Plastic tax - different approaches

On 1st January 2021, the EU introduced a levy based on the amount of non-recycled plastic packaging waste produced by each member state. This “plastic levy” is designed to reduce the proliferation of non-recycled plastic waste while also funding the 2021-2027 EU budget considering the increased spending from Covid-19.

Each member state is required to pay a levy determined by multiplying a rate of 0.80 Euro per kilogram to the weight of non-recycled plastic packaging waste. While some member states have paid the levy out of their national budgets, others have introduced (or are introducing) new taxes, charges or fees on plastic products or have refined existing regimes. Some non-EU European countries have also begun to target the use of specific plastic products to cut waste and move towards a circular economic model. 

Very different regulations

Among the countries that have plastic tax, the tax design varies greatly. Some are focused on (plastic) packaging while others target single use/non-reusable plastics. Some impose a tax on locally and foreign sourced plastic products whereas others use an excise tax to tax only foreign sourced plastic products. The rate of tax varies across countries with some choosing not to levy a tax altogether.

Conflicts of interest prevent uniform refinancing

A uniform European plastic tax law would be a major labour-saving measure for international corporations. However, the introduction of EU-wide excise duties is not easy, as the principle of unanimity in tax matters applies here. All 27 member states would have to agree on uniform tax objects, taxable events and (minimum) tax rates.

However, the volume of plastic waste and the recycling rates differ greatly from country to country, so that a lengthy process of compromise would be required. Adjustments to a plastic tax directive would also have to be agreed unanimously by member states. 

The flexible room for manoeuvre in refinancing should enable the mem-ber states to take the most appropriate measures in each case to reduce their generation of unrecycled plastic waste. For example, the member states can choose regulatory measures, subsidies for recycling measures or even taxation at national level.

Challenges for multinational corporations

What has emerged is a patchwork of uncoordinated national rules, making it challenging for enterprises operating in multiple countries to navigate. Unfortunately, an EU-wide harmonisation is neither planned nor in sight for the moment. For this reason, multinational enterprises would need to stay abreast of developments and track the evolving regulatory and tax landscape to ensure that they do not fall afoul of the applicable national rules and are not subject to enforcement proceedings or financial penalties for non-compliance.

Companies should constantly follow legislative developments in all countries in which they operate. Responsible employees must be defined for the new tax type in each country. These employees must identify the materials that may be subject to the new tax. The ERP (Enterprise Resource Planning) systems must be adapted to the new requirements. Within the supply chain, the person liable to pay tax must be clarified with suppliers and customers. There are also implications for pricing and invoicing. And of course, the tax department must be prepared for additional compliance obligations.

Further obligations

It should be noted that plastic taxes are regularly not the only regulations to reduce plastic consumption in the member states. With the implementation of the EU Single-Use Plastics Directive, the production and import of disposable plates, cutlery, to-go cups, straws, cotton swabs made of plastic, etc. were banned in the EU as of 3rd July 2021.

Manufacturers or initial distributors of packaging are required to obtain a license from a producer responsibility system for household collection and disposal for the packaging they place on the market. A contribution to the costs of street cleaning because of carelessly discarded waste, so-called littering, can also be passed on to the manufacturers and distributors of single-use plastics. 

Overview on the situation in the member states

Below is a summary of some of the significant measures proposed or adopted by European countries to impose a financial cost on the use of plastic products.

Bulgaria: The country levies a product fee on certain plastic products (incl shopping bags) which is payable if the person that releases the relevant product in the Bulgarian market does not meet the obligation for waste collecting, utilisation and recycling or does not meet certain targets either individually or through an organisation for waste utilisation.

Denmark: Products such as carrier bags (incl plastic bags), disposable tableware (incl plastic tableware) and packaging not included in the mandatory deposit on returnable packaging scheme, are subject to an excise duty. It is expected that the Packaging Tax Act will be broadened in scope soon.

Estonia: Packaging (incl plastic packaging) is subject to an excise duty at the rate of 2.50 Euro per kilogram. The excise duty is levied on the introduction of packaging goods into the Estonian market or the acquisition and import of such packaging from another member state in the event of a sale, exchange, transfer without charge or use for self-
consumption of the packaging. The excise duty would cover plastic packaging made of polymer and all natural and artificial polymer-based 
materials in both single and multi-
layer embodiment.

Germany: While the EU assumes own resources from plastic levies of 7 billion Euro per year, the Federal Republic of Germany has a national refinancing requirement of 1.4 billion Euro per year. Against this background, the federal government plans to introduce a plastic tax in Germany. Last summer, the German government had already launched a research project to evaluate the possible designs of a plastic tax in terms of legal feasibility, practicability, economic impact, and its potential incentive effect.

Independent of national developments, the city of Tübingen was the first local authority to introduce a packaging tax at municipal level on 1st January 2022. 

Great Britain: The Plastic Packaging Tax Act 2022 came into force on 1st April 2022 and charges at a rate of 200 GBP per tonne of plastic packaging. The tax is designed to incentivise businesses to use substantively recycled plastic in the manufacture of plastic packaging, stimulate recycling and reduce plastic waste.
The tax should only apply to plastic
packaging manufactured in or impor-ted into the UK that contains less than 30% recycled plastic. Packaging that contains multiple materials but contains more plastic by weight that any other single material will be deemed “plastic packaging”. Imported plastic packaging will be liable to tax. 

Italy: The plastic packaging tax, which was previously scheduled to enter effect on 1st July 2021 after several postponements, will not come into force until 1st January 2023. The tax is expected to be charged at a rate of 0.45 Euro per kilogram and will apply to single-use plastic manufactured goods (manufatti con singolo impiego or “Macsi”). 

The tax will apply to products that are intended for the containment, protection, handling or delivery of goods or foodstuffs made using plastics consisting of organic polymers of synthetic origin, which are not designed for repeated usage. While the exact list of products that will be taxable will only be set out in the implementing measures, bottles, bags, and food packaging made of polyethylene, Tetra Pak packaging, packaging made of expanded polystyrene and plastic caps will likely be covered by the tax. The tax will also be charged on semi-finished products, including preforms made with the use (whether wholly or partly) of the plastics, used in the production of Macsi.

Latvia: As part of its natural resources tax, Latvia levies a tax on plastic packaging, single-use tableware and accessories made of plastic, and plastic bags. The applicable tax rates for plastic bags, plastic packaging, single-use tableware, and accessories made of plastic range from 0.24 Euro per kilogram to 4.80 Euro per kilogram.

Lithuania: Filled packaging (incl plastic packaging) supplied to or within the Lithuanian market may be subject to the pollution tax. Therefore, a manufacturer or importer supplying filled packaging to or within the Lithuanian market may be liable to pay the pollution tax at the time of first supply of filled packaging to or within the Lithuanian market, provided that the filled packaging constitutes, inter alia, plastic packaging, polyethylene terephthalate packaging or composite packaging.

Poland: There are currently two draft bills relating to the taxation of plastics making their way through the national legislative process – the first bill is concerned with introducing a product fee, while the second bill proposes levying a packaging fee. When adopted, the product fee will be imposed on the marketing and making available of single-use plastic products to consumers as an additional fee of up to approximately 
0.22 Euro per package, and the packaging fee will be levied on entities that market packaged household products at a rate of 0.40 Euro per kilogram, if it does not meet the requirements concerning recycling of a packaging waste. 

Portugal: A contribution of 0.30 Euro per package will be levied on single-use packaging made of plastic or aluminium used in ready-to-eat meals. The contribution is expected to enter into force on 1st July 2022 for single-use packaging made of plastic and 1st January 2023 for single-use packaging made of aluminium. The contribution will be levied on the production, importation, or acquisition from another member state or from the Autonomous Regions of Azores and Madeira of single-use packaging made of plastic or aluminium (or of multi-material packaging made of plastic or aluminium, regardless of its amount in the total weight of the packaging), which are used in ready-to-eat meals.

Romania: A contribution of 2.00 Romanian Leu (approx 0.40 Euro) per kilogram is levied on certain plastic items for the excess of packaging waste corresponding to the minimum recovery or incineration objectives in incineration plants, and an ecotax of 0.15 Romanian Leu (approx 0.03 Euro) per piece is applied to certain transport bags made of non-biodegradable materials.

Slovenia: A tax is chargeable on all types of packaging material (incl plastic packaging) and grave candles. The tax is levied on packers and acquirers (incl importers) of packaged goods and producers and acquirers of (unfilled) packaging at the rates of 33.38 Euro per annum per taxpayer and 0.0017 Euro per environmental pollution unit. Specifically, the environmental pollution unit for plastic packaging is 300 units per kilogram.

Spain: The country is close to approving the tax on non-reusable plastic products as part of a broader waste and contaminated soils legislative package. The new law is intended to discourage the production and use of non-reusable plastic products by introducing a tax on non-reusable plastic products at the rate of 0.45 Euro per kilogram of non-reusable plastic packaging. The tax is expected to enter into force on 1st January 2023 and it will be levied on the manufacture, import and intra-EU acquisition of non-reusable plastic packaging, semi-finished plastics which are used in the manufacturing of the packaging (for example, pre-forms or thermoplastic foils), and any plastics that are used for the closing, commercialisation or presentation of single-use plastic packaging