Sustainable Plastics spoke with Bertil Kapff, director in the Climate Protection, GreenTax & Energy department at WTS, about how companies are dealing with changing legislation.
Why did WTS decide to compile this report? Have you had many clients ask for your services in relation to the plastic tax? Which countries are most represented?
WTS Global compiled the report on plastic taxation to address the growing complexity and rapid evolution of the regulatory and tax landscape surrounding plastic use in Europe. The decision to compile this report was influenced by the increased number of clients seeking advice on plastic taxation, particularly from companies importing goods into the UK and Spain, where there has been a significant demand for guidance on Plastic Packaging Tax, interpretation of rules, data collection, and compliance with the requirements of the responsible authorities. The report aims to aid companies in navigating tax issues arising from the manufacture, importation, distribution, or use of plastic products and to foster deeper thinking on how plastic value chains can become more circular. The heightened interest from these regions underscores the necessity for a comprehensive understanding of local regulations and best practices for compliance.
There have been many postponements of announced plastic taxes (e.g., Germany, Italy). What would you say are the main reasons for this?
The postponements of announced plastic taxes in countries like Germany and Italy can be attributed to several factors. In Germany, the delay in implementing the national plastic tax, initially planned for 2025, was due to challenges in data collection and the risk of excessive bureaucracy. The German government faced difficulties in finalising a practicable model for the tax, leading to considerations of postponing its introduction to possibly 2026. In Italy, while specific reasons for the postponement are not detailed, it can be inferred that similar challenges, such as the need for more time to develop an efficient and low-bureaucracy solution, might have influenced the decision to delay the implementation of the PPT until 1 July 2026. Additionally, feedback from stakeholders and the need to carefully assess the economic impacts play a role in these delays, as governments must ensure that the introduction of plastic taxes does not lead to unintended side effects, such as increased burdens on small and medium-sized enterprises or impairing the competitiveness of the national industry.
What aspect of plastic taxation are your clients finding most challenging?
Clients find several aspects of plastic taxation challenging, including navigating the patchwork of uncoordinated national and regional rules, which requires careful examination and navigation by enterprises operating in multiple Member States. Identifying the types of plastic taxes and levies imposed in each country of operation, determining the liable entity within the supply chain, and adapting internal processes and enterprise risk management systems to handle compliance requirements are significant challenges. Another challenging aspect is the uncertainty and constantly changing requirements, requiring companies to remain flexible and continuously adjust their compliance strategies to keep up with the latest developments. This not only involves regular monitoring of legislative changes but also the ability to quickly respond to these changes to minimise potential risks and penalties.
If a plastic manufacturer operates in member state X and imports its packaging to another member state Y where there is a plastic tax on imported plastic, does X get taxed twice?
In order to avoid double taxation, there is generally a right to relief for plastic taxes paid in the domestic territory, provided that taxed plastic products have been demonstrably exported from the tax territory. In order to claim tax relief, corresponding proof and application procedures are provided. Due to the comparatively low volume of refunds and the high bureaucratic effort involved, many companies refrain from claiming refunds on exports.
The taxation scenario for a plastic manufacturer operating in Member State X and importing its packaging to another Member State Y where there is a plastic tax on imported plastic depends on the specific tax laws and regulations of the involved Member States. Our research highlights the complexity and varied nature of plastic taxation across Europe, suggesting that companies must carefully navigate these regulations to avoid unintended tax liabilities. It's important to note that the specific regulations to prevent double taxation can vary from country to country, and companies operating in multiple Member States must understand not only the tax laws of each country but also any agreements or mechanisms in place to avoid double taxation. Careful planning and consultation are crucial to developing an efficient tax strategy that avoids unnecessary costs.
Given the amount of different levies and laws across the member states, have you seen cases of companies getting fined for not complying with the plastic tax? How do you expect this to develop as more member states introduce plastic taxes?
With regard to the regulatory plastic taxes that have been in place for some time (such as the extended producer responsibility systems), we are regularly confronted with penalty proceedings by the relevant administrative authorities. The tax authorities are also tightening the rules on the new plastic taxes. We are increasingly receiving feedback from importers to Spain who have not included information on the plastic packaging of imported products in their invoices and delivery documents and have been fined as a result. In the UK, customs are increasingly scrutinising our clients' bookkeeping and records relating to plastic packaging tax. So far, our experience with the authorities has been relatively positive.
Our research emphasises the importance of enterprises staying abreast of developments and ensuring compliance with national rules to avoid enforcement proceedings or financial penalties. As more Member States introduce plastic taxes and as enforcement periods begin, as seen with the UK's PPT penalty regime, it is expected that there may be an increase in scrutiny and potential fines for non-compliance. Companies are advised to review their supply chains, maintain appropriate records, and ensure compliance to mitigate the risk of penalties. The increasing introduction of plastic taxes and associated enforcement actions underscore the importance of adopting a proactive compliance stance. Companies should not only react to potential penalties but also take proactive steps to strengthen their compliance systems, including implementing effective internal controls, training employees, and establishing monitoring and reporting mechanisms. This proactive approach can help minimise the risk of penalties while protecting the company's reputation and brand image.