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Taxing Matter of Recycled Plastic

Viewpoint / Taxing Plastic

Manufacturers likely to be taxed if PCR is less than 30%. Experts disagreed with exclusion of filled imports. Need to bridge gap between recycled and virgin costs. Demand may exceed ability to supply.

In this world, nothing can be said to be certain, except death and taxes, in the words of Benjamin Franklin. And, by 2022, taxation is a certainty for manufacturers of plastic packaging which uses insufficient Post-Consumer Recycled (PCR) content.

The new tax on the production and import of plastic packaging with less than 30% recycled content, subject to consultation, was announced in 2018. The government’s aims are to:

  • Provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging.
  • Create a greater demand for recycled material.
  • Stimulate increased levels of recycling and collection of plastic waste.
  • Divert plastic waste away from landfill or incineration.

Earlier this year, HM Treasury launched a consultation seeking views on the initial proposed design for the tax, and this closed in May. During the consultation period, the government engaged directly with over 200 organisations, including manufacturers, retailers, environmental charities, and other experts.  

The majority of respondents supported the government’s approach of setting a flat rate per tonne of a plastic packaging product.

However, the majority disagreed with the government’s proposal – now being reconsidered – not to include filled plastic packaging imports in scope of the tax. The main concerns were:

  • The potential negative impact on the competitiveness of UK manufacturing. 
  • Businesses may be encouraged to fill plastic packaging overseas in order to avoid the tax. 

Just under half of respondents also disagreed with a single 30% recycled content threshold. 

Assuming the tax cost is transferred to households by packaging producers and retailers, the average impact of plastic packaging tax would be in the range of 7p per week per household, according to a study from Imperial College London.

However, the study also notes the recycling road can be bumpy. For example, it reveals that several recycling companies have already collapsed after being squeezed between a slump in global oil prices and a supermarket price war. This led to the price of reprocessed plastic in the open market being between £300 and £500 per tonne more expensive than virgin plastic.

The government, therefore, also has to meet the challenge of setting the correct tax level to make costs to industry similar between using 100% virgin plastic packaging and having a minimum 30% recycled plastic.

The Imperial College study suggests around £150 per tonne would be the correct incentive for packaging producers to use recycled content.

As stated above, the government aims to stimulate increased levels of recycling and collection of plastic waste. However, as things stand, there is great concern that there is not enough recycled plastic available to meet the targeted amounts and that the proceeds of the tax will not be used to help develop new badly needed recycling infrastructure in the UK.

Therefore, manufacturers could find themselves being taxed despite using their best efforts to be compliant. And, until supply catches up with demand, that may become the Catch 22 of the forthcoming plastic tax.

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