In this way, Spain has become the only European country that will apply a tax on non-recycled plastic. The companies affected also do not know with any certainty and accuracy the documentation they will be required to have.
This circumstance occurs in a complicated economic situation, in which the fight against inflation has become a priority for governments. Furthermore, it means a new storm cloud affecting the price of the shopping basket which, although it has seen a drop in VAT, will now have to bear this new tax. All of this in an average 15.7% inflationary setting for foodstuffs, which reaches over 20% in some Autonomous Communities, such as the case of Extremadura.
The new step on non-reusable plastic containers affects all the links in the agrifood industry, with a tax rate of 0.45 euros for every kilogram of material acquired.
What is the EU’s tax on plastic containers?
- The application of a new “tax on plastics” for non-recycled plastics.
- Integration with existing politics or taxes.
- A system of additional rates that would be added to the existing steps (such as the CO2 tax, the extended producer responsibility (EPR), the system of deposit, return and refund and other rates/taxes related to containers).
- Other taxation steps such as the reduction of subsidies or exemption to taxes and rates used in the country in question.
The calculation of the rate will use the data taken from the companies that use plastic containers and trade with them in Europe and, if the States decide to apply a tax, it will also have a direct cost for these same companies.
Why has the EU adopted the tax on plastic containers?
In 2020, the EU revealed a recovery plan that intends to help Europe “to rebuild itself” after the Covid-19 pandemic, with measures to fight against climate change and to support the circular economy. This tax forms part of these steps and it is aimed at reducing waste of this type. The revenue generated by this tax will be sent to the EU’s Covid-19 recovery fund, which will support the companies most affected by the coronavirus pandemic throughout Europe. The plan is expected to collect 750,000 million euros, of which around 8,000 million will come from the tax on plastic containers.
What are the possible repercussions of this regulation?
It is not clear whether the tax on containers funded by the State could give rise to large scale changes towards a circular economy, nor is it very clear how it will affect the companies throughout the plastic supply chain.
In the last instance, the tax on plastic and the associated taxes are intended to reduce the amount of waste generated, increasing recycling and improving infrastructures. However, the diversity of approaches in the application of the rate in Europe could mean that it does not have the desired impact on the secondary plastic market and on recycling itself.
The taxes that are centred on single-use plastics could be applied to materials that are already regulated by the EU Directive on single-use plastics. Therefore, the taxes cannot have any impact as they overlap with the already demanded bans.
Additionally, within the framework of the EU’s tax on containers, the payments will be based on the plastics that are not recycled according to the Eurostat average data per Member State, which may be paid through general taxation, which limits the potential impact on the real use and elimination of plastics in the countries.
Sale by weight of F&V
One of the aspects that the fruit and vegetable sector disagrees with most is relative to the sale by weight when the sales unit is less than one and a half kilos.
The last half of the year will be essential in the calendar for the final enactment of the actions. From the month of June onwards, all fruit and vegetables in packs of less than 1.5 kilos must be presented by weight at the points of sale.
This obligation will not apply to fruit and vegetables that are packaged as a protected or registered variety or that have an indication of differentiated quality or that come from ecological farming.
Food retailers, with a surface area of 400 square metres or more, must use at least 20% of their sales area to the offer of products without primary packaging, including sale by weight or using reusable containers.
It will also not affect fruit and vegetables with a risk of deterioration or wastage when they are sold by weight. This list will be determined by the Ministry of Agriculture in coordination with the Ecological Transition, along with the Spanish Agency for Food Safety and Nutrition.
FEPEX considers that the Royal Decree will have a negative impact on the consumption of fruit and vegetables, which will be added to the continuous drop in consumption in recent years, which is estimated at around 10%, and it will have negative repercussions on the Mediterranean diet and on health.
The new legislation will have other negative consequences such as a lower product valuation due to its differentiation, greater food waste and a greater consumption of plastic at the points of sale themselves.
The bureaucratic rigmarole
Neither consultants nor business owners dare to put a figure on the percentage of their invoicing that will be affected by this tax, as its application has been turned into a veritable mumbo-jumbo.
Different legal sources explain that business owners have many reservations. “We are being asked questions about the target area of the tax, and in many cases determining when a plastic container is not reusable is very complicated. The law hardly enters in this area, and additionally there are many queries regarding the formal obligations and accounting that the tax entails, meaning periodically informing about stocks and operations carried out with non-recyclable plastic products, which include a very broad scope.”
Added to all this is the problem with the foreign market, because products that come from outside our borders will be exempt; that is to say, it will only be applied on the Spanish national market transactions.
This fact also causes great confusion amongst the operators on the chain. For example, “a taxpayer who makes an intra-community acquisition must settle and pay the tax for the amount of non-recycled plastic in the packaging containing the product and the packing that covers the pallet on which it is received. But, how is this information about the amount of plastic in the container obtained? Is there discrimination between recycled/non-recycled plastic? Foreign suppliers are not familiar with this law, nor do they have the obligation (and in many cases, the resources) to offer this data. Another point occurs with the accounting and information obligations that are imposed on intra-EU manufacturers and acquirers, which even reach operations that the law itself declares are not subject to the tax, and so increasing the complexity of its control and declaration.”
However, the greatest problem lies in the uncertainty involved in not knowing how this tax is going to affect the profit and loss account. “The companies do not exactly know the information they are going to be asked for; therefore, they cannot adapt their systems to obtain it with enough notice, given the imminent start up of the tax,” different sources consulted indicate.
What is happening in other European countries and in the United Kingdom?
At present, some markets have opted for covering the costs of the EU packaging tax through their national budgets, amongst which are France, Germany, Ireland, Luxemburg and Slovakia, while they plan that the future taxes will be totally or partially paid by the private sector. The following countries have announced more detailed application plans:
Italy
It plans to apply a similar legislation in which single-use plastic containers have a tax of 0.45 euros/kg and it is paid by the manufacturers, retailers, buyers or importers. The application of this tax on plastics has been delayed.
Belgium
It is considering the possibility of integrating the tax on plastics in the existing EPR (Extended Producer Responsibility) rates, which could be a preferable solution for smaller countries. In these cases, it would be too expensive to establish an independent rate or tax system if we take their annual income into account.
Germany
It could be the next country to move forward in the funding of the tax by the producers, as new policies are agreed on between the new joint federal management.
The United Kingdom
As a differentiating point from the EU tax, the United Kingdom has developed a tax on plastics that sanctions the use of plastic with less than 30% recycled content, in force since April, 2022. The tax on plastic will be charged at £200 per tonne only on containers that contain less than 30% of recycled content (although all the plastic will be declared, only a part will be charged.)
