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Plastic packaging taxes around the globe

Today, plastics are ubiquitous and virtually irreplaceable. Plastic is cheap, strong, lightweight, hygienic, and resistant to corrosion. In modern society, plastic packaging serves several vital functions, such as food safety and chemical resistance.

However, plastic pollution is a monumental global issue, posing tremendous problems for ecology and human health. The biggest problem is single-use plastics, which often end up in landfills or the sea. Targeting single-use plastics with taxes is one of several steps governments are taking to steer nations towards more circular economies and tackle plastic waste and pollution issues.

As a provider of plastic pallets, we wholeheartedly support this move. Our business proposition is built on reusability, recycling and a circular economy. Unlike many plastics, none of our products end up in landfills or oceans.

We also support the idea of plastic taxes and other measures to drive down single-use plastics. Still, from a B2B perspective, we must determine whether current plastic taxes are adequately designed, targeted and enforced to achieve the intended impact.

In our recent blog, we discussed the plastic packaging tax in the UK and highlighted some of its flaws. This article explores further afield to see how other countries use tax incentives and disincentives to modify single-use plastic in B2B supply chains.

Tackling plastic pollution: the global drive for intervention

Before looking at some individual countries’ plastic packaging taxes, it’s helpful to understand how the movement to end plastic pollution is unfolding.

A historic step was taken in 2022 at the UN Environment Assembly in Nairobi, where its 175 member states endorsed a resolution to commence work on crafting a legally binding international agreement by the end of 2024 to tackle plastic waste and pollution.

The new Global Plastics Treaty aims to get countries working together to reduce plastic pollution and create standard rules for dealing with polluters. Crucially, the resolution addresses the entire life cycle of plastic and recognises the importance of a circular economy to ensure plastics are kept in use at their highest value for the longest time possible.

As part of its plastics strategy, the EU has several initiatives that aim to transform how products are designed, produced, used, and recycled. Key actions include:

  • Making recycling more profitable for businesses
  • Curbing plastic waste
  • Driving innovation and investment in the field

The EU is revising its regulations on packaging and packaging waste (PPWR) to align with its goal of creating a low-carbon circular economy. By 2030, all packaging will need to be designed to be recycled. The PPWR also proposes to increase the recycled content of plastic packaging.

Read more on the EU’s rules on packaging and packaging waste here.

What is the role of plastic packaging taxes?

Plastic taxes and tax incentives play a significant role in directing more environmentally sustainable behaviour throughout the supply chain but vary considerably and can be introduced at different stages of the packaging lifecycle. Examples include taxes on the use of virgin plastic materials, the production (or import) of single-use plastic packaging, or the generation of residual plastic waste.

Exemptions can include using virgin plastics for packaging in industries with strict hygiene requirements, like pharmaceuticals, for instance, or for the transportation of hazardous materials, which can ensure businesses aren’t unfairly penalised.

The objective is to protect the environment and address climate change. Such taxes should create a greater demand for recycled and reusable plastic material. Targeted taxes can ensure the businesses that wantonly contribute most to unrecyclable plastic packaging waste, start to account for it in their bottom line. Nothing is more effective in changing behaviour in business than tightening profit margins.

Plastic taxes – the EU approach

The EU introduced certain rules and targets that apply to specific areas, including single-use plastics, plastic packaging, and microplastics, to tackle plastic pollution. This is one of several tax reforms proposed as part of the EU Green Deal, which aims to make the EU climate-neutral by 2050.

On 1st January 2021, as part of the EU’s economic recovery package, it introduced a plastic levy as a new own resource (the EU’s own resources are the primary sources of revenue for the EU budget).

A national contribution from each Member State is based on the amount of non-recycled plastic packaging waste. It gets paid by the Member states from their national budget. The contribution of each Member State is calculated at a rate of EUR 0.80 per kilogram of non-recycled plastic packaging waste produced.

The measure reinforces the incentive for Member States to take action to reduce plastic waste. Member States are not required to introduce a tax, though some have, like Spain and Germany. Italy is also poised to do so.

Spain: From 1st January 2023, Spanish law enacted a special tax on non-reusable plastic packaging in Spain. The indirect tax is on the use (in Spain) of non-reusable packaging containing plastic, irrespective of whether it is empty or used to contain, protect, handle, distribute or display goods.

Spain’s Plastic Tax is levied when non-reusable plastic packaging is produced (or imported). There is no threshold of recycled content to determine the taxability of the product. It only applies to the packaging (not the goods within the packaging).

The tax rate is EUR 0.45 per kilogram. The Plastic Tax taxpayer is either the manufacturer, the importer into the EU, or the acquirer of the intra-EU acquisition of the packaging. Some products are exempt or zero-rated, such as the plastic packaging for pharmaceutical products.

Germany: From 1st January 2024, a single-use plastics levy came into effect in Germany, which will be payable for the first time in 2025. The measure aims to reduce waste, stimulate better use of plastic as a resource, and align with circular economy objectives. The levy covers consumer packaging items like food and drink containers and flexible material containing food, beverage cups, lightweight carrier bags, wet wipes, balloons, and tobacco products.

Within the legislation, according to tax specialists MHA, the definition for a ‘single-use plastic product’ is “a product made entirely or partly of plastic that is not designed, developed and placed on the market to undergo several product cycles during its lifetime by being returned to a manufacturer or distributor for refilling or reused for the same purpose for which it was manufactured”.

Italy: Italy has proposed a plastic tax but has postponed its introduction until 1st July 2024. According to KPMG, the plastic tax in Italy will apply to “the consumption of manufactured single-use items, which have or will have the function of containing, protecting, handling or delivering goods or food products”.

The levy will arise at “the time of production, definitive importation into the national territory or introduction into the same territory from other countries of the European Union and becomes payable when the items are released for consumption.”

KPMG’s guide, Plastic taxes – A European perspective, provides a more detailed discussion of the wave of plastic taxes in Europe.

Plastic taxes in the USA

The USA has moved forward significantly with its aim to protect the environment – it has made several great leaps in terms of environmental regulations in recent years, such as the Biden administration’s passing of the Inflation Reduction Act of 2022 and several new legislative measures being taken in the state of California to reduce emissions.

Plastic taxes are proving more problematic to pass, even though less than 10 per cent of plastic waste in the United States is recycled yearly. Two critical solutions have emerged to combat plastic pollution in the USA – these being:

  1. To encourage “advanced recycling,” a process that strips plastics down to their chemical form for reuse
  2. Limiting and reducing plastic consumption

Neither solution is gaining traction at the national level, though regulation involving both methods is increasingly taking shape at State and local levels.

That said, a whopping $85 million donation towards preventing plastic pollution by Bloomberg Philanthropies, following their ‘Beyond Petrochemical’ campaign, is steering the narrative towards a more circular economy.

And in September last year, Democrats re-introduced a bill to tax ‘virgin plastic’ packaging sales, including imports. Sen. Shelden Whitehouse (D-OH), who sits on the Senate Finance and Environment and Public Works committees, recognises that the nation is living with a flood of plastic pollution.

Exports and recycled plastic resin would be exempt, and there are carveouts for virgin plastics used to make medical products and packaging, personal hygiene products and for use in the shipment of hazardous materials.

Plastic tax in the UK

Our previous blog post explores this topic more deeply, including how the Plastic Packaging Tax impacts the supply chain.

Here’s a recap on the tax and how it works. The UK’s Plastic Packaging Tax (PPT) was introduced in the UK on 1st April 2022. It applies when a chargeable plastic packaging component is produced in the UK or imported into the UK. A plastic packaging component is chargeable if the proportion of recyclable plastic is less than 30% of the total.

The liable party is the producer or the person on whose behalf the plastic packaging component is imported into the UK. For UK manufacturers, the one hit by the tax is the one that completes the ‘last substantial modification’ to the plastic packaging component. The current charge is £210.82 per tonne, rising to £217.85 from 1st April 2024.

Why use

We can help you hit your sustainability brief – we are leading the way in recycling plastic pallets and boxes in the UK. Read more about the lifecycle of our plastic pallets here.

Our customers purchasing products with less than 30% recycled material can be assured that we take care of all the necessary administration and declarations to make quarterly payments to HMRC – essentially making the products “PPT Tax Paid”, so you don’t have to worry.

We stock more than 160 different plastic pallets to fit any application – as well as nestable plastic pallets and hygienic plastic pallets.

To find out more about our plastic pallets, contact our expert team. Watch this space for more news on PPT – we’ll continue to campaign for fairness and update you. Keeping plastic in the economy rather than throwing it out is where the focus needs to be.