Plastic Packaging Tax

What is a Tax?

There are certain ways tax is defined in various resources, some of which are listed below:

• Investopedia: Taxes are mandatory contributions levied on individuals or corporations by a government entity—whether local, regional or national. Tax revenues finance government activities, including such public works and services as roads and schools, or programs like Social Security and Medicare [1]
• Britannica: Taxation, imposition of compulsory levies on individuals or entities by governments. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well [2]
• Cleartax: Taxation is the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. From income tax to goods and services tax (GST), taxation applies to all levels [3]
• Merriam-Webster Dictionary: A charge usually of money imposed by authority on persons or property for public purposes [4]
• Collins Dictionary: Tax is an amount of money that you have to pay to the government so that it can pay for public services [5]
• Cambridge Dictionary: Money paid to the government that is based on your income or the cost of goods or services you have bought [6]
• Ministry of Statistics and Programme Implementation, GOI: A tax may be defined as a “pecuniary burden laid upon individuals or property owners to support the government; a payment exacted by legislative authority [7]

Some Major Benefits of Taxes

• Development of amenities such as parks, hospitals, subsidies, and schools
• Improve the standard of living of people

Plastic Packaging Waste – UK

• 2016: Annual plastic packaging waste per head accounted for 34.5 kg
• About 70% of the plastic waste generated is plastic packaging waste
• Flexible plastic waste is about 25% of the total consumer packaging waste; however, only 4% of it is recycled

Plastic Packaging Tax – UK

• From 1st of April 2022, the UK Government will be introducing a new Tax termed as ‘Plastic Packaging Tax’ (hereafter referred as PPT) with the expectation to decrease the usage of plastic packaging and boost utilization of recycled plastic
• As per the terms, PPT will be applicable on plastic packaging materials manufactured in UK, and also on those plastic packaging products imported to UK from other countries; wherein, usage of recycled plastic is less than 30%
• The tax amount will be £200 (INR 20,555) per metric tonne (1000 kg) of plastic packaging material
• Laid out by: Chancellor Rishi Sunak in his March 2020 budget
• Expected tax collection: £670m from 2022 to 2026
• PPT is additional to the Packaging Recovery Note (PRN) System.
• Can affect about 20,000 manufacturers and importers of plastic packaging materials
• It’s a milestone for boosting circular economy

Inclusions in the PPT

• In addition to the plastic materials made from conventional plastics, even those manufactured from biodegradable, compostable and oxo-degradable plastics will also be taxed in the PPT
• As per the PPT terms, a packaging material can be used alone or in combination with other materials, for the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the user or consumer
• If a package is manufactured using multiple materials but has higher content of plastic component by weight, then as per PPT terms it will be considered as plastic packaging material and taxed accordingly
• PPT has also precisely distinguished between recycled plastic, recovered plastic, pre-consumer plastic and post-consumer plastic, which can also be a part of the finished plastic packaging material
  • Recycled Plastic: Plastic reprocessed from the recovered material using either a chemical or manufacturing process
  • Recovered Plastic: Cab be a pre-consumer or post-consumer plastic which was collected and recovered which would otherwise have been disposed off as waste or used for energy recovery
  • Pre-consumer Plastic: Plastic recovered from waste generated in a manufacturing process
  • Post-consumer Plastic: Plastic that is generated by householders or industrial or institutional facilities

Exclusions from the PPT

• Plastic packaging material used for packaging of medicinal product
• Plastic packaging material used during transportation of imported goods
• Plastic packaging material used as aircraft, ship and rail applications
• Plastic material not used as packaging material

Other Terms of PPT

• All the plastic packaging manufacturers need to be registered whether they form a part  of the inclusion or exclusion groups mentioned above
• However, all those plastic packaging manufacturers needs to be compulsorily registered with the government of UK under PTT if they have manufacturing or import quantification of more than 10 tonnes over a period of 12 months
• All businesses that manufacture or import plastic packaging material must keep following records:
  • Total amount of plastic packaging material manufactured or imported
  • Composition breakdown of the plastic packaging material
  • Amount of recycled plastic added
  • Quantity of plastic packaging material exported
• Penalties: Penalties have been levied by the government of UK in case of:
  • Failure to register their organization with PTT as per above inclusion / exclusion terms
  • Failure or delay in filing returns or pay the tax
  • Penalty amounts:
    • Fixed penalty: £500
    • Daily penalty (from the date of non-compliance): £40

Impact – Short Term

• Increase in packaging product price, which will cascade to other related costs
• Businesses will search for suitable replacements that do not jeopardise the integrity of products within
• Implementation of this law will lead to additional cost involvement such as staff training, creation of reporting framework for complete tax returns, and even record keeping
• Waste reprocessing capacity would increase appreciably to meet the demand requirement
• As per some unofficial sources, food product prices can increase by as much as 10–20%

Impact – Long Term

• Landmark decision which would increase investment into plastic recycling
• With increase in sales in production, cost of recycled plastics will decrease for manufacturers/industries

Other Countries

ITALY:

• Officially confirmed €450/tonne PPT but delayed until January 2022
• Had been postponed several times previously
• PTT payable for only packaging producers, while those dealing with recycled plastics and compostable biodegradable plastics are exempted

SPAIN:

• Officially confirmed €450/tonne PPT but faced delay as a new draft is sent through parliament for debate
• May not come into effect until early 2022, as pr unofficial reports
• Widely expected to implement from the end of June or early July 2021

Questions

• Will other countries follow suit in future? What about India?
• Will there be any effect on the properties of the final product due to addition of recycled polymer? Are there any specific packaging applications; wherein, this would be better not implemented?
• What other areas can this be implemented, other than plastic packaging?
• Will this strategy really benefit to developing countries?
• Will this tax increase in future?
• How to ensure recycled plastic is really added and is not a documentation gimmick?

Dear Readers, do go through the above literature and let me know your viewpoints in the Comments section.

Thanks for reading!

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References

1. https://www.investopedia.com/terms/t/taxes.asp
2. https://www.britannica.com/topic/taxation
3. https://cleartax.in/g/terms/taxation
4. https://www.merriam-webster.com/dictionary/tax
5. https://www.collinsdictionary.com/dictionary/english/tax
6. https://dictionary.cambridge.org/dictionary/english/tax
7. http://www.mospi.nic.in/
8. https://www.jagranjosh.com/general-knowledge/history-of-taxation-in-india-1481028305-1
9. https://www.myloancare.in/tax/
10. https://www.gov.uk/government/publications/get-your-business-ready-for-the-plastic-packaging-tax/further-information-for-businesses
11. https://www.lexology.com/library/detail.aspx?g=78674720-68c7-400d-ac93-78a288c98653
12. https://www.jdsupra.com/legalnews/uk-plastic-packaging-tax-a-new-measure-9700486/
13. https://www.icis.com/explore/resources/news/2021/05/24/10643562/italy-delays-plastic-packaging-tax-to-january-2022
14. https://www.ragus.co.uk/new-plastic-packaging-tax-uk/
15. https://app.croneri.co.uk/feature-articles/impact-new-plastic-packaging-tax
16. https://wrap.org.uk/taking-action/plastic-packaging#