Environmental taxes:

Plastic packaging and packaging waste

A summary of international tax measures

The proliferation of plastic waste, much of which accumulates in landfills, waterways, and the oceans, poses devastating threats to the climate, the environment and biodiversity. Once plastic products become waste, they are a challenge due to their complex end-of-life management: only a portion can be recycled and, if the collection is not managed correctly, what remains may be released into the environment resulting in environmental degradation. And the production of plastic itself is one of the most greenhouse-gas emission-intensive industries. These are among the factors that have spurred some governments around the globe to action. 

The lens on plastics

The European Union (EU) has been at the forefront of the “war on plastic” and has issued a multi-pronged response to urgent demands for a transition to sustainability from institutions, the general population, and the business community, as well as a viable path to carbon neutrality. 

The EU’s Circular Economy Action Plan, first released in 2015, contained legislative and non-legislative actions designed to drive the EU’s transition to a circular economy. (A circular economy is one in which resources are used as long as possible, then recovered and recycled, as opposed to a “linear” economy where resources are created, used, and then disposed of.) The circular economy package was subsequently updated in 2022. 

The EU aims to become a promoter of economic growth that ensures the containment of the negative effects linked to the use of natural resources and reverses the current system of development through an industrial reconversion that triggers circularity of goods and reuse of resources. In effect, a transformation in the way products are designed, manufactured, consumed, and recycled, eliminating the traditional linear production of goods in favour of a new economic model able to regenerate growth. 

Other EU initiatives to reduce plastic waste and the use of plastic in packaging, and to increase awareness of industries and citizens of how to use plastics more sustainably, include:


The EU’s focus on plastics includes curbing the environmental impact of the packaging supply chain, in particular, the release of plastic packaging into the environment and its inability to biodegrade and/or be recycled. With a series of regulatory constraints on the horizon, the use of plastic packaging will change profoundly. 


Packaging: the new EU policy 

The cornerstones of the EU’s policy to mitigate the environmental impact of plastic packaging and promote the effective recycling of packaging materials is based on several linked actions:

  • Domestic environmental taxes; 
  • Legislation to strengthen the Extended Producer Responsibility (EPR) principle; and 
  • Establishing common technical standards. 

These are summarised below. 

Several European countries have introduced—or are implementing—plastic taxes that affect the production and use of single-use plastic packaging in favour of reusable packaging or packaging made of recycled plastics. 

The charges to be paid and accompanying reporting mechanisms aim to disincentivize, as much as possible, the production of certain types of plastic packaging, in favour of recycling and making the market for recycled materials competitive. 

Plastic taxes have been introduced in Germany, Ireland, Spain, and the UK, and are planned in Estonia, Portugal, and Italy. In the Netherlands, charges apply to single-use cups and meal containers, and sellers are required to offer their customers reusable alternatives. In addition, in Luxembourg (as is the case in other jurisdictions), plastic bags are no longer distributed free of charge and VAT applies to the charge for bags distributed to customers. 

This is clearly an area that is likely to see further proliferation globally.

EPR is a policy tool that has gained significant momentum in Europe in recent years. Under EPR, responsibility for the environmental costs of the entire life cycle of products is shifted from consumers to producers, in particular, with respect to waste generated by the products. One of the key initiatives in the EU is to ensure that all packaging in the EU is reusable or recyclable in an economically viable manner by 2030.  

In November 2022, the European Commission issued a proposal for a Packaging and Waste Regulation, which will make packaging producers and users more responsible for the life cycle of the packaging they place on the market. The regulation would set requirements for the entire packaging life cycle—from raw materials to final disposal—and would establish sustainability requirements for packaging substances by: 

  • Increasing packaging waste recycling targets; 
  • Introducing constraints on the design of packaging by making it fully recyclable; 
  • Prohibiting the release for consumption of certain types of single use packaging; and
  • Introducing measures to encourage the reuse of specific types of packaging. 

The strengthening of the EPR regime—which will oblige businesses, including packaging manufacturers, producers, and users to bear the costs of collecting, sorting, and recycling packaging waste—will require affected producers, etc. to shift their focus more to environmentally sustainable designs to avoid heavy penalties or a ban on release for consumption. 

For example, in almost every EU country, producers placing packaging on the market are required to join an authorised Producer Responsibility Organisation, which finances the waste collection and treatment system, coordinates collection and recycling points, arranges treatment for recyclable packaging, achieves recycling targets and reports data to the Environment and Resources Authority.

To ensure common rules for all packaging manufacturers, a process of harmonization of technical standards is underway. 

The following aspects will be regulated: 

  • The recyclability of packaging; 
  • The definition of recycled material and how to quantify it; and
  • Harmonised environmental labelling to avoid greenwashing and prevent differing information being presented in different countries. 

How to prepare for change 

 The initiatives to move from the grip of a “plastic economy” to one of sustainability can be valuable opportunities for businesses that are willing to embrace them. Businesses that can adapt in time and avoid potential economic and business risk burdens may also benefit from some competitive advantages.

To this end, companies operating in global markets should assess, verify and, where necessary, reconsider the following: 

  • Their reporting systems for packaging used for selling and shipping their products, both in terms of quantity (e.g., weight) and quality (types, materials, technical specifications); 
  • Their supply chains and the possibility to propose environmentally sustainable solutions (e.g., recyclable and/or reusable materials); and
  • Their compliance with existing packaging rules, e.g., in terms of participation in EPR systems, correct and timely payment of any environmental contributions or taxes, correct labelling and use of environmental claims. 

Meanwhile, businesses should monitor developments relating to plastic packaging carefully to understand potential new obligations and help safeguard the environment. These steps will require procuring specific expertise in the packaging sector, tax advisers, customs experts, materials scientists, and consultants with expertise in environmental law.

Measures in EU member states

In Estonia, as of 1 May 2023, it is prohibited to place on the market:
  • Packaging made of oxo-degradable plastic; or
  • Single-use food containers, beverage containers, and cups for beverages, which are made of expanded polystyrene.
In addition, as of 1 January 2024, only reusable food containers and cutlery may be used to serve food and beverages at public events.

Estonia has proposed the introduction of a plastic packaging tax.
 

Germany has enacted a “plastic tax” in the form of the Single-Use Plastic Fund Act that will apply as from 1 January 2024. The levy, based on the EU Single Use Plastic Directive, will be due by businesses that place covered single-use plastic products on the market for the first time, and, starting in 2025, producers will have to pay an annual levy.

Registration and an annual reporting requirement will apply to covered “manufacturers”, with penalties for noncompliance. "Manufacturers" within the meaning of the law can be producers, fillers, sellers or importers, as well as foreign companies that sell single-use plastic products commercially via distance selling in Germany.

Revenue collected from the special levy will be placed in a fund from which waste management companies will be reimbursed for costs incurred in connection with the disposal and reduction of certain single-use plastic products.

The Single-Use Plastics Fund Act is administered by the Federal Environment Agency. By 1 January 2024, the Federal Environment Agency will ensure that registrations, applications, notifications by the "manufacturers" subject to the levy and the waste management companies entitled to claim etc. can be processed via a digital platform.

 

Two pieces of legislation in Ireland aim at reducing the volume and impact of single use plastic items:

  • In line with the EU Single Use Plastics Directive, the government has introduced market restrictions on items such as straws, plates, cutlery, and expanded polystyrene single use food containers. Affected parties should source substitute materials for the single use plastic items identified in the legislation; and

  • Since 2002, Ireland has imposed a levy on disposable plastic bags (in 2023, the levy is EUR 0.22 per plastic bag). More durable plastic bags can be sold for a charge not less than EUR 0.70 per bag.

The market response to this legislation has included a shift to the use of more durable bags made from different materials, as well as increased use of biodegradable bags.

A common source of confusion for affected businesses is whether novel disposable bags made from biodegradable materials fall within the scope of this legislation.

Since 1998, Italy has implemented Directive 94/62 for the management of packaging and packaging waste. This Directive covers all type of packaging (sales and transport packaging) made with wood, paper, plastic, metals (iron and aluminium) and glass.

Management of packaging waste in Italy follows the Extended Producer Responsibility (EPR) principle, which makes packaging producers, fillers and distributors responsible for financing the collection, and environmentally friendly treatment, of packaging waste that results from their products in the national market. The EPR also requires them to meet certain recycling targets.

Producers, fillers and distributors, placing sales and transport packaging into the market, are required to join an authorised Producer Responsibility Organisation (PRO). In Italy, the principal PRO is CONAI (Italian Consortium for the recovery and recycling of packaging). The main obligations of a PRO are to finance the waste collection and treatment systems, coordinate door-to-door collection and recycling points with local councils, arrange treatment for recyclable packaging, achieve recycling targets, and report data to the Environment and Resources Authority.

The national legislation only impacts Italian companies (not end-consumers). It is very important to emphasise that every national company that imports empty packaging or packaged products, whether from within the EU or from outside of the EU (i.e. China), is obliged to join the CONAI, declare the type of packaging imported, and calculate its weight.

The environmental fee (called Contributo Ambientale Conai) differs depending on the weight and the type of packaging material involved. In addition, the environmental fee for paper and plastic packaging, is also calculated according to how recyclable the packaging is.

The plastic tax, regarding plastic packaging, foreseen by national legislation, has not yet entered into force. It is currently expected the tax will take effect from 1 July 2024.
 
Luxembourg has implemented into its national law the rules in the EU Directives for the promotion of circular economy.

The measures apply with respect to waste management, notably the:
  • Prevention/reduction of the generation of waste; and
  • Reuse, recycling, and recovery of waste.
For instance, as from 1 January 2024, advertising material will be left in mailboxes only if the recipient expressly consents, and as from 1 January 2025, cutlery that is used in food delivery/takeout services will have to be reusable. Furthermore, based on the Extended Producer Responsibility (EPR) principle, producers (and distributors) take responsibility for the prevention, reuse, and management of waste.

To reduce packaging waste, as from 1 January 2025, certain single-use products, such as beverage cups and food containers and plastic bags, will no longer be provided free of charge at the point of sale, regardless of their size, consumption pattern or material.

Finally, Luxembourg legislation requires product producers to take the necessary actions to reduce the amount of single-use plastic products consumed by 2026 compared to 2022. Notably, a reduction of 20% should be achieved by 2026, with a further reduction of 10% each year starting from 2026.

Considering the existing and envisaged additional measures for the achievement of the EU objectives in the circular economy and sustainability, Luxembourg businesses are expected to face considerable organizational, financial, and logistical challenges and therefore should ensure their compliance in a timely manner.
 
Malta, one of the EU’s smallest member countries, has been taking steps to address the challenges posed by packaging and packaging waste. Domestic legislation implements various EU directives relating to packaging waste management.

Management of packaging waste in Malta follows the Extended Producer Responsibility (EPR) principle, which makes packaging producers responsible for financing the collection and environmentally friendly treatment of packaging waste resulting from their products in the national market and meeting recycling targets.

Producers placing sales and grouped packaging (i.e., the packaging ending up at consumers) on the market are required to join an authorised Producer Responsibility Organisation (PRO). The main obligations of a PRO are to finance the waste collection and treatment system, coordinate door-to-door collection and recycling points with local councils, arrange treatment for recyclable packaging, achieve recycling targets and report data to the Environment and Resources Authority.
 
As from 1 July 2023, entrepreneurs in the Netherlands that supply food or beverages may no longer provide disposable plastic cups and containers free of charge to consumers who carry out food/beverages or have them delivered. A charge will now be imposed for the use of single use plastic items and entrepreneurs must offer consumers reusable options or allow them to bring their own containers. Disposable plastic cups and containers will be completely banned for on-site consumption starting in 2024.
 
Spain’s plastic packaging tax that became effective on 1 January 2023 already has run into some roadblocks due to ambiguities in the statutory language. By April 2023, the tax authorities already issued 18 binding rulings on the scope and procedural aspects of the tax.
Spanish companies and operators looking to market products in Spain must navigate the evolving regulatory and sustainability landscape, and address challenges in aligning with EU directives and frameworks. With the introduction of new obligations, such as the plastic packaging tax on non-reusable plastic packaging and the implementation of the producer registry, the number of requirements has increased significantly.

Spanish companies face unique challenges in implementing EPR practices that are aligned with EU directives. These challenges stem from the complex regulatory framework that varies across different member states, requiring companies to navigate country-specific requirements while adhering to overarching EU directives.

Keeping current with evolving legislation and understanding the intricacies of each jurisdiction can be a daunting task.

Furthermore, the compliance burden will present additional challenges, particularly for small and medium-sized enterprises with limited resources.

Finally, non-resident companies operating in Spain may also face additional obstacles due to a lack of local workforce or the presence of language barriers.
 

Measures in non-EU jurisdictions

While the EU and other jurisdictions have begun the implementation of volume-based taxes and levies on the importation and use of certain consumer plastics, the regulatory framework in Canada between the federal and provincial governments is more fragmented.
Nevertheless, the federal government is working with provinces, territories, and industry to set an ambitious collection target of 90% for recycling plastic beverage bottles, developing regulations to require that certain plastic packaging contain at least 50% recycled content, and establishing clear rules for labelling recyclable and compostable plastics.
 

Effective dates of the prohibitions
Item Manufacture and import for sale in Canada Sale Manufacture, import and sale for export
Checkout bags, cutlery, foodservice ware, stir sticks, straws 20 December 2022 20 December 2023 20 December 2025
Ring carriers 20 June 2023 20 June 2024 20 December 2025
Flexible straws packaged with beverage containers N/A 20 June 2024 20 December 2025

In addition, Canada’s provinces are at varying stages in the implementation of packaging taxes and recycling levies. For example, Ontario, the largest/most populous province, is introducing the “Blue Box Regulation,” which will impose a volume-based levy on paper, glass, metal, and plastic packaging imported and used in the province, although certain exemptions will exist on a revenue- or volume-tested basis.
As the provincial-level tax regimes and rules differ, it will be important for producers to assess and re-assess the volume of plastics and materials imported into Canada and into each province, to arrive at a risk-informed approach to registration and compliance.
 

The UK plastic packaging tax became effective on 1 April 2022.
Since that time, businesses and their advisors have had to navigate several practical difficulties such as:
  • Measuring the weight of manufactured or imported plastic packaging, which in many cases is not part of a company’s financial data; as a result, it cannot readily be extracted, especially where mixed materials are used in packaging. This has resulted in additional administrative costs in producing data for tax calculation purposes.
  • Verifying whether a manufacturing process includes 30% or more recycled content can be challenging, as there is a requirement to obtain copies of supplier certifications or conduct audits on the origin of goods. Again, business that cannot obtain this evidence have been forced to register for the tax as a protective measure.
  • Keeping detailed data and documentation to monitor whether the cumulative 10 tonne de minimis limit is reached, and when registration is required. The UK tax authorities are already calling to see data that will verify registration dates and prove requests for overpayments of the tax.
  • Determining responsibility for registering for the tax is often unclear, especially in relation to the importation of manufactured plastic packaging. If the importer is an overseas business that is responsible for transport and goods clearance through UK customs, it will be required to register if the 10 tonne de minimis limit is exceeded, regardless of whether it has a UK presence. Requests for support in this area are growing, as multinational businesses strive to meet their requirements for the tax.
  • Conducting due diligence checks required by the UK tax authorities to reduce the risk of being involved in a supply chain where PPT goes unpaid. This is an additional cost burden on businesses who are neither manufacturers or importers.
     
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BDO can advise on packaging tax measures

Organisations worldwide are confronting a range of different and complex measures being introduced across the EU and globally. It’s important to stay on top of these developments and avoid getting caught out by lack of understanding or clarity. BDO’s Tax teams across the globe specialise in advising clients on how to prepare for incoming plastic packaging and packaging waste tax measures. Get in touch with a member of our team to help you understand how your business can be better prepared.
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