Businessmen who import phones, TV sets, laptops, computers, and other information carriers into Kazakhstan pay tax at a rate of 0.7% of the cost per a commodity with a capacity to play audio or video. It is the so-called blank-media tax. Kazakh entrepreneurs are also wondering who they pay and whether their money reaches the final beneficiaries.

These issues were put forward at the initiative of KATEKS, the Kazakhstan Association of Trading Companies and Commodity Producers of Electrical, Computer, and Complex Technical Systems, at a meeting at the Atameken NCE  chaired by Acting Deputy Chairman of the Board Erbol Ustemirov. The meeting was also attended by representatives of the Ministry of Justice, Anti-Corruption Agency, organizations for collective management of property rights, MTI, Samsung Electronics Central Eurasia LLP, Technodom Operator JSC, Kar-Tel LLP, and others.

"According to the Copyright Act, importers will be obliged to pay to the Copyright Company 0.35% of the customs value and 0.35% of the selling price of the unit of equipment. We have analyzed the work of Copyright societies. And we found out that money for royalties does not always reach the authors and copyright holders. Copyright societies sometimes announce in search of their founders, who own the copyrights in the musical works or sound recordings. We see here a formal approach to finding and paying rewards. Business is ready to pay royalties, but it also has the right to know where and to whom this remuneration goes," Temir Shyngys, Managing Director of the Department of Legal Protection of Entrepreneurs of the Atameken NCE RK, said.

"We believe that this norm was adopted in violation of the Entrepreneurial Code, as according to Article 65 of Article 82, the norms affecting the interests of entrepreneurs should contain calculations of economic consequences and regulatory impact analysis. We believe that the rate of 0.7% is high and it strongly affects the economic activity of enterprises. We propose to suspend this resolution until it is amended," Sergey Arkhipkin, KATEKS Chairman, said.

Gulnara Kaken, Deputy Director of the Department for Intellectual Property Rights of the Ministry of Justice of the Republic of Kazakhstan, believes that the established procedure was observed during the introduction of the Decree.

"The law provides that 40% is paid to authors, 30% – to performers and 30% – to producers of phonograms. Each society will distribute income every quarter. The norm of Article 26, which provides for the payment of compensation fees from importers and manufacturers of equipment on which audio recordings can be reproduced, was introduced in 1996, so no regulatory impact analysis was conducted. In international practice, the rate varies from 3 to 6%, in Russia, it is 1%. We have supported the initiative of the National Chamber to review the list of equipment and material carriers used for the playback of audiovisual works or sound recordings, reducing it to five items, and are currently waiting for approval by the National Chamber," added the representative of the Ministry of Justice.

Also, the representative of the Ministry of Justice recalled that Copyright societies should spend no more than 30% of all fees on their administrative expenses. Unclaimed remuneration is kept in the account of organizations on demand by the author with no statute of limitations. And the organizations collecting the copyright fees are not entitled to use these funds.

"In 2019, we proposed to collect copyright fees from ISPs, because they have statistics regarding the content the user downloads. But our proposal was ignored by the Ministry of Justice," Sergey Arkhipkin said.

"The blank-media tax was introduced when people recorded music on cassettes and discs, violating copyrights. It's been a long time since anyone has done this. Everyone watches music and movies online or on streaming platforms. This tax is outdated and there is no compensating role. Why would we have an agreement with the Copyright Society if we do not interact with them in any way?  We don't mind paying, but let it be an official tax that the state collects. What is the mechanism to choose the organizations that will collect the money? We cannot explain to our foreign founders how the organization was defined and where the money goes," Evgeniy Amanbayev, Samsung Electronics’ representative, said.

"Atameken together with the Anticorruption Service within the framework of the Roadmap for Implementation of the Cooperation Agreement between the Anti-Corruption Agency and Atameken NCE RK signed on February 27, 2020, will analyze the practice of collecting copyright rewards. It is necessary to develop a transparent and clear mechanism for the distribution of remuneration to Copyright holders by collective management organizations," Erbol Ustemirov said.

As a result of the meeting, it was decided to consider the possibility of reducing remuneration for the reproduction of audiovisual works and phonograms for personal purposes and without income, and find a way to automate and digitize the activities of societies of authors to ensure transparency. Also, the amendments proposed by the authorized body will be discussed with the public and business community to solve these problems.