Bono: controversial tax laws have brought Ireland the only prosperity it's ever known

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U2 singer wades into row over Apple and Irish state aid - and says that capitalism and commerce play a vital role in lifting people out of poverty

by Rupert Neate and Dorian Lynskey, The Guardian/The Observer

From stadium-packing rock star to champion of the impoverished, Bono has fronted a band and causes that have endeared him to millions. But the U2 frontman is likely to alienate more people than he wins over with his latest rallying cry: backing Ireland's corporate tax regime.

In an interview with the Observer, the Irish singer says his country's controversial policies - which help multinational companies avoid billions in tax - have "brought our country the only prosperity we've known".

The 54-year-old says that Ireland's economy is dependent on attracting multinational companies - including Apple, Facebook, Google and Amazon - with tax avoidance strategies, including a loophole dubbed the "Double Irish", the use of two Irish companies to lower the effective tax rate.

Bono said: "We are a tiny little country, we don't have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we've known.

"That's how we got these companies here ... We don't have natural resources, we have to be able to attract people."

Bono's comments come as the European Union launches a crackdown on the state aid that Ireland allegedly provides illegally to some US companies. Releasing preliminary details of an investigation last month, Brussels suggested deals between the Irish government and Apple "constitute state aid". Both Ireland and Apple - which teamed up with U2 last month to release the band's latest album - deny any wrongdoing.

Brussels is pressuring Ireland to end its highly controversial tax policies or face a full investigation, which could lead to multimillion-euro penalties.

The Double Irish loophole allows US companies, mostly in the technology and pharmaceutical sectors, to reduce their effective tax bill far below Ireland's already generous 12.5% corporate tax rate by shifting most of their taxable income from an operating company in Ireland to another Irish-registered firm located in an offshore tax haven, such as Bermuda.

This controversial structure enables many US multinationals to avoid paying tax on their UK sales, by diverting them to the Irish Republic. Google, for example, made $5.6bn (£3.4bn) of revenues in the UK last year, but paid corporation tax of just £20.4m. The UK's corporation tax rate is 21%, but is being reduced to 20% next year.

The arrangement has allowed some American companies to pay an effective tax rate of just 2.2%, according to the 2011 reports of the Irish divisions of US companies to the US Bureau of Economic Analysis. But the Irish government disputes the figures.

Margrethe Vestager, the new EU competition commissioner, has vowed to make tackling multinational tax avoidance a high priority and described the Double Irish as "a very unfortunate arrangement".

Bono, who has been nominated for the Nobel peace prize and was given an honorary knighthood by the Queen in 2007 in recognition of his work campaigning against extreme poverty, said leftwing campaigners should understand the role businesses plays in alleviating poverty.

"As a person who's spent nearly 30 years fighting to get people out of poverty, it was somewhat humbling to realise that commerce played a bigger job than development," he said. "I'd say that's my biggest transformation in 10 years: understanding the power of commerce to make or break lives, and that it cannot be given into as the dominating force in our lives."

Bono, who describes himself as a "natural social democrat", said Ireland had benefited from "more hospitals and firemen and teachers because of [our tax] policies".

The Irish government did not respond to requests for comment from the Observer about Bono's views.

However, Enda Kenny, Ireland's prime minister, last week described the low tax rate as a cornerstone of Irish industrial policy. "Ireland's package of tax, skills and the reputation for being business-friendly is a huge advantage that other countries will struggle to match," he said in a speech on Thursday night.

The Irish finance ministry said: "The state aid investigation currently under way relates to one company only [Apple]. Ireland has and will continue to cooperate with this investigation.

"This involves exchange of information and face-to-face meetings to discuss details of the investigation. General discussions on taxation do not form part of these discussions."

Bono has previously attracted controversy for the band's tax arrangements. In 2006 the band transferred the company that handles its publishing royalties from Ireland to the Netherlands to reduce its tax bill.

Speaking about that decision, U2's guitarist, the Edge, said: "Was it totally fair? Probably not. The perception is a gross distortion. We do pay a lot of tax." But he said protesters who challenged the band when they headlined the Glastonbury festival in 2011 were right to do so.

Speaking about U2's partnership with Apple to give away the band's latest album, Songs of Innocence, free to half a billion iTunes users, Bono said: "We got paid. And this is about a company [Apple] that's fighting for musicians to be paid."

Many iTunes users were, however, incensed that the album had been automatically downloaded to their accounts and Apple was forced to released a tool enabling unhappy customers to delete it.

While the band's 13th studio album has attracted highly critical reviews, Bono said: "These songs, you could stamp on their head and kick them to the ground and they're still going to stay there."

© 2014 Guardian News and Media Limited or its affiliated companies. All rights reserved.

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This page contains a single entry by Jonathan published on October 12, 2014 12:29 AM.

Bono on wife Ali: 'She's an elusive character and sees me as a figure of amusement' was the previous entry in this blog.

Screenshots of U2's performances and interviews on the RAI Italian television show "Che Tempo Che Fa"! is the next entry in this blog.

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