Browne v Ag

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 06 February 1991
• Neutral Citation: 1991 WJSC-HC 114
• Court: High Court
• Docket Number: No. 4254p/1985,[1985 No. 4254P]
• Date: 06 February 1991

1991 WJSC-HC 114

THE HIGH COURT

No. 4254p/1985

BROWNE v. AG

BETWEEN

PAUL BROWNE, PETER HOPKINS AND GEORGE SPICER

PLAINTIFFS

AND

THE ATTORNEY GENERAL, THE MINISTER FOR FINANCE AND THE REVENUE COMMISSIONERS

DEFENDANTS

Citations:

INCOME TAX ACT 1967 S117

FINANCE ACT 1982 S4

FINANCE ACT 1958 S23

FINANCE ACT 1982 S4(2)(a)

FINANCE ACT 1982 S4(9)

FINANCE ACT 1982 S4(9)(b)(i)(I)

FINANCE ACT 1982 S4(2)(b)

FINANCE ACT 1982 S4(3)(a)

FINANCE ACT 1982 S4(3)

FINANCE ACT 1982 S4(4)

MURTAGH PROPERTIES LTD V CLEARY 1972 IR 330

RODGERS V ITGWU & ORS 1978 ILRM 51

YEATES & ORS V MIN FOR POSTS & TELEGRAPHS & ORS 1978 ILRM 22

PAPERLINK V AG 1984 ILRM 373

PARSONS V KAVANAGH 1990 ILRM 560

CONSTITUTION ART 40.3.2

BRENNAN V AG 1984 ILRM 355

BLAKE & ORS V AG 1982 IR 117 1981 ILRM 34

MADIGAN V AG & ORS 1986 ILRM 136

CONSTITUTION ART 40.1

GREEN & ORS V MIN FOR AGRICULTURE 1990 ILRM 364

QUINNS SUPERMARKET LTD V AG 1972 IR 1

FINANCE ACT 1982 S4(5)(b)

FINANCE ACT 1982 S4(6)

CAFOLLA V AG 1985 IR 486

Synopsis:

REVENUE

Income tax

Assessment - Employment - Emoluments - Benefits - Employer's car - Availability - Private use - Cash equivalent of benefit chargeable to tax - Commercial traveller - Right to earn livelihood - Property rights - Infringement - Constitution - Statute - Validity - Finance Act, 1982, s. 4 - (1985/4254 P - Murphy J. - 6/2/91) - [1991] 2 I.R 58

|Browne v. The Attorney General|

1 Judgment of Mr. Justice Murphy delivered the 6th day of February 1991

2 All of the Plaintiffs herein are or were sales representatives. The nature of their work and the terms of their employment involved them in calling at regular intervals on customers or potential customers scattered throughout wide areas usually involving four, five or more counties. For all practical purposes the use of a motor car was essential to each of the Plaintiffs in the course of his work. Every one of them was in fact provided with a motor car by his employer. In addition all of the employers concerned permitted their employees, including the Plaintiffs, to use the cars so provided otherwise than for the business of the employer.

3 In these proceedings the Plaintiffs on their own behalf and on behalf of the sales representatives whom they represent challenge the constitutionality of the legislation under which the Revenue Commissioners purport to assess tax in respect of the benefit accruing to the Plaintiffs and such other persons from the right to use for private purposes the cars provided as aforesaid.

4 The relevant legislation falls into two distinct parts. The first in time consists of Sections 117 to 120 of the Income Tax Act 1957 and the second consisting of Section 4 of the Finance Act 1982. The Income Tax Act 1967was of course a codifying provision and so far as is material to these proceedings Sections 117 and 120 merely re-enacted Sections 23 to 26 of the Finance Act 1958. In substance (and subject to numerous qualifications and refinements) Sections 23 to 26 aforesaid provided that income tax should be payable (by the beneficiary) on expenses incurred by a body corporate on the provision for its directors or certain classes of employees "of living or other accommodation, of entertainment, of domestic or other services or of other benefits or facilities of whatsoever nature" save to the extent that the expense so incurred related "wholly, exclusively and necessarily" to the performance by the director or employee of the duties of his office or employment as the case should be. The relevant provisions of the 1958 Act (and subsequently the 1967 Act) applied to all directors of bodies corporate but only to those employees whose emoluments for a particular year of assessment were £15,000 or more. The Plaintiffs attached importance to the fact that the class of employees affected was identified in 1958 as employees earning £15,000 or more per annum.

5 Section 4 of the Finance Act 1982is a lengthy and somewhat complex section. It comprises nine subsections and enumerable sub subsections together with paragraphs and subparagraphs thereof. Unlike Sections 117 to 120 of the 1967 Act which purport to tax a wide range of benefits in kind, Section 4 of the 1982 Act segregates and deals exclusively with what is described in the marginal note as "Benefit of use of a car".

6 Section 4 aforesaid is expressed to have effect for the year 1982/83 and for subsequent years of assessment.

7 The persons and cars to which the section relates are specified in subsection (2) (a) as follows:-

"In relation to a person chargeable to tax in respect of an employment, this section shall have effect for a year of assessment in relation to a car which, by reason of the employment, is made available (without a transfer of the property in it) to him and it is in that year available for his private use".

8 "Private use" and "business use" are defined in subsection (9) as follows:-

9 ""Private use", in relation to a car, means use of the car other than business use.

10 "Business use", in relation to a car in respect of which this section has effect in relation to a person, means travelling in the car which that person is necessarily obliged to do in the performance of the duties of his employment".

11 What is or is deemed to be private use is defined in subsection (9) (b) (i) (I) in the following terms:-

"A car made available in any year to an employee by reason of his employment is deemed to be available in that year for his private use unless the terms on which the car is so made available prohibit such use and no such use is made of the car in that year".

12 The essence of the charging provision is to be found in subsection (2) (b) as follows:-

"In relation to a car in respect of which this section has effect for a year of assessment ———- for that year, there shall be treated as emoluments of the employment by reason of which the car is made available, and accordingly chargeable to income tax,—- the cash equivalent of the benefit of the car—-".

13 "The cash equivalent of the benefit of a car for a year of assessment" is then defined in subsection (3) (a) as being "20 per cent of the orignal market value of the car".

14 For the purpose of emphasizing the operative parts of the subsection I have omitted the qualifications and adjustments which may fall to be made in either the taxable emoluments or the cash equivalent of the benefit of the car.

15 It is also material to note that Section 4 applies to all employees to whom a car is made available by reason of their employment without reference to the amount of their annual emoluments.

16 The effect of the charging provision is that every employee to whom a motor car is entrusted for the purposes of his employer's business and who is not effectively prohibited from using the same for his private purposes is liable to tax annually on a sum which, subject to a variety of adjustments and refinements, is equal to one-fifth of the original market value of the car.

17 Of these "adjustments and refinements" there are two to which I should refer. First it is provided (in subsection (3)) that the percentage of the original market value of the car which is to be treated as the cash equivalent of the benefit of the motor car must be reduced when the employee bears any part of the cost of the fuel, the insurance or the excise duty relating to the car in the year of assessment. In the present case (and I would infer that it is the general rule) employees bear the cost of the fuel relating to private use and in accordance with the statutory provisions the relevant percentage of the market value of the car is reduced from 20% to 17% thereof. More dramatic adjustments to the "cash equivalent", and the resulting notional emoluments on which tax falls to be paid, may occur by virtue of subsection (4) of Section 4 which provides that the cash equivalent should be reduced in stages from a sum equivalent to 95% thereof as calculated under subsection (3) down to 10% thereof and ultimately nil where the business mileage for a year of assessment exceeds 10,000 miles and rises up to or in exceed of 25,000 miles. The appropriate scale is provided in the Table annexed to subsection (4) aforesaid.

18 The challenge to the constitutionality of the 1982 Act is made on the following grounds:-

19 (1) That it imposes a tax on the motor car which is so indispensable to a sales representative that it can be equated with and properly described as "a tool of his trade". Accordingly, it is argued, that the tax infringes on the right of each of the Plaintiffs and others in a like position to earn their livelihood. As the right to earn a livelihood has been recognized as an unspecified personal right within the meaning of Article 40, Section 3 of the Constitution it is claimed that the tax can and does operate as an impermissible infringement of that right. In relation to this argument reference was made to Murtagh Properties Limited v. Michael Cleary 1972 I.R. 330; Rodgers v. I.T.G.W.U and others 1978 I.L.R.M. 51; Yeates and others v. The Minister for Posts and Telegraphs and others 1978 I.L.R.M. 22; Paperlink v. A.G. 1984 I.L.R.M. 373 and Parsons v. Kavanagh 1990 I.L.R.M. 560.

20 (2) That the tax was ill-targeted, discriminatory and arbitrary. As such it constituted an unjust attack on the Plaintiff's property rights in breach of Article 40.3.2. In this connection reliance was placed on Brennan v. The Attorney General 1984 I.L.R.M. 355; Blake and others v. Attorney General 1982 I.R. 112 and Madigan v. The Attorney General and others I.L.R.M. 136.

21 (3) That the tax discriminated against sales representatives who, unlike others, were required by the circumstances of their employment to use a motor car in the course of their work and as such was an infringement of their constitutional right to "be held equal before the law" in...