ICAEW concerned by burden of plastic packaging tax

The ICAEW has raised concerns that compliance costs often exceed the tax liability of plastic packaging, in response to HMRC’s consultation on plastic packaging tax. 

This comes after the institute welcomed HMRC’s recent consultation, which sought to consider whether a “mass balance approach” would allow more chemically recycled plastic to be used in plastic packaging, such that it qualifies for relief from plastic packaging tax (PPT).

Chemical recycling has an important role to play in ensuring enough plastic is recycled for use in plastic packaging in the UK. 

However, ICAEW’s tax faculty felt unable to comment on the details of the consultation, which focused on the technical detail of chemical recycling rather than the tax itself.  

The faculty noted instead that taxes should be easy to collect and to calculate. Members already report that PPT is difficult to comply with, having noticed that compliance costs often exceed the cost of the tax liability. 

The response, therefore, questioned whether it would be appropriate to require businesses using a mass balance approach to suffer the cost of being independently certified. 

The aim of PPT is to “provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging”. ICAEW noted that a situation in which businesses cannot afford to demonstrate that they are not chargeable to the tax would be a policy failure. 

According to the institute, it supports the policy objective of reducing the use of plastic and encouraging plastic recycling, but is only questioning whether PPT in general – and this latest approach in particular – are appropriate policy tools to achieve that. 

Finally, the response noted that HMRC is already overstretched and not managing the tax system effectively, saying that “making an already complicated tax more complex would only exacerbate this problem”.