May 09
31
Follow the Money or How Hollywood Hides its Billions
It will come as a suprise to many readers, but there are those that still watch, free to air television.
Those that do, tend to watch the programming on TV and use the advertising
segments as convenient toilet or coffee breaks.
But those of us that think that advertising is an
inconvenient distraction from observing our chosen content stream – don’t quite
“Grok” how Mass Media operates.
If one counts the number of minutes of
advertising per 60 minutes of TV, one quickly realizes that the programming
including movies, series, news, documentaries and other entertainment are there
in order to capture audiences for the advertisers.
Think of it as the invisible taxation of your leisure time.
There is no such thing as free entertainment.
But all that programming is licensed and the media owners
and the movie and CD distributors all have to pay licensing fees, or royalties,
to the original owner of the content, which means that the vast majority of the
purchase price of the ticket, CD and the taxation of your leisure time through
ads goes to the USA.
In 1958, the amount of licensing fees being moved out of
Australian hands and into American bank accounts was so high for movies alone
that the Australian Government redesigned the CPI around those very license
fees. They gave films their own unique special category. That year films
actually cost Australian taxpayers 2.6%
of the national Balance of Payments. (Page 373 Aus Yearbook 1958).
To place this into perspective – In 1958 Australia’s foreign debt
represented only 1.6 % of the GDP in comparison. Films were the only product
imported or exported from Australia that by the quantity of money involved, deserved their very own special
category by name. Everyhting else was labelled Agriculture or Machinery or dry Goods.
These days the entire industry does it slightly differently.
Last year Foxtel Licensing fees were $645 million dollars and the proceeds of
virtually every movie ticket sold and every digital copy of music sold went
straight into overseas bank accounts – outside of Australia’s economy and
ironically also largly invisible to the USA economy.
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Financial abuses have been around for as long as there |
Great paragraph, but I didn’t write it. It was written not last week, but in 2001by William F.
Wechsler In July/August
2001 in an article entitled, “Secrets and Lies”.
His article went on to say:
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The United States their governments — remembering that Al Capone was put company-incorporation and trust-formation laws were and law enforcement agencies developed specialized |
What does this have to do with Advertising, Television or
Movies?
Lets start with Google who came under pressure recently for
their corporate
taxation structuring.
“Well well well, what do we have here?”
OK – Let's see if Hollywood fair any better? For a moment, lets review Hollywood Accounting
and some if its example pushback casestudies.
You my dear reader will no doubt say, “So what! That’s just
normal large company business practice. But what do you call it when Government
gets in the act to aid the industry.
Lets review some US Government documents…..
From The Department of Commerce – THE BALANCE OF
PAYMENTS OF THE UNITED STATES Concepts, Data Sources, and Estimating
Procedures, May 1990 Table I-3.—BEA Balance of Payments Surveys—Continued (Page 13)
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Survey title and number (Annual Survey of Royalties, License Fees, Types of information Sale and |
In 2005, the BEA decided to cancel this survey http://edocket.access.gpo.gov/2005/05-8976.htm
Because
The Department is proposing to remove the reporting requirements
for these five annual surveys because the information collected is now
being collected on four separate quarterly surveys. Specifically, ……the BE-25, Quarterly Survey of Transactions Between U.S. and Unaffiliated Foreign Persons in Selected Services and in Intangible Assets, replaces the BE-47 and BE-93 surveys; ……………….BEA began collecting data on these quarterly surveys in 2004.
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Because….
Paperwork Reduction Act
The surveys that would be discontinued by this rule have been
approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act under the following OMB control numbers: 0608-
0013 (BE-36 survey), 0608-0015 (BE-47 survey), 0608-0016 (BE-48
survey), 0608-0017 (BE-93 survey), and 0608-0063 (BE-82 survey). OMB
approved the quarterly surveys under the following OMB control numbers:
0608-0068 (BE-9 survey); 0608-0067 (BE-25 survey); 0608-0066 (BE-45
survey); and 0608-0065 (BE-85 survey).
List of Subjects in 15 CFR Part 801
International transactions, Economic statistics, Foreign trade,
Penalties, Reporting and recordkeeping requirements.
Dated: March 30, 2005. Rosemary D. Marcuss,
Acting Director, Bureau of Economic Analysis.
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I would have thought that requiring companies to file quarterly reports would increase the paperwork and not decrease it.
An example of a licensing organisation, existing solely to
accept foreign movie licence fees.(Without the Stichting entities displayed).
Source: http://fraser.stlouisfed.org/publications/scb/page/10642/2008/download/10642.pdf
And from the official BE-25 FAQ (http://www.bea.gov/international/pdf/be25faq.pdf)
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15) We Since your 16) We No. Your 27) My You have a 32. Finally, |
In other words – if a service “affiliate” company has lots of
“collection” overheads – e.g.: royalty payments – then the small amounts under
4 million – do not need to be reported. An interesting option if the service
company has 200 shareholders due 3.9% royalty on every 100 million dollars of revenue from license
fees.
We are dumbfounded.
And of course, not one penny of which was payable in
taxation by American (or American Affiliate Corporations (Stichting))
corporations to the Australian government.
Government used to be about governing for the benefit of the
taxpayers, the constituents, the voters.
The Australian government used to balance the books by the
simple mechanism of the purchase or sale of gold.
Australia is a gold rich country – and in times of shortage
we were still capable of balancing our international accounts by funding
additional mining exploration and extraction of the precious mineral.
But then the government was hoodwinked in the seventies into
accepting an alternative to the gold standard. And the balance of payments has
been getting worse ever since.
Just review the folowing comparison between US Dollar bonds and Gold. An interesting story.
Now, on the back of the greenback – our future is no longer
our own to determine. Every point the greenback nosedives increases the cost of
our standard of living – Unless we stop using US Dollars to settle our overseas trade accounts..
The United States is bankrupt. Everyone in the world knows
it, except a couple of policy advisors in Canberra. Consequently, to keep up with the Joneses (the USA) – the
government has no choice but to tax every part of our lifestyle.
Interestingly enough – there doesn’t yet appear to be a way
of actively taxing P2P.
That means that every time a file is downloaded via P2P – no
money leaves Australia, making our economy stronger.
Yes – I know that you, my disbelieving reader, will
immediately retort – “Hah! What about GST on DSL connections” and my response
will be – that you are quite correct – DSL which is taxed, does enable one
form of P2P.
(And I blogged about this the other day…… http://www.perceptric.com/blog/_archives/2009/5/29/4203779.html)
But at least that GST is payable to the Australian
Government and not an offshore entity that routes the payment through Stichtings
in Austria and the Netherlands designed to ensure that licensing revenue isn’t
taxed by Uncle Sam.
http://www.sec.gov/divisions/corpfin/cf-noaction/stichting050704.htm
What You Can Do….
What can you my dear reader do to right this travesty of justice resulting in the legal quagmire imbalance that we have at the moment with ACTA and various other attempts of legislation by litigation instigated by the law-breaking Hollywood industry ? (Or maybe it's not law-breaking if the US Administration are in on it. After all, the Government is never wrong, it's the Government.)
Well if you are a P2P user and insist on downloading files
illegally, then could I at least appeal to your patriotic side. (Don’t download any Australian content – Australian
artists are one of us – they need to eat. If you download their music and
movies, then they’ll be on the dole and your taxes will be paying for it. –
Besides Australian film and music producers don’t use Hollywood Accounting and
they all pay their taxes and artists royalties.
)
Be a Patriotic Australian, do your bit for the economy,
download an American product; (movie or music track) makes no difference.
After all, how can you be breaking the law if the Studios
that created the content in the first place are hiding their income from their
Government.
If the movie didnt break even, then you cant be damaging it.
Their argument is what’s ours is ours and what’s yours is ours
also – but no, we don’t pay tax and no we don’t pay dividends – but yes we will
sue you because that adds to our personal bottom line and doesn’t get added to
the movie or music revenue – so the artists never see it.