How the new plastic packaging tax could impact business

All tax is polit­i­cal, espe­cial­ly a new tax. It tends to cre­ate win­ners and losers, at home, in busi­ness and on polling day. So, with less than a year to go before the plas­tic pack­ag­ing tax (PPT) comes into force in the UK, the mood in this mar­ket mat­ters – and it is mixed.

From April 2022, a new £200-per-tonne tax will apply to plas­tic pack­ag­ing con­tain­ing less than 30% recy­cled con­tent. The gov­ern­ment esti­mates that this will affect up to 20,000 pack­ag­ing pro­duc­ers and importers. HMRC will spend £6.6m on devel­op­ing a new com­put­er sys­tem to man­age the tax, plus £11.3m more on staffing.

Cost and consequence

The bureau­crat­ic bur­den of the PPT could prove dis­pro­por­tion­ate­ly heavy for small­er firms and have unin­tend­ed ram­i­fi­ca­tions, pre­dicts Pro­fes­sor Robert Hold­way, a design expert at Brunel Uni­ver­si­ty Lon­don and direc­tor of envi­ron­men­tal con­sul­tan­cy Giraffe Inno­va­tion.

“The argu­ment is that this tax will increase demand for recy­cled plas­tics and stim­u­late the mar­ket. But it’s like­ly to dri­ve up their price in the short to medi­um term. It could also dis­rupt well-estab­lished sys­tems,” he warns. “If the oil price remains low, that makes using vir­gin mate­r­i­al more attrac­tive.”

An oppos­ing view, from the end-of-life per­spec­tive, is that the tax will encour­age inno­va­tion. Roger Wright, waste strat­e­gy and pack­ag­ing man­ag­er at Bif­fa, says: “Intro­duc­ing a tax to increase recy­cled con­tent will have the desired effect. A grow­ing num­ber of busi­ness­es are approach­ing us for advice. We expect most to try using at least 30% recy­cled con­tent and we’ve seen many do so already, although there may be issues for man­u­fac­tur­ers of soft and flex­i­ble food pack­ag­ing to solve.”

While the tax could add impe­tus to the dri­ve for greater sus­tain­abil­i­ty in pack­ag­ing, the indus­try is already inno­vat­ing more than ever, sug­gests Susan Hansen, glob­al strate­gist for food and agribusi­ness sup­ply chains at Rabobank. 

Hansen argues that there are rea­sons why progress can­not be rushed. “The tax assumes that there will be enough recy­cled con­tent avail­able for all types of plas­tic pack­ag­ing mate­ri­als. This isn’t the case. It also antic­i­pates that pro­duc­ers can swap recy­cled mate­r­i­al for vir­gin mate­r­i­al in an instant. That’s not the case either,” she says.

Changing behaviour or raising revenue?

The task of reduc­ing the nation’s depen­dence on plas­tic pack­ag­ing as a whole will, arguably, be made tougher by a tax pol­i­cy that fails to dis­tin­guish between plas­tics that are rel­a­tive­ly easy to recy­cle and those that are more trou­ble­some. Tax is a noto­ri­ous­ly blunt instru­ment in any case, but the prob­lem that some peo­ple have with the PPT is that it will be plain indis­crim­i­nate.

San­ti­a­go Navar­ro, CEO of Garçon Wines, not only thinks that pack­ag­ing is being sin­gled out unfair­ly; he also believes that lump­ing high­ly recy­clable plas­tics such as PET in with prob­lem mate­ri­als such as poly­styrene is too sim­plis­tic.

“Group­ing all poly­mers under the blan­ket term ‘plas­tics’ is like call­ing all vehi­cles ‘cars’ or set­ting income tax at the same lev­el for every­one,” he argues. “Not all plas­tics are cre­at­ed equal and not all have the same end-of-life per­for­mance when recy­cling for cir­cu­lar econ­o­my.”

A pio­neer of the sus­tain­able let­ter­box-friend­ly flat plas­tic wine bot­tle, Garçon Wines already uses 100% recy­cled mate­r­i­al. Nonethe­less, Navar­ro ques­tions the maths under­ly­ing the tax.

“A tax of £200 per tonne on pack­ag­ing that’s usu­al­ly very light is also quite light­weight when it comes to its finan­cial impact. If the aver­age plas­tic pack­ag­ing prod­uct weighs 50g, a pen­ny of tax would be charge­able on that unit,” he says.

It’s worth remem­ber­ing that the pur­pose of tax­a­tion is not only to change behav­iour, but also to gen­er­ate rev­enue. The UK’s record in this respect looks poor. The gov­ern­ment raised just under £41bn via so-called green tax­es in 2020. Accord­ing to law firm Pin­sent Masons, this sum rep­re­sents only 6% of the £633bn raised through tax­a­tion over­all – down from 8% a decade ago.

Jason Collins, part­ner and head of lit­i­ga­tion, reg­u­la­to­ry and tax at Pin­sent Masons, expects to see “a cer­tain amount of ‘avoid­ance’ of the PPT – which is actu­al­ly a good thing. The 2018 levy on sug­ar in soft drinks demon­strates some­thing like a best-case sce­nario here: many drinks man­u­fac­tur­ers avoid­ed pay­ing that by reduc­ing pack sizes and sug­ar con­tent. That’s the sort of behav­iour­al change the gov­ern­ment would like to see.”

A drop in a polluted ocean

Many envi­ron­men­tal­ists are less con­vinced that the PPT will have the desired effects. A 2018 cam­paign run by the City to Sea group called for a tax on all sin­gle-use plas­tic items, with the rev­enue ring-fenced for ini­tia­tives to tack­le pol­lu­tion and boost the cir­cu­lar econ­o­my. Near­ly 250,000 peo­ple signed its peti­tion to the gov­ern­ment.

While she acknowl­edges that PPT is a pos­i­tive step, City to Sea’s founder and CEO, Natal­ie Fée, believes that it doesn’t go any­where near far enough. 

“This is anoth­er exam­ple of a pol­i­cy aimed at the wrong end of the waste hier­ar­chy. It focus­es on resource effi­cien­cy and recy­cling rates when we des­per­ate­ly need the gov­ern­ment to take action on reduc­ing the amount of plas­tic pro­duced,” she says. “Until it does, this is just anoth­er drop in a very plas­tic-pol­lut­ed ocean.”