U2's Bono defends economic illiteracy

Britain's Observer newspaper is carrying an interview with U2's frontman Bono, containing these pearls of wisdom:

"Q: The other persistent criticism is about the band's decision to offshore part of their income through the Netherlands to avoid tax. Was it not hypocrisy for you to try to hold the Irish government to account for its spending while going through fairly exhaustive efforts to avoid paying into the Irish exchequer yourself?Bono: It is not an intellectually rigorous position unless you understand that at the heart of the Irish economy has always been the philosophy of tax competitiveness. Tax competitiveness has taken our country out of poverty. People in the revenue accept that if you engage in that policy then some people are going to go out, and some people are coming in. It has been a successful policy. On the cranky left that is very annoying, I can see that. But tax competitiveness is why Ireland has stayed afloat. When the Germans tried to impose a different tax regime on the country in exchange for a bailout, the taoiseach said they would rather not have the bailout. So U2 is in total harmony with our government's philosophy."

Let's get two things straight, Paul Hewson (for that is your real name.)

First. Repeat after us. Tax 'competition' bears absolutely no relation whatsoever to competition between firms in a market. As Martin Wolf has explained: "The notion of the competitiveness of countries, on the model of the competitiveness of companies, is nonsense." The word 'competitive' is a complete misnomer.

Endless misguided government tax policies have hidden behind this weasel word - perhaps the worst of all weasel words in the entire tax lexicon. And as for the 'Celtic Tiger' - it would not have been possible without huge (tax-financed) subsidies from the European Union, and now that the Irish bubble has burst, that whole model isn't looking so clever now.

Second. Tax competition is always, irredeemably noxious and harmful.  What is there to be proud of?

If you don't believe us, read this. See if you can knock any of those arguments down. 

As the entertainer Graham Norton so memorably put it, in response to news of U2's tax dodging strategy:

"Tarmac the road outside your house, tightwad!"

Oh, and last of all, a post from TaxGirl. We certainly don't agree with everything in this post - but we do like this bit:

Bono may tout the band’s position as supporting the country’s “tax competitiveness” but it’s not. Their big tax move was primarily in response to a non-competitive cap on tax-free income, introduced in the country in 2006. Before that time, U2 had received a tremendous benefit from an exemption which was available to artists for the sale of certain works.

Years later, the criticism hasn’t diminished. Former Irish Junior Health Minister Roisin Shorthall voiced his opinion of the move this year, saying:

"I think there is that issue about loyalty to the country you are born in and I think it would show a tremendous example to everybody if they were to bring back their tax affairs to Ireland. In any modern democracy people pay their fair share of tax."

Ouch. And there’s more.

Dublin North-East TD Tommy Broughan said, about the band, that while he thought the band was amazing and admired their dedication to wiping out poverty in Africa, “their first duty is to their own people.” That duty, he indicated, was to pay taxes in Ireland.

So maybe it’s not so much that Ireland wants this as U2 wants this.

 Yes. Weasel words, indeed.

Update: for background and resources on "tax competition", or rather, "tax wars", see here. For in-depth commentary on competitiveness, see Fools' Gold - rethinking competition.