UK court: PS2 is no computer

British tax court rules that Sony's current-gen console is a games device, not an 'automatic data processing machine'; multimillion euro rebate quashed as a result.

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It's official: The PlayStation 2 is not a computer--in the UK, anyway.

A legal argument involving duty paid by Sony on PlayStation 2 imports into Europe has finally been resolved by a UK Court of Appeal, although it's not good news for the console giant. Sony had hoped to claim up to 50 million euros in a form of rebate based on its description of the console's functionality, but the latest appeal has been overturned.

The row came about in 2001 and centres on European legislation that deals with taxes levied on goods imported into the European Community. Each type of product that lands in Europe must be classified under a specific code, and that code defines the amount of duty to be paid.

When the PlayStation 2 started shipping in 2000 it was classified by customs authorities under subheading 9504 10 00 as 'video games of a kind used with a television receiver'. This meant that Sony was required to pay a 1.7 percent duty in 2001, 1.1 percent in 2002, and 0.6 percent in 2003, adding up to a total of around 50 million euros.

Since January 2004, the level has been set at zero, but Sony contested the decision to classify the PlayStation 2 under that particular subheading, maintaining instead that it should have been imported under 8471 10 00 and classified as an 'automatic data processing machine', a code that would have levied no duty at all. The view generally held on the matter is that the difference between the two codes roughly defines the difference between consoles and computers--given that the PlayStation 2 is 'not freely programmable' it is not classed as a computer and therefore falls under the 9504 code. After an initial ruling against Sony's claim by the VAT and Duties Tribunal in October 2004, the company appealed, and now that appeal has also been dismissed.

Lord Justice Chadwick, presiding over the case, had some harsh words for the appellant, stating that the case filed went 'beyond what can be regarded as acceptable written advocacy: it exceeds the bounds of propriety'. He was referring to 'repeated aspersions that are cast in that document on the intellectual honesty of the High Court Judge from whose decision this appeal is brought'. Sony's appeal text had stated that the judge 'often completely misrepresented the text of documents', 'deliberately misinterprets part of the review decision', and accused him of 'trampling over the evidence in which the High Court has allowed itself to indulge'. However, the Lord Justice's comments were effectively a rap on the knuckles for Sony's counsel in the case and have no bearing on the ruling itself, nor do they reflect on Sony as a company.

According to Struan Robertson, technology lawyer with Pinsent Masons, the ruling shouldn't have any effect on the imports of future consoles because the levy on both codes now stands at zero. It's an important point given the forthcoming launch of the PlayStation 3, which Sony executives have repeatedly referred to as a full-fledged computer.

An official statement from Sony said, 'At present, SCEE [Sony Computer Entertainment Europe] is considering the implications of the judgment in detail and will decide what further action to take in due course'.

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