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This paper proposes a technique for scalable and also provides for lossless compression. It reduces smooth objective scalability, in terms of SegSNR, from lossy to lossless compression. The proposal is built around the perceptual SPIHT algorithm, which is a modification of the SPIHT algorithm and is introduced in this paper. Both objective and subjective results are reported and demonstrate that the proposed method performs comparably with the MPEG-4 AAC coder at 16, 32 and 64 kbps, yet also achieves a scalable-to-lossless architecture.