U2 go Dutch on royalties ahead of tax crackdown

A FLIGHT of the stars is feared after it emerged U2 are transferring some business dealings to the Netherlands ahead of the tax crackdown on artists’ earnings.

The band have set up a company in Amsterdam to handle their income from royalties — the lucrative earnings from record sales, radio play of their songs and cover versions of their work.

About a third of the famous foursome’s multi-million-euro fortune is believed to come from royalties but this tax-free stream of income would be seriously dented under Government plans to cap the tax relief known as the artists’ exemption next January.

Royalties are protected in the Netherlands, however, and although the band have not commented publicly, industry observers believe tax avoidance is the reason for the move.

The Arts Council warned last year when the artists’ exemption was under review that its scrapping could lead to an exodus of songwriters, composers, authors and other artists, both successful and struggling.

It commissioned a study by PricewaterhouseCoopers which calculated that when the impact on the arts industry was taken into account, the Exchequer would only gain about €15 million a year from ending the relief but would lose more in the long run.

The decision to retain an exemption but cap it at earnings of €250,000 in any given year was made as a compromise. However, the Arts Council argued that it did not take into account the inconsistent nature of some artists’ earnings which meant they could sell well one year and have virtually no income for several years to follow.

Fine Gael spokesman on the arts, Senator Frank Feighan, said while some tax should be paid on royalties, he felt the system should be more flexible to take account of the fluctuating earnings of many artists.

Senator Feighan, who is taking part in the Charity You’re A Star series, also called for the capped exemption coming into effect in January to be reviewed after a year or two to examine what effect it was having on the arts community.

“We have to make sure the tax system is fair but also that we have a tax system that encourages vibrancy within the artistic community,” he said.

“Just talking to artists here at rehearsals has been a real eye-opener. Earnings are very volatile. There might be a case for, instead of yearly tax returns, having three-year returns that give a clearer picture of their overall financial situation.”

The artists’ exemption was introduced in 1969 by the late Taoiseach Charles Haughey but has been criticised by the Labour Party, among others, as a tax break for the wealthy.

Income from performances and merchandise was never exempt and supporters of the scheme argued tax on these earnings would be lost if artists pulled out of Ireland.