Nicky (arcmorality) wrote in u2,

  • Music:

Interesting article

From today's Sunday Times.

Matt Cooper

For a man who won popular support when he castigated the Irish government for its failure to spend our tax in the way that he saw fit, Bono now finds himself standing in a lonely place. Last week the rock-star-turned-campaigner was exposed for taking part in a decision that will deliberately reduce the amount of tax that he and his business partners in U2 will contribute from next year onwards.

Since June, the band and its manager have engaged in what is known as "tax avoidance," moving U2's publishing empire to the Netherlands where it can avail of a near zero rate of tax on royalties. It is absolutely legal, but it still jars. How can the music industry's preacher-in-chief hope to retain his credibility when next he delivers a sermon to governments on how they should spend their taxpayers' money? This development is a bitter disappointment to those of us who have admired Bono's campaigns on behalf of the world's poorest. The U2 singer has taken the unprofitable, and often unpopular, course of demanding adequate healthcare provision for those afflicted with HIV and AIDS, advocating the reduction of debt owed by impoverished countries to rich nations and promoting equitable global commercial trade.

It has been all too easy for some commentators to mock the bombast and posturing that often accompanies his public engagements, but I always admired the skill that Bono employed in marrying his idealistic intentions to the pragmatism demanded by those he dealt with in the world of politics and economics.

Not for Bono the futile tactics of the naive anti-globalisation lobby, who would make themselves (and nobody else) feel better by engaging in boycotts, rather than helping the needy through active engagement with the powerful. It is impossible not to be impressed by the energy with which the U2 frontman has pursued his objectives.

Not only does Bono agitate on the world stage, putting pressure on leaders such as George Bush, Tony Blair and Vladimir Putin in the full glare of the media spotlight, but he acts locally, too.

When U2 played Croke Park last summer Bono used his platform to assail Bertie Ahern, highlighting the government's decision to renege on a commitment to deliver annually to the Third World a sum equivalent to 0.7% of our national income by 2007. The taoiseach had shifted the target to 2012 so the money could be spent domestically.

Bono provided his take on these events to an audience that might not otherwise have noticed this slippage and the crowds in Croke Park hollered their support. It seemed to have the desired effect. Already contributing more than (EU)540m each year to relief efforts, Ahern promised that he would speed up efforts again to realise the 0.7% target sooner than 2012.

That money, of course, is ours since the only funds the government has are those it raises through various taxes. Bono -- or Paul Hewson, as the taxman would know him -- contributes to that pool, albeit not in the same proportion as you or I, given that he enjoys an income that is a multiple of that earned by pretty well everyone reading this paper.

All his annual Irish-sourced income is taxable as Bono remains resident in the country. Any trade in assets, such as property, would be liable to capital gains tax, and income from non-music related activities, such as dividends from his hotel investments, would also be taxed.

But a significant amount of his income is not liable for tax at all, irrespective of when and where it was earned.

Bono is a beneficiary of the tax exemption scheme for artists introduced in the 1960s. This tax break meant Bono did not need to follow the lead of other multi-millionaire Irish citizens who live elsewhere and limit the number of days they spend in this country each year so as to reduce their domestic tax bills.

Because Bono was one of the few members of Ireland's super-rich club who could enjoy preferential status while still living at home this contributed to the jaundiced view that followed his lecture to Ahern. His critics believe he is compromised and therefore acting hypocritically. I disagree. Bono did not lobby to have these particular tax laws introduced and neither did he choose to leave the country in order to avoid paying tax on his non-royalty income.

But maintaining that defence has become so much harder now that U2 has decided to go Dutch. Hard-headed realists will claim that U2's decision to relocate its most important business interests to the Netherlands was inevitable as soon as the government announced a change to the controversial artists' tax exemption scheme.

Under the new laws the band would have been required to pay full tax rates on annual incomes of more than (EU)250,000. That seems fair enough, especially given the range of tax reliefs still available to wealthy individuals with access to clever accountants.

Clearly, the U2 corporation -- the four members of the band and manager Paul McGuinness -- were about to be caught in this tax net. So the business assets were transferred to allow the income they produce from royalties to be distributed to the owners in a "tax efficient manner." As a result, the five can remain tax resident in Ireland.

As I say, the move is entirely legal and might even be described as enlightened and rational. Why would anyone give more money to the state than legally required? But just because the option exists doesn't mean it has to be availed of.

Bono may have had a problem in that he is only one part of a five-man business concern. He does not control U2 but is a partner with Adam Clayton, Larry Mullen, Dave Evans (the Edge) and manager Paul McGuinness. It is entirely possible that Bono was outvoted when it came to this hard-headed business decision.

But why should we give him that out. What this story highlights is a fact that isn't often appreciated. While Bono has become synonymous with campaigns such as Drop the Debt that fit his right-on rock star image, he also has a well-developed sense of how capitalism works. U2 has acquired a business empire with an estimated worth of nearly (EU)700m. Much of that is due to their artistic talent, but a substantial portion has come from careful management of business opportunities.

Bono's idea for helping the Third World involves the destruction of trade barriers and protectionism, and investment in the development of self-sustaining businesses. His economic instincts are pro-globalisation, but in a perfectly sensible business way. One of his big ideas to help the Third World, the launch of the ethical brand Product Red, with partners such as Motorola, Gap and Giorgio Armani, is based firmly on capitalist principles.

But even though he is familiar with the ways of commerce, it is Bono's hectoring of world leaders that resonates with so many of his fans. The negative publicity spawned by the Dutch decision, however, means he may have to pull his punches in future.

Many of our prominent tax exiles, such as Michael Smurfit, Sir Anthony O'Reilly and Denis O'Brien, have been known to make pronouncements as to what this country "needs" economically and sometimes politically.

The fact that these people have gone to considerable lengths to deliberately limit their own contribution to our national finances has not lessened their enthusiasm for lecturing our leaders on how the country should be run, what type of political parties should be supported, or any other issue they feel needs airing.

Bono is still resident in Ireland, but the decision to move the company's business offshore to avoid tax means that the public is unlikely to indulge him the next time he takes a swipe at the government. How can he be taken seriously on issues like the government's contribution to overseas aid, when he himself is reducing the pool of income from which that funding comes. If he does try it on then, in classic Irish fashion, he is likely to be told to "shut up and sing."

Speaking to the journalist Michka Assayas for a book of conversations published last year, Bono said: "I am discovering how much respect I have for people who stay true to their convictions, no matter how unpopular. As you get older, your idea of good guys and bad guys changes," he said.

It will be up to his fans to decide into which of those categories Bono falls.

© Sunday Times, 2006.

Its really hard to argue with that article.
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