Plastic tax – be prepared for change

Belgian chemist Leo Baekeland pioneered the first fully synthetic plastic in 1907. He beat his Scottish rival, James Swinburne, to the patent office by one day. His invention, which he would christen Bakelite, combined two chemicals,
formaldehyde and phenol, under heat and pressure.

Bakelite sparked a consumer boom in affordable yet highly desirable products. It had a dark brown, wood-like appearance but could be easily mass-produced, making it ideal for bringing new design trends such as Art Deco to the masses.

In the early decades of the 20th century, the petroleum and chemical industries began to form alliances with companies like Dow Chemicals, ExxonMobil, DuPont and BASF, which are still the primary producers of raw material resins for the plastics industry.

Single-use plastic laws around the globe

The ‘Drowning in Plastics’ report released by the United Nations in 2021 estimates that 9.2 billion tons of plastic have been made between 1950 and 2017, with more than half of them produced since 2004. If these trends continue, by 2050, annual global plastic production might reach over 1,100 million tons.

Globally, packaging is the largest source of plastic waste – and by some margin. In 2015, 141 million tons of plastic packaging waste was generated, compared to 42 million tons of plastic textile waste –the next largest sector.

Governments around the globe have been implementing long lists of legislation to slow the demand and lower single-use plastic production and consumption. Throughout the EU, the big themes surrounding much of the packaging legislation, include eco-modulation, heavy regulations on single-use plastics, requirements of post-consumer recycled content (PCR), labeling, recyclability package design and plastic taxes.

Some countries can recycle most of their plastic waste. Up to 56 percent is recycled in Germany, closely followed by Austria, South Korea and Wales. But the global picture is quite different – 15 percent of plastics go to recycling, but 40 percent of this waste is rejected for contamination or other issues, meaning only 9 percent of plastic waste is recycled. By contrast, metals can have an up to 100 percent recycling rate.

Australia is phasing out single-use plastic in different states and territories over the coming years. In November 2022, its most populous state, New South Wales, banned a range of single-use plastic, including straws, cutlery and bowls. Polystyrene foam food containers are also banned under the new rules, along with some face, body and hair products that contain plastic microbeads. Businesses that breach the regulations could face fines of tens of thousands of dollars.

The United States still lacks country-wide bans or taxes on plastic bags, although some states have implemented such laws. California, Connecticut, Delaware, Hawaii, Maine, New Jersey, New York, Oregon, Vermont and Washington have imposed bans on disposable plastic bags.

China is another developing country that has outlawed certain types of plastic packaging. India has also passed new tax laws facilitating a plastic ban, but its implementation was paused due to the pandemic.

Plastic Packaging Tax in the UK The UK introduced Plastic Packaging Tax (PPT) in April 2022. Businesses  manufacturing or importing 10 tons or more a year of plastic packaging that contains less than 30 percent recycled plastic will be taxed at 200 GBP a ton. Plastic packaging
containing at least 30 percent recycled material is exempt from the tax.

An estimated 20,000 businesses in the UK are affected across a broad range of sectors. Companies that fall within the regime must submit quarterly returns to HMRC detailing the weight of plastic packaging components imported or manufactured in the country.

One of the leading packaging data services providers, Ecoveritas, has noted the increase in registrations for the Treasury’s flagship Plastic Packaging Tax (PPT). As of September 26, over 2,600 businesses across the UK successfully submitted their Q1 returns on time. The first quarter of the tax raised around 58 million GBP and went some way towards alleviating fears that PPT might not raise the 235 million GBP projected for year one.

‘It’s pleasing to see the number of registrations jump, but for a measure that would supposedly affect up to 20,000 businesses, there is still work to be done,’ says Kathy Illingworth, head of sustainability consulting at Ecoveritas. ‘HMRC will surely be keen to rachet up the pressure after some of the abysmal headlines and come down hard with penalties for late or non-filed returns. Businesses should partner with a packaging data specialist that can consistently deliver a highly efficient and transparent service without the need to scale up to meet the requirements.’

According to Illingworth, there are specific steps that businesses need to take to prepare for the tax, such as checking existing records, ensuring they can accurately verify the source and composting of the plastic packaging, removing unnecessary packaging and increasing recycled content.

‘You may be charged significant penalties if you do not submit your return or pay the tax in time, and you’ll also be charged interest on late payments. Late payment interest is applied from the date the tax was due until it’s paid,’ adds Illingworth.

Ecoveritas recently launched a data collection vehicle (DCV) to support UK businesses through the first reporting year. The tool captures data and enables manufacturers, retailers, and brands to collate it efficiently to calculate tax liability accurately.

‘Our DCV is free to use and enables companies to map the data they currently have onto the tool,’ notes Illingworth. ‘It provides a great framework for collating the data metrics required while highlighting missing data, allowing businesses to adjust their data ahead of submission.’

Sandy Dhesi, commercial manager at Ecoveritas, adds: ‘There is a wealth of help out there for companies which wish to understand what PPT is, whom it applies to, and so on. However, very little is out there to help capture the required data. We understand that quality granular data is going to prove pivotal under the new legislation, but as many companies are already feeling the pressure of PPT liability, we wanted to make robust data capture as accessible as possible. This is why our DCV tool is completely free.’

The data collection vehicle allows manufacturers, retailers and brands to collate this data efficiently to calculate their tax liability accurately. It is the latest in a suite of tools from Ecoveritas designed to help businesses manage the introduction of PPT and broader Extended Producer Responsibility (EPR) laws, alongside their PPT calculator and their global EPR matrix.

‘The new legislation is already bringing significant cost impacts, so it is paramount that businesses avoid incurring unnecessary additional costs due to non-existent or insufficient data. As a packaging data specialist who supports businesses in packaging data collection, analysis, and calculation for extended producer responsibility regulations, we understand that data quality will prove pivotal for manufacturers and importers,’ says Dhesi. ‘That’s
why, as a next step forward from our plastic tax calculator, we have designed this data collection template to help businesses get started with their data collection journey.’

From data that is required from internal sources or the supply chain, the DCV tool is separated into primary, secondary, and tertiary packaging to make data collection easier.

Eco view on your packaging

Another tool available from Ecoveritas, Ecoview, is a versatile digital platform, making transparency and compliance much simpler. The system is designed to simplify technical and sustainable packaging management and more value-adding for brands, retailers and their supply chains. It brings online analysis, audit and reporting technologies together in one place – with an intuitive user dashboard that ensures every business has access to packaging data at every level, from the top line to granular.

‘At any point in time, users can view a high-level snapshot of their packaging products, enabling them to interrogate their data, see gaps and opportunities for improvement in their packaging operations, and benchmark progress to meet KPIs,’ says Josh Remi, commercial manager at Ecoveritas. ‘Users can really drill down into everything from the packaging by polymer type, the volume of recycled content by supplier and recyclability of materials, to plastic packaging tonnage by department and information about OPRL certification. It also provides information relating to branded and own-brand products.’

Moreover, users can see their projected Plastic Tax costs from April 2022 and efficiently identify, at the click of a button, where action can be taken to reduce their bill by both supplier and product.

‘The platform has been developed with users front of mind,’ says Remi. ‘In creating it, we have really focused on making life easier for brands and retailers as they try to navigate the increasingly important area of packaging compliance.’

Collecting, collating, and submitting data to ensure your business  complies with a myriad of packaging waste regulations can be a daunting and complex task. From assessing your business activities and packaging flows and identifying what packaging is obligated to collecting and sorting relevant packaging data, completing your data form, and providing a methodology statement for use at audits, the work is unrelenting.