Introduction

The case of Perrigo Pharma International DAC v. McNamara & Ors (2020) [2020] IEHC 552 is a pivotal judicial review proceeding heard by the High Court of Ireland. Perrigo Pharma International DAC ("Perrigo") challenged the legality of a substantial amended tax assessment issued by the Revenue Commissioners ("Revenue") amounting to over €1.6 billion. The crux of Perrigo's challenge centered on allegations that the Revenue had breached Perrigo's legitimate expectations, engaged in an abuse of power, and unjustly infringed upon Perrigo's constitutionally protected property rights in the context of a transaction involving the disposal of intellectual property rights ("IP"), specifically the Tysabri IP.

Summary of the Judgment

Delivered on November 4, 2020, by Mr. Justice Denis McDonald, the High Court dismissed Perrigo’s application for judicial review. The court found that Perrigo failed to establish a legitimate expectation that the Revenue would not reassess past transactions, particularly the disposal of the Tysabri IP, as part of its trading activities. The judgment meticulously examined four categories of representations, including the Shannon Certificate, Tax Briefing Issue 57 ("TB57"), and the course of dealings between Perrigo and the Revenue over more than a decade. The court concluded that none of these elements sufficiently established that the Revenue had made a promise or representation that would give rise to Perrigo's claims.

Analysis

Precedents Cited

The judgment extensively referred to key cases that shape the doctrine of legitimate expectation in Ireland:

• Glencar Exploration plc v. Mayo County Council (No. 2) [2002]: Established the three preconditions for legitimate expectation.
• Cromane Seafoods Ltd v. Minister for Agriculture, Fisheries and Food [2017]: Emphasized the necessity for precise representation.
• Unilever plc [1996] STC 681: Highlighted the abuse of power in tax assessments, later distinguished by the Supreme Court.
• Droog [2016] IESC 55: Addressed the time limitation for reassessing tax liabilities.
• Keogh v. Criminal Assets Bureau [2004] 2 I.R. 159: Demonstrated that procedural fairness impacts legitimate expectation.

These precedents collectively underscore the stringent requirements for establishing legitimate expectation and the judiciary's reluctance to extend such doctrines into areas lacking explicit representations.

Legal Reasoning

The court employed a meticulous approach to assess Perrigo's claims against the established legal framework:

• Legitimate Expectation Criteria: Drawing from Glencar, the court evaluated whether the Revenue made a promise or representation to Perrigo, Perrigo acted upon it, and it would be unjust to allow the Revenue to withdraw this expectation.
• Shannon Certificate and TB57: The court analyzed these documents, concluding that they did not constitute explicit representations assuring Perrigo that IP disposals would be treated as trading activities.
• Course of Dealings: While recognizing a long-term relationship between Perrigo and the Revenue, the court found no objective basis to infer an implicit representation regarding the tax treatment of IP disposals.
• Abuse of Power and Unfairness: Without a substantiated legitimate expectation, claims of abuse of power lacked foundation. The court emphasized that the Revenue retained its statutory rights to reassess within defined limitations.

The judgment reinforced the principle that in tax contexts, unless there is a clear and formal representation, taxpayers cannot rely on implicit expectations, especially when statutory provisions grant tax authorities extensive reassessment powers.

Impact

This judgment has significant implications for the intersection of administrative law and taxation:

• Clarification on Legitimate Expectation: The ruling delineates the boundaries of legitimate expectation in tax assessments, emphasizing the need for explicit representations.
• Tax Authority Discretion: Affirmed the broad discretionary powers of tax authorities to reassess and reinterpret tax treatments, even in longstanding taxpayer relationships.
• Future Taxpayer Conduct: Encourages taxpayers to seek formal assurances and explicit clarifications from tax authorities rather than relying on implied or informal understandings.
• Role of Judicial Review: Limits the scope of judicial intervention in tax disputes unless there is a clear administrative overreach or illicit conduct by the tax authority.

Overall, the decision reinforces the primacy of statutory frameworks in tax matters and sets a high bar for establishing legitimate expectations in complex financial and administrative dealings.

Complex Concepts Simplified

Legitimate Expectation

Legitimate expectation is a principle in administrative law where an individual or entity can expect a certain outcome based on the representations or conduct of a public authority. To establish a legitimate expectation, three criteria must be met:

• Representation: The authority must have made a clear promise or representation.
• Reliance: The individual or entity must have acted upon that representation.
• Unfairness: It must be unjust to allow the authority to withdraw the expectation.

Shannon Certificate

The Shannon Certificate is a special tax designation issued to companies operating within Shannon Airport, County Clare. It allows eligible companies to benefit from a reduced corporation tax rate of 10% on specified trading activities, aimed at promoting economic development in the region.

Tax Briefing Issue 57 (TB57)

Tax Briefing Issue 57 (TB57) was a document issued by the Revenue Commissioners to provide guidance to taxpayers on the treatment of trading activities after the expiry of special tax regimes like the Shannon Certificate. It clarified that the determination of whether activities constitute trading would be based on an examination of the facts and relevant legal principles, without guaranteeing fixed tax treatments.

Conclusion

The High Court's judgment in Perrigo Pharma International DAC v. McNamara & Ors (2020) underscores the stringent application of the doctrine of legitimate expectation within the realm of tax administration. Perrigo's inability to demonstrate a clear, explicit representation by the Revenue that IP disposals would be treated as trading transactions led to the dismissal of its claims. This case reinforces the principle that in the absence of explicit assurances, taxpayers cannot presume favorable tax treatments based on past conduct or informal understandings. Additionally, it affirms the broad discretionary powers of tax authorities to reassess and reinterpret tax obligations, even in long-standing taxpayer relationships. For businesses operating within special tax regimes, this judgment highlights the imperative to seek formal confirmations and maintain comprehensive documentation to safeguard against unforeseen tax liabilities.