Parliament debates stricter enforcement of Plastic Packaging Tax

Nigel Mills (Con) began the debate by expressing his disappointment with Parliament’s effectiveness at reviewing taxes once they have been introduced.

He emphasised that the industry's concern about illegal imports claiming to contain a sufficient amount of recycled plastic content when that is not the case, adding that there is very little enforcement to try to work out whether it is or not.

HMRC has to enforce this regulation, said Mills. “The idea that the job can be passed on to someone at the border who can check a pallet and see what is in the cling film will not work. It needs to be a process-driven situation.”

The Amber Valley MP suggested that big retailers and manufacturers should play their part in ensuring they do not buy something that is undercut the market.

Mark Pawsey (Con) acknowledged the positive step taken with the introduction of the plastic packaging tax; however, “with no verification of products manufactured outside the UK, the grave danger is that we are doing a disservice to UK manufacturers”, he said.

Mills agreed with Pawsey’s point and stated that plastic film that includes recycled content is 20 per cent more expensive than using virgin polymer, justifying the need for the plastic packing tax. He explained that “if we allow imports to enter which claim to contain that, and avoid the tax, clearly they can undercut the market for products that can be made here”.

Mills proposed that the government provide guidance or a list of territories with lower risk for importing recycled plastic film and those with a higher risk, assuming that the plastic packaging tax applies. “It is effectively tax avoidance, bordering on tax evasion”, he said.

Mills stressed the importance of educating the industry about the rules, especially since the plastic packaging tax is a new initiative. Additionally, he anticipated that the government will increase the threshold of 30 percent recycled material up to 40 percent, while the EU may raise it to 70 per cent by 2040.

Steven Bonnar (SNP) noted data released by HMRC which indicated that only 4,142 business had registered to pay PPT by 8 August 2023, when they initially estimated that 20,000 businesses would be affected. “That raises a vital question: what has gone wrong with the roll-out of this scheme?”

Bonnar said that PPT “is designed to provide an economic incentive for businesses to use recycled plastics and [so] we must ensure that the revenue generated by it supports that primary goal”.

The Shadow Financial Secretary, James Murray (Lab), repeated Labour’s longstanding support for the PPT. He echoed Mills’ comments and expressed interest in hearing the minister’s response on how the tax is applied correctly to imports. Furthermore, he urged the government to provide some detail about Treasury and HMRC engagement with the agricultural sector and businesses in transition to more sustainable plastics.

“A clear, stable policy environment is critical to encouraging companies to invest in productive capacity here in the UK, and it is therefore crucial in securing the jobs and economic resilience that such investment would bring, so I will be grateful if the Minister can explain what the Government are doing to support private investment in the production of sustainable plastics here in the UK”, concluded the Shadow Financial Secretary.

Gareth Davies, the Exchequer Secretary, recognised members’ concerns on false claims and explained that since the plastic packaging tax was introduced last year, HMRC has been continuously helping businesses to understand their obligations, and has developed a comprehensive enforcement and compliance response to identify and tackle any non-compliance. He further elaborated that, following extensive consultation, “the tax includes a de minimis threshold of 10 tonnes of packaging per year, which is intended to avoid placing a disproportionate administrative burden on businesses that would outweigh the environmental benefits. This means that many small importations of plastic packaging will be out of scope of the tax”.

Responding to some of the questions asked, Davies emphasised that the tax's design strikes a balance between verifying recycled plastic content and avoiding undue burdens on businesses. The challenge, he noted, is the absence of a scientific test for recycled plastic content, making it essential for businesses to maintain evidence.

On imports, the minister said: “Where businesses do not have or hold sufficient evidence for us to inspect, they must not declare that their packaging contains at least 30 per cent recycled plastic, and they must pay PPT”. He added that businesses should demonstrate to HMRC what checks have been carried out in their supply chains.

HMRC has a range of enforcement and inspection powers at its disposal and can challenge claims from businesses, said the minister “To embed the tax, HMRC delivered a wide-ranging communications programme that targeted both domestic manufacturers and importers of packaging. It focused on making them aware of the requirements and supporting them to comply with those”. He continued that HMRC has also provided a 12-month soft landing period for business, to educate and support them.

Regarding to the registration issue, he noted that the initial estimate of 20,000 was made before the final policy decisions were reached. HMRC is actively engaging with businesses to ensure compliance.

“Businesses found to be negligent or cheating the system will incur penalties in addition to the tax due and can face liabilities of up to 100% of the tax due”, pointed out Davies, adding that these businesses could also face legal action to recover the tax.

In his closing remarks, Mills expressed hope that HMRC would remain vigilant in addressing these issues, and said that “we all, on all sides, want this tax to deliver its objectives; we all want to see more recycling of plastic packaging”.

You can read the full debate here.