CBS Detroit – We all know Subway, who has marketed their sandwiches under the phrase “Eat Healthy”. As it sits now, Subway with all its franchised locations tops over 40,000 in 111 countries. One such subway franchisee in Ireland is in a pickle over its bread, or what Ireland’s Supreme Court says is not “bread”.

According to Forbes, Bookfinders Ltd. a Subway franchisee in Ireland claimed it was exempt from Ireland’s Value-Added-Tax (VAT). Arguing the food they sell and their ingredients are “staple” foods under Irish law. VAT is not like a sales tax, where a sales tax is usually collected at the end of sale for a good or service. VATS are collected at various points along the supply chain. According to Forbes its a way to prevent less tax fraud and to increase revenue, athough being rather complicated to to keep track of.

Credit: Getty Images | Amir Mukhtar: Subway chicken tikka burger in wheat bread with different vegetables.

Bookfinders argued that from 2004 and 2005 it paid 9.2% in VAT, but they shouldn’t have paid anything. Claiming among other things, that the bread they use considered a staple food and thus tax free. However, Ireland’s Supreme Court ruled differently… as the saying goes “the devil is in the details”.

Ireland’s Value-Added Tax Act of 1972 places tax rates and defintions for various things that inlcude bread. To call your bread – “bread” in Ireland means that “fat, sugar and bread improver, subject to the limitation that the weight of any ingredient specified in this subclause shall not exceed 2% of the weight of flour included in the dough”. However, in Subway’s case their bread recipe has sugar totalling about 10% of the total weight.

Bakers commonly use sugar so that the yeast will cause the bread to rise, but sugar also keeps in moisture to prevent bread from drying out and going stale. The reason behind having to have definitions on what “bread” is according to Justice O’Donnell is that to consider bread a staple food, it has to be different from foods like pastries that also use flour.

Ireland’s Supreme Court ruled that Bookbinders claim that they fell into a 0% tax bracket for their bread was a bit too far concerning the letter of the law, with Justice O’Donnel writing, “This seems a very cumbersome and unnatural description of a hot meatball sandwich. Arguments like this induce some sympathy for the beleaguered draftspersons and for the tortured language to which they sometimes have to resort in order to carry into effect a reasonable statutory policy.” With that Bookfinders appeal was dismissed.

This is not the first time something like this has happened, as Forbes also reports back in 2008 Proctor & Gamble’s brand “Pringles” did not qualify as a potato chip. As the Pringles are made from a baked dough.


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