation of broadcasting
– But technological advances has seen a convergence of these services
– Revenue authorities may argue for a broader concept of broadcasting to
capture additional payments
– Should broadcasting include mere transmission (narrow casting)?
– Does the requirement of ‘images or sounds’ makes sense when digital
communications may be more correctly viewed as data and information?
– Would abandoning these criteria fundamentally change the nature of the
withholding tax?
The University of Sydney Page 11You can also read
