Bono: I Still Havent Found the Tax Rate That I’m Looking For Located in a buildi
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Bono: I Still Havent Found the Tax Rate That I’m Looking For
Located in a building where s;ave traders and spice merchants made business transactions 400 years ago, a company called Promogroup has its corporate headquarters. Promogroup helps individuals and companies with high levels of income “shelter” the tax exposure of their income. Clients include the three members of the Rolling Stones – Mick Jagger, Keith Richards, and Charlie Watts – the record label EMI; CORE MediaGroup, the company that owns the rights to American Idol; and Elvis Presley’s estate. Promogroup was able to reduce the total tax paid by the three Rolling Stones members to $7.2M on income of $450M, resulting in an aggregated tax rate of 1.5%.
Another client of Promogroup is Bono and the rest of U2. Bono is well known for his stance on many global causes, including AIDS awareness, reducing global poverty, and helping developing countries reduce their level of foreign debt. He also wrote the foreword to the book The End of Poverty, written by Jeffrey Sachs in 2005.
The tax shelter established by Promogroup is based on the simple flow of royalties that go into and leave the Netherlands. A Dutch holding company was established for Promogroup’s clients, and the revenue from the royalties of any other intellectual property sent to the holding company is exempt from taxes. The clients are then allowed to withdraw the royalties with the tax being “paid”. A tax consultant in Rotterdam, the Netherlands, Ton Smit, stated that for the vast majority of clients who set up these holding companies, the sole motivation is to achieve either tax minimization or tax avoidance. The Dutch tax shelters are available only to artists who are not U.S. citizens. The U.S. Department of the Treasury charges the standard corporate income tax rate on any revenue that is transferred into the United States from a Dutch company.
U2 has accumulated an estimated net worth of more than $900M, and band members felt that they needed to move their royalty revenues because Ireland was going to greatly reduce the tax incentives given to musicians and other artists living in Ireland. In June 2006, U2 moved its song publishing catalog to the Netherlands via Promogroup. A research group in Netherlands, SOMO, the Centre for Research on Multinational Corporations, concluded that the tax haven given to individuals and corporations through the use of holding companies was having a negative impact on the capacity of developing countries to be able to provide essential services to their citizens and on the ability of developed countries to reduce or forgive their outstanding debt agreements through U2 Ltd. in the Netherlands is completely inconsistent with Bono’s stance on helping developing countries move from poverty conditions. Murphy continued, stating that Bono cannot demand that resources to the governments so they can implement antipoverty campaigns.
In commenting on Bono’s shifting his tax burden to the Netherlands, a spokesperson of the Irish Labour Party, Joan Burton, stated that Bono should be applauded for being an advocate for improvements in developing countries. However, those improvements come from taxes, and it would be difficult to ask other people to pay taxes to improve economic development if he is not paying taxes himself.
U2 business manager, Paul McGuinness, stated that U2 is a global business and pays global taxes. In addition, approximately 95% of U2’s revenue, which includes concert ticket sales and record sales, is earned outside Ireland. The band pays taxes all over the world on its worldwide income and abides with all Irish tax laws. However, McGuinness continued by stating that unique tax solutions are common Ireland and that U2 runs its business in the most tax-efficient way possible.
In 2011 at the Glastonbury Music Festival, when U2 took the stage, activists from the organization Art Uncut inflated a 20 foot balloon that stated “U Pay Your Tax 2”
1. Although other artists are mentioned in the case, including three members of the Rolling Stones, why was U2 and, specifically, Bono selected as the focus of the article?
2. Why do you think that Bono fails to see the inconsistencies of his actions?