U2 offshore: Bono should put a sock in it or just give us a song

THE old adage that there’s no such thing as bad publicity is being tested in U2’s case.

Despite a brilliant international marketing campaign — that has resulted in the band’s new album getting masses of publicity not just in Ireland but in Britain and the US as well — U2 is getting the sort of coverage in its homeland that must hurt because it could diminish its popularity and that of its members. If the campaign gets global attention, that could impact commercially, too. Instead of the music, it is the tax status of the band and its members that is getting attention.

A nation that suffered tax exiles during the boom years is becoming somewhat intolerant of those who are not seen to be contributing their fair share, especially when everybody else is facing a massive hike in taxes, if lucky enough to still have a job, and a much lower standard of living. There are many fat cats at whom this anger could be directed — especially some of those who lecture the rest of us as to what needs to be done for the economy, as if they are exempt from blame — but U2 is bearing the brunt of the anger.

The band’s decision to move its publishing empire — which attracts the bulk of the revenue, apparently — to the Netherlands in 2006 to reduce its tax bill in Ireland has come to haunt it.

Bono says he is “hurt” and “stung” as a result. “We pay millions and millions of dollars in tax,” he said last week, an unfortunate choice of currency given that this country trades in euro.

At the same time, The Edge has denied a charge that hasn’t been made against the band. “We do business all over the world, we pay taxes all over the world and we are totally tax-compliant,” he said last week. Nobody has ever accused U2 or its members of tax evasion, which is the illegal non-payment of tax. What U2 has been accused of, and which it has admitted to, is tax avoidance, legally reducing the tax payable to this State by deliberately paying it elsewhere.

Many exceptionally high income earners — who, for reasons of business do not need to be in a place of work in Ireland for most of the year — choose to go abroad. It is likely they still pay some tax here in Ireland if they have business interests here, although that is limited again by holding ownership of Irish assets through foreign companies. It is what accountants call good tax planning. Why pay up more tax than is necessary if a system exists that legally allows you to reduce it? Well, there are many good reasons why U2 and Bono, in particular, are under fire. The first is that up until 2006, U2 enjoyed extraordinarily favourable tax treatment in Ireland. A tax exemption scheme for artists had originally been introduced in 1969 by the finance minister at that time, Charles Haughey, but a cap of e250,000 on tax-free incomes for artists was introduced in 2006 by then finance minister Brian Cowen. That new limit would be more than enough tax-free income for most people, but not necessarily when the balance on which tax of 41%, plus levies, could be applied runs into millions of euro annually.

However, it is also true that U2 was able to increase its wealth dramatically over the previous two decades by reinvesting the tax-free profits they had accrued in such a favourable environment. Having made such a fortune already, how much more do they need?

That is essentially a private matter of course, and some people might even describe it as enlightened and rational self-interest to act so as to pay the minimum tax possible. It is what most people do when they claim the cost of pension contributions against tax, for example, or the cost of having the bins collected.

Why would anyone with the right accounting advice give more money to the State than legally required? Wouldn’t anybody else do the same if given the opportunity? And wouldn’t Bono be able to put it to better use, rather than have the Government waste it?

However, the situation is different because Bono has taken it upon himself to lecture our Government over how it spends our tax money. The last time U2 played Croke Park, Bono lectured then Taoiseach Bertie Ahern from the stage about a failure to live up to the commitment to pay a sum equivalent of 0.7% of the national income to the Third World each year.

Now Bono has been a tireless and excellent advocate of improving foreign aid to Africa to alleviate illness and poverty. He deserves enormous praise for that because it has been driven by his conscience and desire when many others would have rested on their laurels and enjoyed their wealth while doing little social good.

But that’s our tax money he wants to spend although he is limiting his own contribution to the well from which he wants the Government to draw.

The second problem is that he and The Edge are using weak arguments to legitimise their tax planning.

Last week Bono said this: “I can understand how people outside the country wouldn’t understand how Ireland got to its prosperity, but everybody in Ireland knows that there are some very clever people in the Government and in the Revenue who created a financial architecture that prospered the entire nation — it was a way of attracting people to this country who wouldn’t normally do business here. And the financial services brought billions of dollars every year directly to the exchequer. What’s actually hypocritical is the idea that then you couldn’t use a financial services centre in Holland. The real question people need to ask about Ireland’s tax policy is: ‘was the nation a net gain benefactor?’ And of course it was — hugely so.”

This is out of touch with the reality of what is going on in our economy at present: much of “financial architecture” of which Bono boasts was built on very flimsy foundations and has created many of the problems we are experiencing now.

WORSE, what Bono doesn’t seem to understand is that companies in the International Finance Services Centre are now taxed at 12.5%, the same as the corporation tax rate for anybody else making profits here. Those are the same rates that would apply to U2 if its business operations had remained in Ireland. The issue is the income and dividend taxes that would apply to the band members if they remained resident here.

All of this is a great pity. Just because the option to go abroad existed doesn’t mean U2 had to avail of it. The Edge said last week that his tax affairs are a “private matter”. They are, but he is a public figure. He also benefited greatly from a very favourable tax system up until 2006. But it is true he has never lectured the Government about anything.

Bono has forfeited that right to privacy, however, by making demands on the Government as to how it spends our money. He is about to be tested. I suspect further cuts to Ireland’s foreign aid budgets are likely to be announced in the mini-budget in April, much to his annoyance and that of other anti-poverty activists. It is expected U2 will announce details of three Croke Park concerts for July next Monday. If any Government representatives follow the example of Bertie Ahern from four years ago and attend, then I suggest that no matter what temptation may overcome Bono to do his usual stunt of lecturing politicians on their duties that instead he just shuts up and sings.

The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.