Blurred Keys

Just with reports of music, film, and game piracy “costing” businesses in ‘lost’ revenue and the State in tax ‘lost’ taxes, one cannot lose something you never had. Claims from the Irish Tobacco Manufactures Advisory Committee of ‘loses’ as reported by the Irish Independent and the Irish Examiner recently are likely to be on the high side.

With lower music sales being blamed on piracy, reports from the OECD and others have said a more significant impact is likely to be consumers not having money to spend on growing types of media. Other reports outline how people downloading large amounts of music illegally are often the best consumers of the music and buy large amounts of music, gig tickets, and merchandise.

But the piracy line by these industries is still been reported as fact or claims without any mention of independent reports from groups such as the OECD which take a different line.

In the same vain, cigarette smokers who buy illegally imported cigarettes most likely could not afforded the same amount of cigarettes at the very high legal cigarette prices in Ireland. And it’s more complex than the cigarette industry claim, or what at least what is the result or their claims to newspapers.

There’s a lot to consider. Cost-benefit analysis for strict, strict control by the State would show a drop off of any possible benefit at some point –- it becomes more costly to control illegal imports than any possible tax take would generate. Even levered against health spend benefit, the benefit drops off. So, very strict controls would not be worth the cost. Control measures at ports can also damage other business by slowing down goods movements.

Furthermore, somebody is getting their figures messed up, the Irish Independent reported last month that:

“The manufacturers said last night the figures showed the geographic spread of the market for the smuggled cigarettes, which were estimated by the authorities to cost the Exchequer €500m every year in lost revenue”

But just at the start of the year the same reporter in the same newspaper said the following:

“In 2007, the Irish Government lost some €352m in taxes because of smuggling”

So, the most recent report claims that the cost to the Exchequer is “€500m every year”, but the same paper about five months before reported the Exchequer only lost “some €352m” in 2007? It get worse, the earlier reports says:

“CIGARETTE smuggling is predicted to cost the country more than €500m in lost revenue within a year”

So, what was first reported to maybe happen within a year, the second report tells the reader this is happening “every year.” Amazing stuff. Something which is predicted to happen “within a year” is then apparently happening “every year”. But the Indo’s Sunday paper, the Sunday Independent, said only in April:

“Cost to State of EUR2-per-pack price rise could have been as much as EUR500m in lost revenue”

So, get this. What is reported as something which only “could have” happened just back in April is already happening “every year.” Fault can often be found with this type of reportage based on reports and figures –- which rarely have an explained source or author — released by groups for one or another industry or cause. And often the PR people behind the apparent facts and figures are good enough at their jobs that blunders won’t be as obvious in reports just month apart, or figures will look realistic. However, in this case, the Examiner said on Saturday that:

“The illegal trade is reaching epidemic proportions and one estimate, for the losses to the exchequer per year by the end of 2010 of excise duties and VAT, has been put at 750 million”

Even if larger demand for illegal supply in a recession is taken into account, this is quite a jump from the claim of “€500m every year” printed in the Irish Independent last month – and even the €500m figure is in doubt given the record of reporting on the issue.

In The Irish Times today, Peter Murtagh writes (’Journalists are supposed to be against abuses‘) about Monica Leech being awarded €1.87 million in her libel case against the Evening Herald / Independent News & Media.

He says journalists should not be standing “shoulder to shoulder” with those who abuse power — in this case the Herald.

The argument on the other side is the large sum awarded will deter serious journalism. But is it not the Herald which is at fault here rather than the jury? Beside money, what else does Independent News and Media understand? What else would make them think twice?

UPDATE #2 (17/05/2009): Reports in Sunday newspapers today suggest IN&M have managed to secure a standstill pact with bondholders, the company is due to announce this in the morning.

(Via Greenslade) The print edition of the Telegraph reported today that “City traders are betting heavily that Independent News & Media (INM) will be forced into administration as early as Monday as 11th-hour talks between shareholders and bondholders collapsed.”

Meanwhile, also in a print article this morning, The Irish Times reports the Independent group is “on the cusp of a ’standstill’ pact with its bondholders, which would give the company breathing space until late June to reorganise its debt,” however these “efforts are ongoing to convince the remaining holders to approve the standstill deal.”

UPDATE #1: The Daily Telegraph article (’Traders bet on Independent owner to fail as bond looms’ City, page 35) reports “The bondholders are refusing to accept the offer” and quotes one bondholder as saying: “This is the equivalent of 15p when we are owed 100p. The situation has gone on for long enough. The shareholders need to inject more cash and equities and get on with the asset sales over the next year or so.” The Telegraph says INM declined to comment.