This article first appeared in Irish Tax Review, Vol. 32 No. 4 (2019) © Irish Tax Institute
Written by Martin Phelan, Head of Tax, and Trish McGrath Trainee Solicitor, William Fry Tax Advisors.
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The recent Supreme Court judgment of Mr Justice MacMenamin in Dunnes Stores v Revenue Commissioners & Others IESC 50 (“Dunnes Stores”) considered the fundamental features of the plastic bag levy provisions contained in the Waste Management Act 1996 (as amended by the Waste Management (Amendment) Act 2001), the Waste Management (Environmental Levy) (Plastic Bag) Regulation 2001 (“the 2001 Regulation”) and related legislation. In his judgment Mr Justice MacMenamin observed that “the meaning of a legal provision must, insofar as is practicable, be clear and discernible”.
By way of background, the High Court delivered its judgment in Dunnes Stores v Revenue Commissioners & Others IESC 469 in December 2011. Dunnes Stores challenged the Dunnes Stores Appeal Case on Plastic Bag Levy 2001 Regulation imposing the plastic bag levy after the Revenue Commissioners served the supermarket chain with tax assessments of €36.5m in levies on plastic bags used in Dunnes Stores supermarkets.
The High Court held that the 2001 Regulation included “flimsy plastic bags (often used for fruit, vegetables and bread), as well as more robust plastic carrier bags. Dunnes Stores contended that:
- the levy related only to larger plastic bags given to customers at the “point of sale” that were suitable for carrying groceries and other goods;
- the definition of “plastic bag” included in the 2001 Regulation was so unclear as to render the Regulation unenforceable; and
- the Revenue Commissioners had failed to provide Dunnes Stores with information on how they had calculated the sum due in the assessments.
There is an exemption under the legislation for bags of a certain size or smaller (250mm wide by 345mm deep by 450mm long), but the bags in Dunnes Stores were larger than this.
Mr Justice Hedigan of the High Court ruled against Dunnes Stores and found that “t would be most improbable that the legislature would exempt plastic bags that are supplied anywhere other than at point of sale. Such a provision would miss large numbers of plastic bags and diminish greatly the impact of the Act.”
The High Court further held that the procedures followed by the Revenue Commissioners were not unfair.
Dunnes Stores appealed the decision to the Supreme Court. In dismissing the appeal, the five-judge court was very critical of the “overly complex” legislation. Mr Justice MacMenamin gave particular consideration to the need for clearly drafted statutory provisions and drew the attention of the legislature to the quality of drafting of the relevant legislation in this case. He not only expressed views on the lack of clarity in the drafting but also suggested that provisions, in future hearings by the courts, may be deemed unconstitutional and ultimately unenforceable if they are not “clear and discernible”.
Mr Justice MacMenamin’s Observations
Mr Justice MacMenamin agreed with Mr Justice McKechnie’s finding that the legislative intent of the plastic bag levy provisions is discernible but expressed dissatisfaction that lengthy considerations by the court had been required to get to this point. He also suggested that if a statutory provision that falls for consideration by a court is very ambiguous in its wording or includes confusing cross-references to other statutory provisions, it may “not possess the defining indicia of the law itself”.
Mr Justice MacMenamin also looked at Article 40.3.1 of the Constitution, which provides that “he State guarantees in its laws to respect, and, as far as practicable, by its laws to defend and vindicate the personal rights of the citizen”, and Article 40.3.2 of the Constitution, which provides that “he State shall, in particular, by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the life, person, good name, and property rights of every citizen” . He contended that the “constitutional or legal protections should apply as much to entities as they do to ordinary citizens”, that the guarantees provided in the Constitution are grounded on the rule of law and that therefore the rule of law must be “clear and discernible”. The fundamental protections set out in the Constitution operate to protect not only persons subject to a particular law but also their advisers when assessing whether their conduct is lawful. Although he found that the complexity of the legislation had not resulted in an abuse in the case of Dunnes Stores, Mr Justice MacMenamin opined that the Government and the people responsible for drafting laws must keep in mind that ambiguous legislation can lend itself to abuse and that the provisions involved in this appeal are “surely capable of a much clearer definition”.
In assessing the conduct of both sides, Mr Justice MacMenamin considered whether the same course of action would have been taken by the Revenue Commissioners if the matter had involved a small rural shopkeeper running a supermarket. He was left with a sense that “the conduct on one side has begotten a reaction from the other”, emphasising the need for good faith and fair dealing between citizens, corporate entities and the State.
The use of the words “or otherwise” and “point of sale” was, according to Mr Justice MacMenamin, unnecessarily ambiguous when “it would not have been difficult to define the intended scope of the legislation”. For instance, “the method of estimation, assessment and collection could have been directly defined by the statutory instrument introduced by the Minister.
Although the legislation has an “entirely laudable” purpose, being the reduction of the use of plastic bags that pose a risk to the environment, Mr Justice MacMenamin concluded that “neither public policy, nor benign purposes should stand in the way of legislative clarity”.
It is clear from the judgment in Dunnes Stores that Mr Justice MacMenamin was greatly concerned about the quality of legislative drafting, and therefore the comments should be read by the legislature with great care. The judgment is of particular interest in relation to tax legislation, where recent trends suggest a leaning towards an ambiguous approach and which arguably uses widely undiscernible language, especially in relation to tax structures. The judgment begs the question of whether some aspects of our tax legislation are unnecessarily complicated and ambiguous in an aim to avoid abuse – whereas one would have presumed the purpose of general anti-avoidance legislation was to cover relevant eventualities.