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August 13th, 2006

Interesting article @ 07:23 pm

arcmorality:
I'm currently hearin: Crown - The Waterboys

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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From:whatsername_31
Date:August 13th, 2006 06:47 pm (UTC)
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Wow. I have not one idea of what to say, except why would he do that?

I am a bit dissapointed really...
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From:davefilkins
Date:August 13th, 2006 07:00 pm (UTC)
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Personally, I believe that it's a pretty bold move to condemn a man who's done more for poverty and AIDS awareness worldwide than most politicians. We all do some things that people may see as "shady." Just because he calls us to a higher plane of existence doesn't mean that we need to get all bent out of shape because he makes some poor choices along the way. It just shows us how human they really are. Instead of judging him, lets turn our focus inward... What have we done for AIDS awareness today? What have we done to diminish global poverty today? Until we step up to the plate and try to fill Bono's shoes, and even after we really do, we have no room to judge him.

And as a sidenote... I have not heard a single word from Paul McGuinness or any of the band members on this subject. Could it be true that we're reading this all wrong and that they're not specifically trying to avoid paying taxes at all, but that this is a way to smear their message around the time of a midterm U.S. election? I'm not usually a conspiracy theorist, but it is awfully convenient timing... I just want to hear from their point of view, really. I don't care whether it is or not. Gandhi wasn't a perfect man, yet many people cling to his teachings. Nor was MLK. Just look at our politicians. If you can find one that hasn't laundered money or given in to rich special interest groups at some point in his career, get back to me. Until then, I say we leave Bono alone.
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From:arcmorality
Date:August 13th, 2006 07:13 pm (UTC)
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I cant agree or dissagree with anything you say. I'm in two minds about the whole thing. Whilst I do have allot of respect for what Bono has done, at the same time I don't think the sun shines out of his arse. That article does make you think.

but that this is a way to smear their message around the time of a midterm U.S.
election?


Not everything revolves around America. We have our own issues in Europe too ye know.
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From:davefilkins
Date:August 13th, 2006 07:27 pm (UTC)
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I honestly didn't mean to say that America was any more or less important than any other place in the world... and I'm sorry if I made it seem that way. I just wanted to say that I haven't heard from anyone in the band yet and that there could be a great number of reasons that the band chose to follow through with this course of action.

I am glad you brought this to the community... and I have to admit that it does bring my level of respect for Bono down a good bit. But what this information does NOT do is make his message any less important than it was before.

Again, I am really sorry if I came off as arrogant. That was not my intention at all.
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From:arcmorality
Date:August 13th, 2006 07:55 pm (UTC)
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Don't worry about it. Worse things happen in China. :)

But the facts are there. It is a move to get away from taxes, allot of bands moved royalties to Holland for the exact same reason. The Rolling Stones for example.

Everybody and their dog will have an opinion on this. But it wont make much difference. The band or Paul McG have never discussed money and I wouldn't expect them to start doing so. That's there business and none of ours.

But they will have to expect to take some stick for it. Bono especially. If smaller, independent bands in Ireland can live with the new taxes. Why can't the biggest band in the world cope with that? Ok so there's allot more money involved, but I don't see them struggling with the gas bills after taxes ! :) But again that's U2's business not ours. Interesting topic to discuss all the same.
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From:venusloon
Date:August 13th, 2006 07:09 pm (UTC)
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Government allocation of resources, e.g. tax money, is inherently inefficient. And by paying into a pool of income taxes, you don't get to choose what cause your money goes to.

Under the assumption that they would use the money saved from paying taxes to put directly toward socially responsible investment (which I must admit is a big "if"), then it is vastly more efficient to do what they're doing.
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From:boriel
Date:August 13th, 2006 08:29 pm (UTC)
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i agree. asking the governments to keep their promises on the 1 and 0.75 aid money is the right thing to do, especially if those same governments have a track record of already cutting social spending at home and abroad in favor of bumping up weapons and warfare by billions and trillions of dollars in the mean time. i dont think that trying to pay smaller taxes has any bearing on wanting your government to spend its money wisely.

i tend to agree with one thing expressed in this article. it says that any money earned in ireland by the band stays in ireland and is subject to those taxes... but money earned elsewhere is taken elsewhere to avoid taxes in ireland. I think there is nothing wrong with that. I mean... if i lived in a high tax country or state, but earned my money somewhere else, wouldnt i want to pay the lower taxes of where i earned it?

this article is so long that i lost interest half way through - well, not really lost interest, but lost what they were trying to say - what the point was... i'll have to come back and reread it at a later time and see if it makes more sense.
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From:venusloon
Date:August 13th, 2006 11:30 pm (UTC)
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cheers :D was expecting harsher comments, not one in defence of mine. woooh.

now i shall research what ireland's track record with spending is.
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From:volare
Date:August 13th, 2006 11:57 pm (UTC)
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I second everything you said.
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From:lydia_petze
Date:August 13th, 2006 09:48 pm (UTC)
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It seemed from the article that he wasn't all that impressed with the way the Irish government spends the money it has available (as a taxpayer myself, I thoroughly understand where he's coming from, although I'll never be in his league) At the same time, he's already among the world's "most generous" celebrities, according to Forbes. In terms of giving his own money over to charities and causes, he's up there with Bill Gates. And personally, I think his donation of time is more significant than any amount of cash anyway. Anyone can hand over a cheque, in it's own way that's a form of lip service and balm for the soul - look at me, I'm doing something - but how many of us give up such enormous amounts of time away from our families, friends, homes, jobs, etc in order to work towards bettering the lives of others? That's the part of all this that doesn't often get mentioned. Money is only half the story, here. If people like him weren't prepared to give the time as well, things would be different.

I challenge anyone - *anyone* - to sit there paying tax through the nose like we all do while knowing there is a way to reduce it. And I thought the point that Bono is merely one-fifth of an equally weighted partnership was a good one, despite what the author of the article thinks. The average punter or casual U2 listener thinks mainly of Bono when they think of U2, and understandably so, as he gets 95% of the attention. Fans like us know good and well that there are other peole involved in this thing.

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From:siorai_gra_
Date:August 14th, 2006 02:20 am (UTC)
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Considering how Bono is so generous with his time and money to lots of causes, I don't think less of him for this. I mean they have given ALOT of money to charity over the years. So if they save a bit by moving to another country..meh. He has already shown that he isn't just some greedy bum. And maybe it is an act of civil disobedience? They don't like how their taxes are being spent..so they found a way not to pay them. I'm sure since the tax money wasnt being spent properly that they could find a million charities to donate to that would make much more difference than that tax money
From:vintagefuck
Date:August 14th, 2006 06:12 am (UTC)
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Wow, I'd want to escape paying taxes if I could. Especially if I had that kind of money- but I'm a liberal American and I'd rather see my money go into something other than oil and rich, overpaid assholes.

... Not that I'm saying that's what they did, heh. But certainly something I'd do, while contributing shitloads of money to things I saw fit.
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From:endlessdeep
Date:August 14th, 2006 07:01 am (UTC)
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I don't see anything wrong with what they are doing. I gaurantee you if this guy was making as much money as U2 he would move his business as well to avoid taxes. Also they, meaning U2, may not agree with what the Irish Government does with the tax payers money. U2 can take that money and put it directly where they want it to go. I'm sure they help out quite a bit in the community as well as abroad.

I mean really we don't know everything. And we haven't heard from U2. And we probably won't. It's their money and their business.

Besides for everything Bono has done for Africa and AIDS, and getting debts dropped for third world countries, I don't see what this guy is critisizing.

That's all. :)
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From:roads_outgrown
Date:August 18th, 2006 12:08 am (UTC)
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