IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION ADMINISTRATIVE COURT
(BURTON J)
Royal Courts of Justice Strand, London, WC2A 2LL | ||
B e f o r e :
LORD JUSTICE ROBERT WALKER
and
LORD JUSTICE DYSON
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PROFESSIONAL CONTRACTORS’ GROUP AND ORSAppellants - and - COMMISSIONERS OF INLAND REVENUE Respondents
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Dr Richard Plender QC and Mr Stephen Morris (instructed by the Solicitor of Inland Revenue for the respondents)
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AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Robert Walker:
Introduction
“The Chancellor announced today that changes are to be introduced to counter avoidance in the area of personal service provision. This move underlines the Government’s commitment to achieving a tax system under which everyone pays their fair share.
There has for some time been general concern about the hiring of individuals through their own service companies so that they can exploit the fiscal advantages offered by a corporate structure. It is possible for someone to leave work as an employee on a Friday, only to return the following Monday to do exactly the same job as an indirectly engaged ‘consultant’ paying substantially reduced tax and national insurance.
The Government is going to bring forward legislation to tackle this sort of avoidance. The Inland Revenue will be discussing the practical application of new legislation with interested parties and will work with representative bodies on the production of guidance. The new rules will take effect from April 2000.”
“ … incompatible with European Community law as being:
(a) an unnotified State aid contrary to Articles 87 and 88 EC in respect of the following areas of business activity:
(i) Information Technology
(ii) Engineering (including oil and gas)
(iii) Telecommunications
(iv) Management and Business Consulting;
(b) an unlawful hindrance to free movement of workers, freedom of establishment and freedom to provide services, contrary to Articles 39, 43 and 49 respectively;
and cannot lawfully be applied.”
The IR 35 legislation
“This Schedule applies where –
(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person (“the client”),
(b) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and
(c) the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.”
“Where these Regulations apply –
(a) the worker is treated, for the purposes of Parts I to V of the [1992] Act, and in relation to the amount deriving from relevant payments and relevant benefits that is calculated in accordance with regulation 7 (“the worker’s attributable earnings”), as employed in employed earner’s employment by the intermediary, and
(b) the intermediary, whether or not he fulfils the conditions prescribed under section 1(6)(a) of the [1992] Act for secondary contributors, is treated for those purposes as the secondary contributor in respect of the worker’s attributable earnings,
and Parts I to V of that Act have effect accordingly.”
The judge’s findings of fact
“ … I put them to both Counsel, and they were amended to some extent in the course of argument. Neither side of course agreed all of them, and they are my conclusions: however equally neither side was able with any great vigour to contest that they were conclusions open to me upon the evidence.”
The judge then set out his conclusions, with some short comments. I repeat his conclusions verbatim with some reference to his comments and a few further comments of my own.
“ … to eliminate the avoidance of tax and NIC on payments made by clients in respect of services provided by those who are in fact equivalent to employees; and it has that effect on the companies to which it applies.”
The judge added some comments about tax evasion, tax avoidance and tax mitigation, implying that the individuals referred to (echoing the original press release) as ‘Friday to Mondays’ might be regarded as tax evaders but that the aim of the proposals was not limited to such blatant cases. I do not think it helpful to explore the obscure boundary between avoidance and mitigation. The judge referred to the Revenue’s suggested figure of £350m a year as to the overall tax loss from the increased use of service companies (estimated by the Revenue as an increase from 30,000 in 1981 to 90,000 in 1999). He said (paragraph 23),
“Whatever the precise figures are, the reality is that if the service company is indeed substantially or wholly captured by IR 35, then it will pay more tax. Hence the Revenue’s desire for change and the Claimants’ desire to challenge it.”
“Many service contractors will be required to pay more monies and earlier to the Inland Revenue under IR 35 than under the previous arrangements.”
The judge’s third conclusion was that at least two-thirds of service contractors are in the sector referred to in the amended relief (that is, IT and the three other components of the ‘knowledge-based’ sector mentioned in paragraph 6 above). The judge noted that it was not contended that the legislation was targeted against this (or any) particular sector. It has also affected many other workers in fields as diverse as locum doctors, construction workers and pizza deliverymen. It is true that all the examples in official guidance published in February 2000 were in the IT field but that was explained by PCG and others having complained to the Revenue about the absence of case-law as to the boundary between employed and self-employed status in that field.
“Instead of certainty as to the impact of tax and NIC, service contractors as a result of IR 35 have uncertainty as to whether IR 35 will or will not apply to a particular engagement.”
The judge commented that this was very much a part of the claimants’ complaint, and that the Revenue could not really deny it. Service companies did until 6 April 2000 shield those who used them from having to face up to the often difficult question of whether they would, on the terms and in the context of a particular engagement, be on the employed or the self-employed side of an elusive dividing-line. The immunity conferred by the service company had now gone, and the service contractor had to decide the question for himself, with such help as the Revenue could provide either in the way of informal advice or (once an engagement had been entered into) a formal ruling in the course of the tax year. Mr Barling made the valid point that a taxpayer’s difficulties may be increased by the question arising at one or even two removes (that is through separate contractual links between client and agency, agency and service company, and service company and individual; the latter difficulty may be self-inflicted but the former is not if the client recruits contract services only through an agency).
“The Revenue submits that the real competition was between those who were doing the work at the clients’ premises, sometimes in the same team: on the one hand employees, whether of the client or of the service provider, and on the other the service contractor. That is the competition that Dr Plender QC submitted to be the relevant one.”
“Companies unaffected by IR 35 would have greater flexibility to arrange their tax affairs, to allocate tax between income tax and corporation tax, to defer tax liabilities, and to pay lesser salaries to those providing the services and higher dividends to shareholders, than service contractors.”
This is an important building-block in the claimants’ case on state aid. The judge said that he was entitled to make this finding on the evidence, but noted three points made by the Revenue. First, the companies alleged to enjoy this greater flexibility would already be deducting income tax and NIC under PAYE in respect of the whole of their employees’ remuneration. Secondly (and following from the first point) IR 35 was restoring a level playing field. Thirdly, service contractors would continue to enjoy the same flexibility so far as they were engaged in genuine ‘independent contractor’ work.
“Some service contractors may not continue to operate in the United Kingdom as a result of IR 35, and some who have intended to come to the United Kingdom to set up or work as service contractors may not now come to the United Kingdom.”
Finally the judge reached his eighth, ‘very limited’ conclusion, that his fifth, sixth and seventh conclusions might have an effect on trade between Member States.
State aid and general measures
“Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market.”
Paragraphs (2) and (3) then instance types of aid which are compatible, or may be considered compatible, with the common market. Article 88 (formerly 93) relates to the review of aid by the Commission and the notification of aid proposals to the Commission. Neither side has placed much reliance on these provisions in this court and I need not make any further reference to them.
“(1) An ‘aid’ in the sense of a benefit or advantage which
(2) is granted by the state or through state resources,
(3) favours certain undertakings over others (the ‘selectivity’ principle)
(4) distorts or threatens to distort competition,
(5) is capable of affecting trade between Member States and
(6) has not been notified to the Commission.”
All these points go to make up what this court (in Queen (Lunn Poly) v Commissioners of Customs & Excise [1999] EuLR 653, 662) called a ‘global question’. It is a question for the national court.
“Measures entailing differences in treatment between categories of undertakings or between sectors of activity may be justified by the nature or structure of the system of which they form part (see Case 173/73 Italy v Commission, [1974] ECR 709, paragraph 33 and Case C-75/97 Belgium v Commission [1999] ECR I–3671, paragraphs 33 and 34; see also Case T-67/94 Ladbroke Racing v Commission [1998] ECR II-1, paragraph 76).
In the present case, however, the sole circumstance, put forward by the applicant, that the PRI was aimed at modernising the commercial vehicles on the road in Spain in the interest of environmental protection and improving road safety cannot suffice for a finding that the PRI constituted a system or a general measure in itself or formed part of any ‘Spanish system’, which, moreover, the applicant does not even identify. If that argument were followed, it would be sufficient for the public authorities to invoke the legitimacy of the objectives which the adoption of an aid measure sought to attain for that measure to be regarded as a general measure outside the scope of Article 92(1) of the Treaty. That provision does not distinguish between measures of State intervention by reference to their causes or aims but defines them in relation to their effects (Case C-56/93 Belgium v Commission [1996] ECR I-723, paragraph 79, Case C-241/94 France v Commission, [1996] ECR I-4551, paragraph 20, and Case C-75/97 Belgium v Commission, [1999] ECR I-3671, paragraph 25).
Furthermore, as the Commission points out in its written submissions, the applicant does not explain how the exception for large undertakings was justified by the nature or structure of the alleged system to which the PRI corresponded or of which it formed part. In any event, the objectives which the applicant claims the Spanish authorities sought to attain by means of the PRI do not justify such an exception, since the age of commercial vehicles used by large enterprises also presents risks in terms of environmental protection and road safety.”
“In those circumstances, having regard to the class of undertakings covered by the legislation in issue and the scope of the discretion enjoyed by the minister when authorising, in particular, an insolvent undertaking under special administration to continue trading, that legislation meets the condition that it should relate to a specific undertaking, which is one of the defining features of State aid (see, to that effect, Case C-241/94 France v Commission [1996] ECR I-4551, paragraphs 23 and 24).”
“13. Tax measures which are open to all economic agents operating within a Member State are in principle general measures. They must be effectively open to all firms on an equal access basis, and they may not de facto be reduced in scope through, for example, the discretionary power of the State to grant them or through other factors that restrict their practical effect. However, this condition does not restrict the power of Member States to decide on the economic policy which they consider most appropriate and, in particular, to spread the tax burden as they see fit across the different factors of production. Provided that they apply without distinction to all firms and to the production of all goods, the following measures do not constitute State aid:
- tax measures of a purely technical nature (for example, setting the rate of taxation, depreciation rules and rules on loss carry-overs; provisions to prevent double taxation or tax avoidance)
- measures pursuing general economic policy objectives through a reduction of the tax burden related to certain production costs (research and development (R&D), the environment, training, employment).
14. The fact that some firms or some sectors benefit more than others from some of these tax measures does not necessarily mean that they are caught by the competition rules governing State aid. Thus, measures designed to reduce the taxation of labour for all firms have a relatively greater effect on labour-intensive industries than on capital-intensive industries, without necessarily constituting State aid. Similarly, tax incentives for environmental, R&D or training investment favour only the firms which undertake such investment, but again do not necessarily constitute State aid.
15. In a judgment delivered in 1974 [Case 173/73 Italy v Commission [1974] ECR 709], the Court of Justice held that any measure intended partially or wholly to exempt firms in a particular sector from the charges arising from the normal application of the general system ‘without there being any justification for this exemption on the basis of the nature or general scheme of this system’ constituted State aid. The judgment also states that ‘Article [87] does not distinguish between the measures of State intervention concerned by reference to their causes or aims but defines them in relation to their effects. The judgment also points out that the fact that the measure brings charges in the relevant sector more into line with those of its competitors in other Member States does not alter the fact that it is aid. Such divergences between tax systems, which, as pointed out above, are covered by Articles [94] to [97], cannot be corrected by unilateral measures that target the firms which are most affected by the disparities between tax systems.
16. The main criterion in applying Article [87] (1) to a tax measure is therefore that the measure provides in favour of certain undertakings in the Member State an exception to the application of the tax system. The common system applicable should thus first be determined. It must then be examined whether the exception to the system or differentiations within that system are justified ‘by the nature or general scheme’ of the tax system, that is to say, whether they derive directly from the basic or guiding principles of the tax system in the Member State concerned. If this is not the case, then State aid is involved.”
“The Act itself is not seen as benefiting certain businesses or certain activities, since it applies to experts in all areas and its area of application is not restricted to regions or sectors. The application is assessed on the basis of objectives and non-discriminating criteria without tax authorities being given discriminating powers.
The information from the Danish authorities shows that the scheme is used in more than 150 sectors, by small and medium-sized businesses and by large businesses in the private and public sectors. The reason for the concentration in the office equipment, software and fuel sectors is that salaries are especially high in these sectors. In the correspondence from the Commission regarding the control of state aid and the reduction in employer costs, the Commission writes: “Salaries in the chemical, oil refining, office machinery and IT industries are on average twice as high as salaries in the textile industry and about three times higher than salaries in the footwear and clothing industry and hotel and catering industry. Schemes aimed at the low-paid will therefore have a much greater effect in the latter sectors than in those first mentioned without actually constituting state aid.” In contrast, schemes aimed at the high-paid will have a considerably greater effect in sectors with high salaries but this still does not constitute state aid.”
Lunn Poly and Ferring
“All he has succeeded in demonstrating is that the demand for travel insurance is highly price inelastic. This enables travel agents, in particular, to charge their customers a premium which they should find uncompetitive. They do not do so because they are guided by factors other than price when making their purchasing decision on insurance. Having come to this conclusion, there is no loss of tax which provides an objective justification for the discriminatory rate of tax imposed on tour operators and agents providing insurance. The higher rate contrary to the stand adopted by the commissioners cannot be objectively justified as an anti-tax avoidance measure.”
“ ‘The point of departure’ here was the position before the differential tax rates were introduced. In accordance with that decision, it is necessary to focus on the effect the introduction of the differential rate of tax had on the previous position in order to decide whether the change in the rates constituted an aid.
In doing this I do not observe from the authorities any suggestion that it is not permissible to look at the reason the member state put forward for imposing the differential rate. To not do so is to approach the issues in a vacuum. It is here that the question of there being an objective justification for the implementation of the measure could be relevant.
To take an example relevant to the present case; if a higher rate of tax were imposed to rectify an actual loss of tax due to a tax avoidance scheme initiated by certain members of a group of taxpayers, that would not mean that the remainder of the relevant group of taxpayers were receiving an aid because of the higher discriminatory rate of tax imposed specifically on the tax avoiders. Nor should it make any difference if, instead of the rate of tax being increased for those who are involved in the tax avoidance, it is reduced for those not so involved. In both situations what is being achieved is a level playing field. Where an explanation of this nature is put forward, if the court is satisfied that what had happened is justifiable, the result would be that there would be no discrimination which could constitute an aid.”
“ … to restore the balance of competition between the various distribution channels for medicines, which had been regarded as distorted by the fact that wholesale distributors are under a duty of public service which is not imposed on pharmaceutical laboratories.”
“Nevertheless, the fact that undertakings are treated differently does not automatically imply the existence of an advantage for the purposes of Article [87](1) of the Treaty. There is no such advantage where the difference in treatment is justified by reasons relating to the logic of the system (see, to that effect, Case C-353/95P Tiercé Ladbroke v Commission [1997] ECR I-7007, and particularly paragraphs 33-35).”
“In like manner, provided that the tax on direct sales imposed on pharmaceutical laboratories corresponds to the additional costs actually incurred by wholesale distributors in discharging their public service obligations, not assessing wholesale distributors to the tax may be regarded as compensation for the services they provide and hence not State aid within the meaning of Article [87] of the Treaty. Moreover, provided there is the necessary equivalence between the exemption and the additional costs incurred, wholesale distributors will not be enjoying any real advantage for the purposes of Article [87] (1) of the Treaty because the only effect of the tax will be to put distributors and laboratories on an equal competitive footing.
In this case it is for the national court to decide whether that condition is satisfied.
The answer must therefore be that Article [87] of the Treaty is to be interpreted as meaning that, because it is charged only on direct sales of medicines by pharmaceutical laboratories, a measure such as the tax introduced by Article 12 of Law No 97-1164 amounts to State aid to wholesale distributors only to the extent that the advantage in not being assessed to the tax on direct sales of medicines exceeds the additional costs that they bear in discharging the public service obligations imposed on them by national law.”
This is a clear recognition by the Court of Justice that a measure which was apparently discriminatory (in that case, as between manufacturers and wholesalers) might on examination prove to be the opposite (that is, to put the two groups of undertakings on an equal competitive footing).
“ …measures which have neither as their object nor as their effect the favouring of certain undertakings or the production of certain goods, or which apply to persons in accordance with objective criteria without regard to the location, sector or undertaking in which the beneficiary may be employed, are not considered to be state aid.”
State aid: conclusions
Freedom of movement: introduction
“1. Freedom of movement for workers shall be secured within the Community.
2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.
3. It shall entail the right, subject to limitations justified on grounds of public policy, public security or public health:
(a) to accept offers of employment actually made;
(b) to move freely within the territory of Member States for this purpose;
(c) to stay in a Member State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid down by law, regulation or administrative action;
(d) to remain in the territory of a Member State after having been employed in that State, subject to conditions which shall be embodied in implementing regulations to be drawn up by the Commission.
4. The provisions of this Article shall not apply to employment in the public service.”
“Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.
Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.”
“Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.
The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.”
“ … necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer.”
In Cassis de Dijon the interests of the consumer justified a national rule as to the minimum alcohol content of liqueurs. Justification includes (but is not limited to) the requirement of proportionality.
‘Neutral’ contraventions
“In that context, nationals of Member States have in particular the right, which they derive directly from the Treaty, to leave their country of origin to enter the territory of another Member State and reside there in order there to pursue an economic activity (see, inter alia, Case C-363/89 Roux v Belgium [1991] ECR I-273, paragraph 9, and Singh [1992] ECR I-4265, (paragraph 17).
Provisions which preclude or deter a national of a Member State from leaving his country of origin in order to exercise his right to freedom of movement therefore constitute an obstacle to that freedom even if they apply without regard to the nationality of the workers concerned (see also Case C-10/90 Masgio v Bundesknappschaft [1991] ECR I-1119, paragraphs 18 and 19).”
“It would be possible to construe the broadly worded tests quoted above from Kraus, Gebhard and Bosman as relating solely to the sorts of formal conditions of access to the employment market which were at issue in those and the other cases discussed … above. On the other hand, the Court did not avert expressly to any such limitation of the scope of application of the criteria it laid down in those cases. If, however, it were proposed to treat as restrictions on the exercise of freedom of movement neutral national rules which allegedly preclude, deter, impede, hinder or render less attractive such exercise simply by raising material barriers, for example, by establishing commercial and regulatory conditions in the market in question which are less enticing than in other Member States, or by offering benefits which would be lost in the event that a worker changed employment, those criteria could not be applied in the same way as in the case of a formal condition. Prejudice to the exercise of the freedom of movement of workers or self-employed persons cannot be automatically presumed in all cases where an apparently burdensome national regulation of economic activity, or the loss of a benefit in the case of a change in economic activity, is at issue. Such an approach would be equivalent to applying the Dassonville test [see Procureur du Roi v Dassonville [1974] ECR 837, a case on movement of goods], in its most far-reaching construction, to freedom of movement of persons. Where an alleged obstacle to freedom of movement does not result from a formal condition of market participation but is instead alleged to arise from some neutral material barrier or disincentive deriving from national regulations, the prejudice to the exercise of Community-law rights must be established.
In my view, if the possibility of treating such national rules as restrictions on freedom of movement were admitted, the appropriate criterion would be that which has already been employed by the Court in Bosman and in Alpine Investments in order to reject the application by analogy to certain national rules in the field of the free movement of persons of the approach adopted in Keck [joined cases C-267/91 and C-268/91 [1993] ECR I-6097] to national provisions governing selling arrangements for goods: that, proposed by the Commission in this case, of a direct effect on access to the market in question of the worker or self-employed person concerned. Although the Court did not have occasion in either case to state whether fulfilment of this criterion was essential in all cases to establish the existence of a prohibited neutral obstacle to free movement, this appears to me to be necessary if the Treaty is not to be exploited as a means of challenging any national rules whose effect is simply to limit commercial freedom. Thus, neutral national rules could only be deemed to constitute material barriers to market access, if it were established that they had actual effects on market actors akin to exclusion from the market. As in the case of rules regarding selling arrangements in the case of goods, there can be no presumption that neutral national commercial regulations, or those governing pay scales, social protection and other matters of concern to workers , have this effect. In the normal case, the migrant worker must take the national employment market as he finds it. The same holds true for neutral national rules which are alleged to affect the worker’s decision as to whether or not to leave a Member State in order to take up an economic activity in another. This is especially important as regards such possible exit restrictions because the number of formal restrictions on leaving a post is likely to be extremely limited relative to those applicable to taking up employment. If the Court established, in principle, that such material disincentives could, in certain cases, constitute restrictions on freedom of movement, aggrieved persons should be required to reverse that presumption by demonstrating that a particular rule has, in all the circumstances, such a burdensome and deterrent effect on market access as to constitute a direct denial of such access. It is, of course, implicit in such an approach that the existence of the alleged material denial of market access must be ascertained by reference to the circumstances of the particular complainant.
My analysis is, I think, similar to that of Advocate General Lenz in Bosman, where he sought to establish a distinction between national rules regarding access to the market and those merely governing the exercise of an economic activity. Advocate General Alber has expressed a different view to Advocate General Lenz in Lehtonen, [Case C-176/96, opinion 22 June 1999] arguing, by reference to Keck, that rules regarding the exercise of a profession are closer to product rules than to those regarding selling arrangements, in that they directly affect citizens, who may thus have to take into account different rules and to acquire new skills every time they migrate from one Member State to another. However, I think that the apparent disagreement arises in part from a different understanding of what is meant by rules governing the exercise of an economic activity. According to the scheme I have outlined above on the basis of the case-law, in particular that governing qualifications, national provisions which require certain skills of economic actors and thus tend to subject migrant workers to a dual regulatory regime are more readily classifiable as formally affecting access or, at the very least, as in Kraus and Choquet [1978] ECR 2293, as being sufficiently closely bound up with market access as to be subjected to a similar regime.”
“Provisions which, even if they are applicable without distinction, preclude or deter a national of a Member State from leaving his country of origin in order to exercise his right to freedom of movement therefore constitute an obstacle to that freedom. However, in order to be capable of constituting such an obstacle, they must affect access of workers to the labour market.
Legislation of the kind at issue in the main proceedings is not such as to preclude or deter a worker from ending his contract of employment in order to take a job with another employer, because the entitlement to compensation on termination of employment is not dependent on the worker’s choosing whether or not to stay with his current employer but on a future and hypothetical event, namely the subsequent termination of his contract without such termination being at his own initiative or attributable to him.”
Any non-discriminatory obstacle must have a direct and indisputable effect on the exercise of the particular right in question (in Bosman and Graf, the right to accept an offer of employment in another member state). An indirect or debateable influence or tendency is not enough. The facts of Graf are a clear illustration of this principle.
“ … national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it (see Case C-19/92 Kraus v Land Baden-Württemberg [1993] ECR I-1663, paragraph 32).”
Justification: tax avoidance
Proportionality
“ … that for me as a judge to canvass other possible methods of fiscal reform is wholly inappropriate.”
On that point he referred to the observations of Lord Slynn in Queen v Chief Constable of Sussex ex parte International Trader’s Ferry Ltd [1999] 2 AC 418, 439.
“In principle the decision on proportionality has to be taken by the national court which is seised of an issue on Article [30] EC, subject of course to any possible reference to the Court of Justice. But in the case of a legislative measure the national court must not simply accept the view of the national legislature or confine itself to deciding whether what the legislature has enacted is reasonable …
The judge’s task was … to see whether the exercise of the Secretary of State’s power … had been objectively justified and had been shown not to be disproportionate. The test is more demanding than that of ‘manifest error’ and is also more demanding than that of Wednesbury unreasonableness.”
“Most cases would be decided in the same way whichever approach is adopted. But the intensity of review is somewhat greater under the proportionality approach. Making due allowance for important structural differences between various convention rights, which I do not propose to discuss, a few generalisations are perhaps permissible. I would mention three concrete differences without suggesting that my statement is exhaustive. First, the doctrine of proportionality may require the reviewing court to assess the balance which the decision maker has struck, not merely whether it is within the range of rational or reasonable decisions. Secondly, the proportionality test may go further than the traditional grounds of review inasmuch as it may require attention to be directed to the relative weight accorded to interests and considerations. Thirdly, even the heightened scrutiny test developed in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554 is not necessarily appropriate to the protection of human rights.”
Article 234
Lord Justice Dyson:
Lord Justice Auld: