U2 move their rock empire out of Ireland
Published 06/08/2006 | 00:11
U2 HAVE begun pulling their multi-million business empire out of Ireland and moving it to Holland as a result of the cap on the artists' tax exemption which came into existence earlier this year. Arts chiefs warned that the ?250,000 cap announced as part of last December's budget would mean many of the biggest earners such as U2 would leave Ireland because they now face sizeable tax bills on their incomes.
U2 HAVE begun pulling their multi-million business empire out of Ireland and moving it to Holland as a result of the cap on the artists' tax exemption which came into existence earlier this year.
Arts chiefs warned that the ?250,000 cap announced as part of last December's budget would mean many of the biggest earners such as U2 would leave Ireland because they now face sizeable tax bills on their incomes.
From June 1, U2 moved some of their business affairs to the same Dutch finance house used by the Rolling Stones to avail of a virtually tax-free status on their multi-million Euro royalties.
The northside Dublin rockers were the world's biggest musical earners last year, taking in a whopping ?217m. According to industry sources, they faced a potential multi-million Euro tax bill had their business remained in Ireland this year as a result of royalty earnings from their ongoing Vertigo world tour.
Holland's virtual tax-free status is a great attraction for big players such as the Stones and U2 because there is no direct tax on royalties, unlike in most other countries.
Bono (Paul Hewson), The Edge (Dave Evans), Adam Clayton and Larry Mullen Jr, who share their earnings with their manager Paul McGuinness, have copied a business model adopted by the Rolling Stones, who have operations based in Amsterdam since the early Seventies. Reports last week revealed that the British rockers have established two foundations to manage the rights to their music, performances, merchandise and films and to settle ownership issues should one of them die.
The man who masterminded the Rolling Stones' virtually tax-free Dutch companies has become a director of U2 Limited which owns all the U2 master tapes.
Jan Favie, a 41-year-old Dutchman, runs Promogroup out of an up-market area in Amsterdam. According to sources, he was one of the main reasons why U2 decided to move its U2 Limited firmto the office at Herengracht. Favie has become director and secretary of U2 Limited along with Gaby Smith, who is U2's accountant in Ireland, and 63-year-old Roelof Kloeten, a member of the board of PON, the largest car import company in the Netherlands.
The Irish tax exemption from which U2 and others have benefited so handsomely is attributed to the royalties earned from the sale and performance of their work, but excludes merchandise and other related side projects.
Dick Molenaar, widely recognised as the number one expert in the Netherlands on issues regarding taxes and the arts, says U2 have made a smart decision by moving U2 Ltd to Amsterdam.
"Since Ireland has a zero-tariff on outward royalties, many countries try to tax royalties from Irish groups within their own borders. By introducing a Dutch daughter company, U2 can avoid this by first booking their royalty income to the Netherlands, and then on to Ireland. This is a bright move by U2's advisors," he said.
Although the tax exemption introduced by the late Charles Haughey was originally intended to aid struggling artists, international stars such as U2, Enya and the Corrs have benefited significantly from the attractive tax breaks on their song-writing and royalty earnings.
According to latest available figures, a handful of artists account for the majority of the estimated ?20m a year which the exemption costs the exchequer.
Little or no information about U2's global operation is in the public domain but they are known to employ some of the world's top tax experts to enable them to maximise their income. Their affairs are managed by McGuinness and his company, Principle Management, which has an office in Ireland but is based primarily in London.
The company refused to make any comment in reply to a number of questions from the Sunday Independent last week.
Olive Braiden, chairwoman of the Arts Council, said that many star acts such as U2 stayed in the country because of the benefits of the artists' tax exemption and it would be unfortunate if any of them left as a result of the cap.
"The Arts Council campaigned vigorously on the issue of tax exemption for artists, buoyed up by the active support of the arts community itself. Although not every aspect of the Arts Council's submission was incorporated into the resulting legislation, the Arts Council was pleased with the outcome, believing that the Minister had adopted a fair and reasonable approach to the issue," said Olive Braiden yesterday.
"The Arts Council has consistently argued that one of the benefits of the artist tax exemption scheme was that many high-profile artists chose to live in Ireland as a result. It would be unfortunate if the artistic community were to be diminished as a result of some of these artists choosing to base themselves elsewhere on account of recent changes to the legislative environment," Ms Braiden added.
The Department of Arts, Sports and Tourism said that the exemption was an incentive for artists to work, live and create in Ireland. The revision of the scheme announced recently was introduced to ensure the broadest benefit from everyone from the first-time novelist to the internationally established music act.
A spokesman for the Department said the cap is flexible upwards in order to attract artists to conduct non-exempt work in Ireland. The department refused to comment on the tax or business dealings of any individual act or artist.
Allan Hall in Berlin