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In its response to HMRC’s consultation regarding plastic packaging tax, ICAEW noted that compliance costs often exceed the tax liability.
ICAEW welcomed HMRC’s recent consultation 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 detail 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, with compliance costs often exceeding 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, or cannot afford to, demonstrate that they are not chargeable to the tax would be a policy failure. ICAEW supports the policy objective of reducing the use of plastic and encouraging plastic recycling but questioned 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. Making an already complicated tax more complex would only exacerbate this problem.
Read ICAEW’s response.
ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
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