Bono: helping make poverty reality

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I haven’t written about Bono for a while, although what I have written about him remains among the regularly read pages on this blog.

It’s time I did so again. There’s good reason. I know the messages of tax justice have reached the man. I know how they got there. And in the last couple of days I’ve had my attention drawn to an article about a talk he gave in Ireland made after those messages should have reached him. So I know he’s ignoring the issue.

So I’ve bided my time. I’ve been patient. And now I’m fed up with the hypocrisy of the man.

To give the background, Ireland changed its tax laws in 2006 so that the earnings of artists fell within the tax net if they exceeded Euros 250,000 a year. Extraordinarily, they had been exempt whatever the amount until then. For 99% of all artists this did not, of course, have any impact on their tax affairs. For Bono and his U2 colleagues it did. The royalties from their recordings and use of their music will be considered the income of artists in Irish tax law. You can be sure they exceed Euros 250,000 a year. And from 2007 Ireland planned to tax them. Bono and his U2 colleagues were clearly unhappy at the change, and despite the fact that they could have kept them in an Irish company and have paid no more than 12.5% tax as a result this was not good enough for them. They did instead shift the place in which they recorded their royalties as being earned to the Netherlands. As a result they cut the potential tax they might pay to no more 5%, because that’s what the Netherlands allows.

Let me be unambiguous about what this represented: it was classic tax avoidance. The relocation to the Netherlands is wholly artificial. The Netherlands has had nothing to do with the income that will have been recorded as having arisen there. It is simply offering a classic tax haven opportunity. It is abusive as I have shown in work I have done (with colleagues at SOMO) on the Netherlands’ role as a tax haven.

I wrote this about what Bono did in 2006:

Where does this leave Bono? Seriously out of step I’m afraid. In fact, well outside the development agenda. The tax havens he uses undermine development. They divert income from developing countries. They ensure tax is not paid in them. They facilitate capital flight from those developing counties. As Raymond Baker has shown, tax avoidance driven capital flight costs developing countries ten times their aid receipts.

Bono is endorsing this. His credibility is in tatters.

But he has a choice. He could pay tax. This is an option he can afford. But it’s more important than that: it’s his duty.

And now I learn that he has sought to defend his actions. According to Irish broadcaster RTE’s web site in November 2007:

Bono defended the decision by U2 to move part of the band’s business from Ireland to the Netherlands to reduce his tax bill and the tax bill of the other band members. Bono was speaking at University College Cork, where he attended a meeting of the Irish Government’s Hunger Task Force, of which he’s a member.

He said Ireland’s prosperity had been achieved through tax innovation and it would be churlish to criticise U2 for being innovative in relation to their tax affairs when that’s what people were encouraged to do and that’s what made the country prosperous.

He said U2 paid taxes not only to the letter of the law but to the spirit of the law too.

The singer said anybody who knew him would know that he wouldn’t ask anyone to do something which he wasn’t prepared to do himself. Around the world he said he had been asking governments to increase their spend on Third World aid by something like 0.2% and he was sure nobody was seriously suggesting that U2 weren’t up to that too.

As bad, he apparently said:

African countries were seeking to replicate the success of the Irish economy because Ireland had come from further behind than any other country in modern history to achieve the levels of prosperity currently being enjoyed.

I thought the man hypocritical before reading this. Having read it I’ll be more blunt: he’s either very stupid or thinks we are. It’s just possible it’s the first: on this video he claims not to be into tax havens when he obviously is. But I doubt this option. I just think he’s representing things as he’d like us to see them. That’s the second option. There are several reasons.

First, Ireland did not build its prosperity on the basis of tax innovation. That’s not possible. Ireland built its innovation on three things. The first was the fact that the EU gave it more grants per head of population than anywhere else. Throughout the 1980s Ireland was one big EU building project (I was there at the time). Second, Ireland happened to have a mass of well educated young people to exploit this situation, paid for by the state (that’s taxation, to you and me). Third, it attracted inward investment not just through low tax rates (although they helped) but by paying massive grants as well. That was only possible because the EU was paying most of its other bills. As a vote of thanks Ireland then went out of its way to steal the taxation revenues of those countries that had just funded the creation of the infrastructure that was the essential prerequisite of the modern Irish economy, all paid for by the state and none of it by private money.

Next, let’s consider this ‘innovation’. What does this mean apart from the fact some people, wealthy and powerful, can game the system, whilst others, poorer and less politically connected, cannot? Is this the sort of innovation Bono wants others to emulate?

What is certain is that if Ireland has done anything with regard tax innovation it has been to demonstrate how to use other people’s tax revenue. That’s not a sustainable tax policy or economic policy, as I suspect some are now realising. No wonder the EU referendum there today is on a knife edge.

In that context let’s also be clear about the innovation that U2 are showing with regard to management of their tax affairs: they’re denying (albeit, legitimately) tax revenues to a state: in this case their own. The action may be typically Irish. It remains wholly unacceptable all the same.

And if this man really thinks that increasing his own charitable contribution by 0.2% is equivalent to the same sacrifice when made by a government that has also to educate its population, provide for their medical well being, ensure there is a social safety net, defend the state, provide law and order, and all the other things government must do, and that out of a budget constrained in a way that Bono will now never know or understand then he is a fool. He has income many times in excess of any person’s need. A government has not. His analogy is offensive.

Bono has shown his true colours: he is part of a libertarian elite who treat government with contempt and who think they can act beyond its constraint and yet are more than happy to suggest what it might do, believing that their wealth gives them a right not just to be heard, but to be heeded.

But Bono has forsaken that right. He had a choice. He knew the options. He made the wrong choice. He is a man who is part of the problem of poverty creation, not a part of its solution. He supports the infrastructure that creates poverty, that facilitates the greatest shift of wealth from the poor to the rich the world has ever seen and that contributes to the deaths of hundreds of thousands of children a year. He may not do that directly: but his participation in and approval of the use of tax havens when he is aware of the damage they cause marks his conduct as being beyond the pale.

Let’s summarise: Bono is helping make poverty reality. It pains me to say so. But I sincerely believe it is true.