In 2008, the Revenue Commissioners imposed a tax bill of €36.4 million on retail giant Dunnes Stores for four years of plastic bag levies for small bags to wrap meat, fish and vegetables.  Dunnes had not charged customers this tax over the past four years.  Dunnes challenged the imposition of this tax and the High Court upheld the Revenue’s assessment.  The battle is poised to continue in the Supreme Court.

The plastic bag levy, currently 22 cent per bag, was introduced in 2002.  The levy applies to bags that (a) are wholly or partly made of plastic; (b) are suitable for use by a customer at the point of sale; and (c) do not fall within the exempt classes of bags.  For example, certain small plastic bags that are used to contain meat, fish, poultry, fruit, vegetables, sweets and that also meet size requirements are exempt.  The Revenue argued that Dunnes’s ‘pinch and pull’ bags were bigger than the exempt bags.

Dunnes claimed that the levy only applies to bags supplied at the point of sale, i.e. the checkout.  The Revenue argued that this ‘checkout’ interpretation would mean that retailers could leave plastic bags at other locations around shops and thus escape the levy. 

The High Court noted that the purpose of the plastic bag levy was to reduce discarded plastic bags littering towns and the countryside.  If the legislation only applied to bags supplied at the checkout, then the exemptions for flimsy bags for certain food would not be necessary, and the levy “would miss large numbers of plastic bags and diminish greatly the impact of the Act.”  Accordingly, the High Court held that the legislation was clear and that the tax bill stood.

Dunnes has appealed the decision to the Supreme Court.  The matter is unlikely to be resolved quickly as the waiting list for Supreme Court appeals is more than three years, although an earlier hearing date may be achieved if there is an application for priority hearing.

In the meantime, the High Court’s decision highlights that retailers should exercise vigilance to verify whether or not the plastic bags they supply are within the permitted exemptions from the levy. Retailers in the UK may wish to consider whether inventive arguments of the type used in these proceedings might be a good work-around for any future levies coming into force.