Apr 15, 2014 - 8:45am

Guess Who Isn’t Paying Taxes – 2014 Edition

Former Manager, International IP, Global Intellectual Property Center

Crossposted from the Global Intellectual Property Center

Last year, we tackled one of the lesser-known liabilities of counterfeiting and piracy- lost tax revenue. While a lot has happened in the last 365 days that may be affecting your taxes (Obamacare, anyone?), unfortunately the problem still remains pervasive, making education and enforcement against these economic crimes all the more important. Here we have a little reminder of how the bad guys behind fake purses, pirated software, and counterfeit pills are sticking it to the American people:

While most of us begrudgingly stood in line at the post office yesterday to send in our checks to Uncle Sam, there are others who, well, did not. And it’s not because they couldn’t. Some of these tax-adverse “entrepreneurs” raked in anywhere from $120,000 to $10 million, and even $100 million through illicit counterfeiting and piracy operations.

That fake handbag or pirated song takes so much more than just from the creator’s bottom line. It takes from local, state, and federal tax revenue, which in turn undercuts school programs, public safety systems, or transportation projects, leaving main street businesses and consumers like you and I to pick up the tab.

In fact, it’s estimated that counterfeiting and piracy deprive the global economy of more than $650 billion in revenue, a number expected to skyrocket each year. In 2010, the U.S. Government and Accountability Office studied the effects of this shadow market and found that in addition to posing risks to consumer health, industry viability, and economic competitiveness, intellectual property (IP) theft also hacks away at government resources in more than one way:

“Many of the experts we interviewed identified lost tax revenue as an effect of counterfeiting and piracy on governments. IP owners or producers of legitimate goods who lose revenue because of competition from counterfeiters pay less in taxes. The U.S. government also incurs costs due to IP protection and enforcement efforts. Researchers have found anecdotal evidence that organized criminal and terrorist organizations are involved in counterfeiting and piracy. A 2009 RAND Corporation study, for example, presented case studies showing the involvement of organized crime or terrorist groups involved in film piracy to generate funding for their activities. Because criminal networks are involved, government law enforcement priorities may be affected since more resources are devoted to combating these networks.”

While legitimate, law-abiding innovators are providing healthcare and wages for employees and are paying their dues every April 15th, IP thieves are blatantly ignoring all civic and corporate responsibilities; all the while forcing an even greater amount of government resources to be spent in enforcement.

There’s no doubt that IP crimes are a scourge on our economy, but it’s important to consider the many precipitating consequences of their activities, with government funding as a less obvious but nonetheless important example.

The products may be fake, but the outrage should be real.

Later this month, we’ll be highlighting the IP enforcement agencies that are at the forefront of bringing to justice those who are skirting laws for personal gain. Please join us in person or by telecast for the 2014 IP Champions Conference. Information and registration can be found at www.theglobalipcenter.com/IPChampions.


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About the Author

Former Manager, International IP, Global Intellectual Property Center