The bag tax
While Dunnes Stores is embroiled in a High Court case about unpaid plastic bag levies, Colette O’ Connor takes a look at what this levy has actually achieved
Print16 January 2012
In mid-December Dunnes Stores lost its High Court case against a Revenue Commissioners’ tax assessment of ?36.4 million. The Revenue Commissioners claim that this is the amount due by Dunnes Stores over a four year period (2004 to 2008) for
unpaid plastic bag levies.
Dunnes’ legal team claimed that the levy was only applicable to the larger carrier bags commonly supplied at checkouts (no
longer the case at Dunnes Stores). However, Justice John Hedigan said that the levy was “not only” limited to carrier bags.
Many in the trade expressed shock at the decision, as it is a commonly held belief that the levy only applies to bags supplied at the checkout and not those supplied for holding fruit and veg, meat or fish. However, Justice Hedigan ruled that the levy is applicable to all plastic bags except for those that are specifically exempted under the legislation.
The High court’s ruling has now been appealed to the Supreme Court. Justice Hedigan agreed to put a stay on the assessment until this appeal has been heard.
According to Nicola Dunleavy, a litigation partner and co-head of the Environment and Planning Law Group at Matheson Ormsby Prentice: “A party has 21 days from the date the High Court judgment is finalised (‘perfected’) to appeal to the Supreme Court. The waiting list for a hearing for Supreme Court appeals is currently 41 months (three years and five months) after all necessary appeal documents have been lodged in the Supreme Court. It may be possible to get an earlier hearing date if either party applies to the Chief Justice for priority status. If a case is given priority status, it is assigned an earlier available hearing date. There are currently 30-40 priority cases awaiting Supreme Court hearing dates.
On the surface it is hard to see how the Revenue arrived at its €36.4 million assessment. Over a four year period this equated to over €9 million per annum. In 2004 when the levy was running at 15c per bag, this equates to over 60 million bags that the Revenue claims were given away by Dunnes. Well over half of the total number of bags on which levies were paid in 2004 amounted to €102 million.
Dunnes opts out
Around three years ago when Dunnes Stores decided not to sell plastic bags that incurred the government levy, they met with minimal objections from consumers. A few grumbles here and there and a few threads on Boards.ie were about the height of it. However, at the same time small stands offering non-branded plastic bags on a roll started to appear at Dunnes checkouts at a cost of 99 cent for a roll of twenty, no levy is applicable to these bags but plenty of margin. Also Dunnes offered consumers the option to buy a 70c bag for life – no levy applicable here either. In fact one source that ShelfLife spoke to estimates that the 70 cent bags would cost Dunnes at most 10 cent per bag leaving a full 60 cent margin for Dunnes. This source reckoned that Dunnes could be making a very conservative €2 to €3 million per year clear profit by selling its 70 cent bag for life. And, this some believe may well have led the Revenue Commissioners to pursue Dunnes for uncollected plastic bag levies.
Dunnes most certainly believed that it was acting within the law. But by opting out of the plastic bag levy and offering bags for sale that did not incur the levy charge it could be interpreted that the company was not acting in the spirit of what the levy is all about.
Big earner
Since it was introduced the plastic bag levy has generated nearly €170 million which has been paid to the Revenue Commissioners. In 2010 the Revenue Commissioners retained €400,454 as its annual service fee for the operation of the collection of the levy and the remainder of the €17,457,667 was passed to the Environment Fund. The fund was established in 2001 under the Waste Management Act as a means of dispersing funds collected.
ShelfLife asked the Department of the Environment how the plastic bag levy monies collected directly from retail grocery outlets was spent? In response we were told that “as the fund receives its income from a number of sources, it is not possible to identify specific projects funded from plastic bags receipts”. The department did say that the fund provides assistance to a large number of schemes and initiatives encompassing all aspects of environmental protection.
Phenomenal success
Prior to the introduction of the bag levy it was estimated that 1.2 billion plastic bags were given to consumers annually. This represented 325 bags per head of population.
In 2010 this figure stands at around 17.5 bags per person. In 2006, the then Minister for the Environment sanctioned an increase to 22 cent per bag on the basis that the annual “consumption” per capita of plastic bags had increased to 31 bags. However, it could be argued that part of the increased usage was as a result of a rise in population. Or perhaps consumers at the time had come so used to the 15c charge that it no longer mattered to them.
Since the levy was introduced, 2008 netted the biggest haul for the department at €26,664,513 million. This dropped to just under €23.5 million in 2007 and then dropped by another €6 million in 2010.
No increase
The good news is that although the 2011 Waste Management Act introduces a framework for the Minister to change the plastic bag levy once in any financial year, the Department of the Environment’s press office says: “There are no plans at present to increase the plastic bag levy in 2012. If Minister Hogan follows the same line of thinking as his predecessor, in that an increase is only warranted when a significant increase in per capita usage has been recorded, then no increase should be on the cards any time soon. Plastic bag usage is now down to around 17.5 per capita per annum.
Cost of waste management including recycling projects
The accounts for the Environment Fund say that this represents payments made to local authorities from the fund to assist in meeting costs associated with the provision of waste management infrastructure. In addition, funding was also provided towards the costs of planning and procurement in relation to the provision of major local authority waste management infrastructure.
We asked the Department to explain the major increases in 2004 and again in 2007.
Expenditure under the heading ‘waste management including recycling projects’ is primarily in respect of the development by local authorities of waste recycling infrastructure such as civic amenity sites and bring banks. In 2002 a circular was issued to all local authorities announcing a grants scheme for the development of waste management infrastructure. As all grants were paid post invoice, i.e. the local authority needed to incur the expenditure before making grant claims, it was not until projects were well underway, that claims began to be paid. 2004 would have been the first year where most projects reached the stage where claims could be submitted for recoupment. After the initial interest in the scheme, which resulted in a large volume of claims being paid in 2004, the volume of claims levelled off. There was a resurgence in claims in 2007 and 2008 as local authorities were notified that the scheme was drawing to a close and outstanding claims would have to be submitted. A new waste recycling capital grant scheme was announced in 2008. As under the previous scheme, there would be a gap between approval under the new scheme and payment of the grant, so recoupment claims would be low in 2009.
Cost of office of environmental enforcement
The accounts for the Environment Fund say that this figure represents the costs incured by the EPA on the establishment of the Office of Environmental Enforcement.
We asked the Department of the Environment why the cost of the Office of Environmental Enforcement has gone from a set up cost of €266,509 to costing €2.2m in 2010?
“The 2003 figure of €266,509 for the Office of Environmental Enforcement (OEE) is associated with initial set up costs for that office. It is noted that the OEE was actually established in October 2003. The first full year of operations for the OEE was 2004, where the operational figure was E861,000. The rise in the allocation over the subsequent six years is a consequence of the expanding remit of the EPA and the developing role of the OEE from the time of its establishment.
Cost of local authority enforcement initiatives
The Accounts for the Environment Fund say that this expenditure is in respect of grants paid to local authorities in support of enforcement activities. We asked the department to explain exactly what this means?
This refers to additional resources provided by the State to underpin waste enforcement by local authorities. The aim is to provide a stronger and more visible local authority enforcement presence on the ground and to ensure more frequent inspections and speedier responses to reported instances of illegal dumping. It is primarily made up of funding costs associated with the employment of over 120 additional waste enforcement staff (mainly recruited during the period 2004/2005) and which funding is guaranteed until 2014 as part of Ireland’s deliverables under a programme of measures to deal with the closure of ECJ Case C494/01-it would also in certain cases include associated support costs for enforcement activities undertaken by local authorities such as covert surveillance, provision of CCTV equipment etc.
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