BONO IS A HYPOCRITE AND SO IS IRELAND
Paradise Papers: Ireland has sold its soul but is getting a very good price for it
Yes, Bono is a hypocrite – but so is Ireland. Around the world, the U2 frontman is the most instantly recognisable living Irishman. It is entirely appropriate that he should be both the face of the country and a prime example of its two-faced attitudes.
He has been an important and sincere international campaigner against the secretive offshore tax schemes that, among other things, strip very poor economies of desperately needed resources.
And, as the Paradise Papers revealed in The Irish Times this week tell us, he is a partner in Nude Estates Malta Ltd, which in turn owns a company in Lithuania called UAB Nude Estates 2, which in turn owns a shopping centre in the small city of Utena.
As it happens, Nude is also the name of the ethical beauty product range co-founded by Bono’s wife Ali Hewson. Its branding draws heavily – as its blurbs boast – on “Ali’s background in global activism and conscious fashion”, and on “pioneering ethics and progressive thinking”.
The overlap in branding between UAB Nude Estates 2 and Nude Skincare is, to say the least, unfortunate. Nude indeed: to adapt Bob Dylan, even the frontman of U2 sometimes has to stand naked.
Bono’s Lithuanian investment may be relatively tiny (and is of course entirely legal) but, as Bono the justice campaigner is well aware, it sucks him into a highly organised system in which the equivalent of 10 per cent of global GDP is held offshore by a species of humanity that has its own acronym: HNWIs, high net worth individuals.
Like so many big names, from Lewis Hamilton to members of the cast of Mrs Brown’s Boys, from Queen Elizabeth and Prince Charles to Madonna and Nicole Kidman, he is drawn, paradoxically, into a world of lucrative anonymity, where money nestles in shell companies with blandly meaningless names, and in faceless foundations and enigmatic trusts established by low-key lawyers.
And, given Bono’s profile as an anti-pov- erty activist, this makes him fair game for mockery – so long as we acknowledge that the mockery is also self-mockery, that the derisive laughter is also at ourselves.
As the Paradise Papers remind us yet again, Ireland is an important part of this global system in which vast amounts of money are moved into secretive tax havens, out of the reach of tax authorities in the countries where they are generated.
But we are two-faced. When it comes to ideals of global justice we want to be exemplary pioneers of “ethics and progressive thinking”. When it comes to money, we are content to play our part in a global system of corporate and personal tax avoidance that robs the poor and further enriches those who are already obscenely wealthy.
We like to think we care about the places where the streets have no name; but we are plugged in to the places where the names on the brass plates have no substance.
On U2’s Zoo TV tours in the early 1990s, Bono played a satanic character called MacPhisto, a play on the devil Mephistopheles from the myth of Faust who infamously sells his soul. It seems an apt metaphor for the Faustian bargain at the heart of Irish modernity.
As the State’s appeal against the European Commission’s ruling that Apple owes it ¤13 billion plus interest has shown so dramatically, there is tacit understanding: Ireland benefits from investment by some of the world’s most successful corporations but in turn it does not ask too many questions about the global consequences of corporate tax avoidance on a staggering scale.
Staggering is no exaggeration. In 2003, less than a year before its initial public offering, Google US transferred its search and advertising technologies to Google Holdings, a subsidiary incorporated in Ireland, but which for Irish tax purposes is resident in Bermuda.
Ever since, all the profits generated by these assets have ended up, after a (tax-free) detour via the Netherlands – the infamous “double Irish Dutch sandwich” – in Bermuda where the corporate tax rate is zero. In 2015 alone, Google’s parent Alphabet reported $15.5 billion (¤13.6 billion) in profits “earned” in Bermuda. Meanwhile, in the same year, Google Ireland Limited reported revenues of ¤22.6 billion, on which it paid all of ¤47 million in tax.
Under pressure on tax avoidance, the State moved in 2014 to close off the notorious “double Irish” and wants to be seen to be at the forefront of international efforts to bring some transparency to the global tax avoidance system. But it is clear from the Paradise Papers that this is being done in a way that allows the giant corporations to find other ways to avoid tax.
The then finance minister Michael Noonan, even as he was announcing the Irish reforms, slipped in a provision that companies incorporated in Ireland before the end of 2014 that were being run from tax havens could continue with the old (and infamous) arrangements until December 31st, 2020.
Apple was thus in effect given notice by Noonan that it should find a suitable tax haven before the end of 2014. The Paradise Papers show Apple, happily forewarned, actively looked for a new way to continue its old practices as early as March 2014, more than five months before Noonan made his announcement of reforms in the budget speech in October. Before the end-of-year deadline, Apple was able to move the management of its two most important Irish subsidiaries to Jersey.
Ireland is by no means alone in facilitating this kind of massive tax avoidance. Essentially six European Union countries – the others being Luxembourg, the Netherlands, Belgium, Malta and Cyprus – are active partners in allowing multinational corporations to siphon off a total of ¤350 billion in EU profits every year into havens.
We also have to remember that most of these havens – such as Jersey, Bermuda, the Isle of Man, the Virgin Islands and the Cayman Islands – are British possessions or territories. British tut-tutting about Ireland’s sins is yet another exercise in hypocrisy.
But we cannot deny that Ireland is the biggest national winner in this game in which so many other countries lose much-needed public revenue.
Our corporation tax (CT) rate may be low in principle (12.5 per cent) and even lower in practice. But the sheer scale of the financial flows means that even a relative small stream diverted from this vast torrent provides vital irrigation for Ireland’s public finances. The yield from CT in 2015 was ¤6.87 billion, which was more than ¤2.2 billion higher than 2014. Receipts increased again in 2016 to ¤7.35 billion. The vast bulk of this money – about 82 per cent – comes from the very large foreign-owned multinational corporations.
There is a paradox. Using 2015 figures for comparison, Ireland comes out as having an extremely low corporate tax rate – our 12.5 per cent rate is almost exactly half the OECD average of 24.9 per cent. But Ireland nevertheless takes more of its overall taxes from corporations.
In 2015, CT made up 11.4 per cent of Ireland’s overall tax take. That’s over twice as much as countries like Germany, France, Austria and Denmark, and far higher than the OECD average of 7.7 per cent.
To put this in context, the increase of ¤480 million in CT receipts between 2015 and 2016 alone is roughly equivalent to the entire amount of money Paschal Donohue had to play with going into this year’s budget. The ¤7.35 billion CT yield for 2016 is almost the same as the entire projected capital budget for the State when it rises to its hoped-for level of ¤7.8 billion in 2021.
And this is why it is too easy just to mock Bono for having double standards. Ireland as a whole is increasingly addicted to the tax revenues it gets from multinational corporations and the price it pays for that drug is allowing those same corporations to divert much larger tax revenues away from other countries. This includes in many cases extremely poor countries who are ravaged by the global system of tax avoidance from which we benefit.
Ireland’s MacPhisto bargain is insidious because we sold our soul but are getting a very good price for it.
We have a big stake in practices that are morally indefensible, socially devastating and, because they contribute to gross inequality, environmental destruction and political instability, ultimately unsustainable.
That induces a kind of moral vertigo in which it is hard to acknowledge that the world must and will move on from this rapacious system, with or without us.
‘‘ Given Bono’s profile as an anti-poverty activist, this makes him fair game for mockery – so long as we acknowledge that the mockery is also self-mockery
It is too easy just to mock Bono for having double standards. Ireland as a whole is increasingly addicted to the tax revenues it gets from multinational corporations