George Bull

Written by: George Bull

George Bull

Consultant

Will the UK Government’s new tax on plastic packaging make a difference?

Whether through episodes of The Blue Planet or the charge for plastic bags in shops, most people are familiar with the risk that the breakdown of plastic waste introduces: residues into the food chain, damaging the health of marine life and, ultimately perhaps, people too.

We each respond in our own way. For some people, it’s a case of “out of sight, out of mind” until a reminder comes along in the form of the recent announcement that the fee for single-use bags in England will rise to 10p and will be extended to all shops from April 2021.

Meanwhile others who meticulously sort their rubbish to ensure that plastics are sent for recycling worry that carefully segregated waste may end up being dumped in south-east Asian oceans.

Will the UK government’s new tax on plastic packaging make a difference? The intention of the new tax is to provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging. This in turn will create greater demand for recycled material, so stimulating increased levels of recycling and collection of plastic waste, thereby diverting it away from landfill or incineration.

Nobody can accuse the Government of indecent haste. At Budget 2018, following a public outcry over plastic waste, the Chancellor announced that plastic packaging with less than 30 per cent recycled plastic would be subject to a new tax from April 2022. Since the initial announcement, two separate consultations have taken place, the first from February-May 2019 and the second from March-August 2020. Later this year the results of the second consultation will be published along with draft legislation.

While we wait for the final details of the new tax, three things are clear. First, it will be levied at a fixed rate – probably £200 per tonne. Second, there will be an exemption for businesses manufacturing less than 10 tonnes per year. Third, while the tax will apply to plastic packaging imported to the UK, it will not apply to packaging manufactured in the UK for export. Environmental groups will regard that as a missed opportunity.

Some people have questioned whether the new plastic packaging tax is just another stealth tax. With a maximum projected yield of £240 million per year, and considerable administration costs both for HMRC and for businesses, this doesn’t look like a money-winner for the Exchequer. It does therefore genuinely seem to be driven by public concern about the environment.

The strength of that public concern will be tested when the new tax comes into force. Recent examples from Amazon and Google, which have passed the digital services tax on to their customers, suggest that the plastic packaging tax will also find its way through to consumers in the form of increased shelf prices.

It’s therefore in the interests of everybody, and especially the environment, that the tax is effective in boosting recycling and collection of plastic waste. Once plastic packaging contains 30% or more of recycled plastic, the tax will not be payable. However, businesses will find themselves left with the administrative costs of providing HMRC with evidence of compliance.

Whether through episodes of Blue Planet or the charge for plastic bags in shops, most people are familiar with the risk that the breakdown of plastic waste introduces: residues into the food chain, damaging the health of marine life and, ultimately perhaps, people too.

We each respond in our own way. For some people, it’s a case of “out of sight, out of mind” until a reminder comes along in the form of the recent announcement that the fee for single-use bags in England will rise to 10p and will be extended to all shops from April 2021.

Meanwhile others who meticulously sort their rubbish to ensure that plastics are sent for recycling worry that carefully segregated waste may end up being dumped in south-east Asian oceans.

Will the UK government’s new tax on plastic packaging make a difference? The intention of the new tax is to provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging. This in turn will create greater demand for recycled material, so stimulating increased levels of recycling and collection of plastic waste, thereby diverting it away from landfill or incineration.

Nobody can accuse the Government of indecent haste. At Budget 2018, following a public outcry over plastic waste, the Chancellor announced that plastic packaging with less than 30 per cent recycled plastic would be subject to a new tax from April 2022. Since the initial announcement, two separate consultations have taken place, the first from February-May 2019 and the second from March-August 2020. Later this year the results of the second consultation will be published along with draft legislation.

While we wait for the final details of the new tax, three things are clear. First, it will be levied at a fixed rate – probably £200 per tonne. Second, there will be an exemption for businesses manufacturing less than 10 tonnes per year. Third, while the tax will apply to plastic packaging imported to the UK, it will not apply to packaging manufactured in the UK for export. Environmental groups will regard that as a missed opportunity.

Some people have questioned whether the new plastic packaging tax is just another stealth tax. With a maximum projected yield of £240 million per year, and considerable administration costs both for HMRC and for businesses, this doesn’t look like a money-winner for the Exchequer. It does therefore genuinely seem to be driven by public concern about the environment.

The strength of that public concern will be tested when the new tax comes into force. Recent examples from Amazon and Google, which have passed the digital services tax on to their customers, suggest that the plastic packaging tax will also find its way through to consumers in the form of increased shelf prices.

It’s therefore in the interests of everybody, and especially the environment, that the tax is effective in boosting recycling and collection of plastic waste. Once plastic packaging contains 30% or more of recycled plastic, the tax will not be payable. However, businesses will find themselves left with the administrative costs of providing HMRC with evidence of compliance.

 
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