Is Subway’s Bread Actually Bread?

By: Bradley Harrah

On September 29, 2020, the Ireland Supreme Court published a judgment ruling that the bread served at Subway could not in fact be defined as bread because of its high sugar content.[1] The case, Bookfinders Ltd v. The Revenue Commissioners, arose because of the Irish Revenue Commissioners’ decision to deny a refund for Value Added Tax (VAT) payments sought by Bookfinders.[2]

Bookfinders is a franchisee of the fast-food chain, Subway.[3] The Supreme Court of Ireland was the fourth appellate body to decide the case.[4] Bookfinders had its claim denied by the Appeal Commissioner, the High Court, and the Revenue Commissioners.[5] Upon appeal at the High Court level, the judge found against Bookfinders on all grounds.[6]

VAT is a consumption tax chargeable on the supply of goods and services effected within the State for consideration by a taxable person in the course or furtherance of any business.[7] Ireland adopted VAT in 1971 in preparation of joining the European Economic Community.[8] Under the EU legal framework, Member States can apply a minimum tax rate of 15% to most supplies of goods and services.[9] Under Irish Law, the general rate of VAT is 21%.[10] However, exceptions are provided for certain goods and services to be charged at 13.5% and 0%.[11] The Irish VAT law attempts to “distinguish between food and drink items which can be described as staples, and therefore appropriate for the 0% rate, and those which are more discretionary indulgences.”[12] The law follows this purpose of distinguishing staple foods from confectionary goods by containing a complicated definition of the term bread.[13] Included in this definition, the law clarifies that the weight of sugar within the bread “shall not exceed 2 per cent of the weight of flour included in the dough.”[14] There was not a dispute as to whether the bread supplied by Subway has a sugar content exceeding 2%;[15] instead, Bookfinders attempted to argue that the requirement should be read to “exclude[] a baked product which exceeds the limitation contained in the Act for each of the ingredients specified and which are used in the baking of the particular bread.”[16] While the court acknowledged that the legislation could have been written more precisely, it ultimately rejected this argument, stating instead that when reading the entire provision together, it was clear “that if one ingredient exceeds the limitation, the resulting product falls outside the definition of ‘bread’ for the purposes of the Act.”[17]

While the practical implications of this decision are relatively small — Subway franchises will not be able to receive an exception for the bread it uses in its sandwiches under Irish law — the social implications are more uncertain. Subway released a statement disagreeing with the Court’s characterization, stating that “Subway’s bread is, of course, bread” and that “[w]e have been baking fresh bread in our restaurants for more than three decades and our guests return each day for sandwiches made on bread that smells as good as it tastes.”[18] However, consumers may become skeptical of Subway’s ingredients following this decision. In fact, this is not the first time its bread has come under controversy. In 2014, Subway removed the flour whitening agent azodicarbonamide from its baked goods.[19] This ingredient is commonly used in the manufacture of yoga mats and carpet underlay and is banned by the European Union from use in food products.[20] Although Subway has appeared unwilling to change the sugar content in its bread, it remains to be seen whether public criticism stemming from this decision will force the fast food chain to revisit its ingredients, especially for its international franchisees.

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[1] Sam Jones & Hellen Sullivan, Subway Bread Is not Bread, Irish Court Rules, Guardian (Oct. 1, 2020, 12:33), https://www.theguardian.com/world/2020/oct/01/irish-court-rules-subway-bread-is-not-bread.

[2] Bookfinders Ltd. v. Revenue Commissioners [2020] IESC 60, ¶ 1.

[3] Id. ¶ 6.

[4] Id. ¶ 7.

[5] Id.

[6] Id. ¶ 20.

[7] Geraldine Davila Gonzalez, Irish Supreme Court Rules Subway Serves Freshly Baked Cake, Libr. Cong. (Dec. 1, 2020), https://blogs.loc.gov/law/2020/12/irish-supreme-court-rules-subway-serves-freshly-baked-cake/#:~:text=On%20September%2029%2C%202020%2C%20in,fat%20in%20the%20ingredients%20and.

[8] The EU and VAT, European Comm’n, https://ec.europa.eu/ireland/news/key-eu-policy-areas/eu-and-vat_en#:~:text=Ireland's%20standard%20VAT%20rate%20is,supplies%20of%20goods%20and%20services (last visited Feb. 8, 2021).

[9] Id.

[10] See Bookfinders, ¶ 2.

[11] Id.

[12] Id. ¶ 67. See also Sam Jones & Helen Sullivan, supra note 1.

[13] Bookfinders, ¶ 90.

[14] Id. ¶ 91.

[15] See id. ¶ 92 (“In this case, there is no dispute that the bread supplied by Subway in its heated sandwiches has a sugar content of 10% of the weight of the flour included in the dough. . . .”).

[16] Id.

[17] Id. 95.

[18] Subway Bread Isn’t Bread, Irish Court Says, AP News (Oct. 1, 2020), https://apnews.com/article/ireland-archive-courts-63bc4788c0912d9546218f0f08239f03.

[19] Sam Jones & Helen Sullivan, supra note 1.

[20] Id.