Nigel Mills (Amber Valley) (Con) I beg to move, That this House has
considered HMRC enforcement of plastic packaging tax on
imports. It is a pleasure to serve under your chairmanship, Ms
McVey. I am grateful for the chance, however long it might be, to
raise this issue. The tax has been enforced for about 18 months. As
a Parliament, we are not brilliantly effective at reviewing taxes
after we have introduced them to check that they are working how
we...Request free trial
(Amber Valley) (Con)
I beg to move,
That this House has considered HMRC enforcement of plastic packaging
tax on imports.
It is a pleasure to serve under your chairmanship, Ms McVey. I am
grateful for the chance, however long it might be, to raise this
issue.
The tax has been enforced for about 18 months. As a Parliament,
we are not brilliantly effective at reviewing taxes after we have
introduced them to check that they are working how we intended.
This is one of those unique taxes where the Environment Secretary
said last week that she was disappointed at how much the tax was
raising—I am not sure that she had checked with the Treasury
before she said it. I will talk about an area where we could
perhaps raise a little bit more money.
There is real concern in the industry about illegal imports which
claim to have a sufficient amount of recycled plastic content,
when that is not the case—and there is very little enforcement to
try to work out whether it is or not. It is hard to do because we
cannot look at stretch film—I actually have some here with me—and
work out how much recycled content is in it: there are no tests
that can be done. We need robust processes to make sure that the
claims people are making have some basis, and they are following
the rules.
I asked for this debate because the industry had a meeting with
His Majesty’s Revenue and Customs, and the latter said that
enforcement was not its job—I am afraid that under the law, it
clearly is. 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 law was clearly written, there is “joint and several
liability” on both the importer who brings in the plastic film
and claims that it has recycled content, and on the people who
buy it from them and place it on the market. There is a whole of
collection of ways we can enforce this on them. We can ensure
that the big retailers and manufacturers, the ones that have
robust supply chains, are doing the work they need to do before
buying this stuff, so that they can be sure that they are not
buying something that is undercutting the market.
(Rugby) (Con)
Does my hon. Friend agree that, while the introduction of
the plastic packaging
tax was a really positive thing that ensured we got more use
from recycled material, in this case, with no verification of
products manufactured outside the UK, the grave danger is that we
are doing a disservice to UK manufacturers?
That is the exact point that I am trying to make. We will not get
more use of recycled content if we do not enforce the law and
ensure that our domestic businesses are not undercut by the
market. The fact is that plastic film that includes recycled
content is 20% more expensive than using virgin polymer; that is
why we need to have the plastic packaging tax
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. That will mean that we cannot achieve the
objectives that we want to achieve.
This is not a cheap industry to start up. If someone wants to
mechanically recycle plastic so they can create 30% recycled
plastic content, they need to have some very sophisticated
machinery. It is a very difficult and intensive process, first to
wash the plastic film, then shred it, and then turn it back into
pellets, and the industry needs to invest millions and millions
of pounds in the lines. This process happens in my constituency,
and if the Minister wishes to come and see how it works, he is
more than welcome.
We need enforcement to send the right signals out that it is safe
to invest in this industry because there will be a market for the
recycled pellet. Sadly, we have already seen at least one factory
go bust because it could not find a market for its product, and
others will be under threat.
We can be pretty sure that we have a problem because industry
experts have assured me that there is no way that the film I have
with me here, which is 12 micron film from India—film this thin,
this strong and this stretchy—can be made with any recycled
content. It is technically impossible with mechanical recycling
to get the film either clear enough or strong enough to work like
the film I have here does. If I tried to stretch film with
recycled content, it would just tear. We can be absolutely sure
that wherever the film I have is coming from, it is not complying
with our plastic packaging
tax
I want to raise with the Minister, in the time we have, some
questions about HMRC’s enforcement strategy, the work it has done
so far, and how we can get the message to people buying this
stuff that they are committing an offence, and that there is a
risk that they will be caught, with significant financial and
reputational penalties. All manner of businesses using this stuff
on their products would be horrified to find out that it has no
recycled content. They are trying to comply with the law and want
to be seen to be helping the environment by using recycled
plastic. If we can get that message out, there is a real chance
to improve performance.
My hon. Friend is being generous with his time. If we know that
shrink and wrap films are not using recycled content, why can it
not be assumed that an imported product does not contain 30%
recycled material? A piece of paper that is produced by an
overseas manufacturer cannot possibly be evidence. Although it is
unreasonable to expect HMRC inspectors to visit plants around the
world, if we know that there cannot be recycled material in it,
why can that not be the assumption?
I strongly agree that we could beef up the HMRC guidance. HMRC
has published guidance on the due diligence checks that
businesses buying this plastic film should make. It does require
something stronger than just asking for a certificate.
My hon. Friend is right: if I were buying film from a reputable
company in Germany that had all the accreditations under German
and EU law, and had the annual inspections that we require in the
UK to prove its process complied with the rules, we could be
quite relaxed about that. That is fair competition and fair
imports. Where we have a much greater issue is when we import
from the Pacific rim without those standards and inspection in
place. How could anyone be sure that the piece of paper
represents anything? Even if it represented something when it was
first granted, how can anyone be sure it has been complied with?
That is especially when what is coming in cannot possibly comply
and there is no way that could happen.
I request the Minister to provide guidance or a list of
territories where there could be a lower risk approach, and those
territories with a higher risk approach if buying film sourced
from there, and assume that the plastic packaging
tax applies. It would be quite straightforward to work out
which countries have an equivalent standards and inspections
regime to ours, and be a little softer on enforcement for those,
and which countries do not have that, where there should be a
high-risk approach.
It is effectively tax avoidance, bordering on tax evasion. Buying
a product that undercuts the market price in the UK, which
research shows cannot be technologically produced in a way that
meets UK standards, and turning a blind eye thanks to a piece of
paper, is not behaviour that we would accept anywhere in the tax
code as competent due diligence and an attempt to comply with the
tax. There is progress we could make there.
4.38pm
Sitting suspended for Divisions in the House.
8.18pm
On resuming—
[Philip Davies in the Chair]
(in the Chair)
The sitting is resumed! The debate may continue for another 52
minutes, which will take us to 9.10 pm.
It is a pleasure to serve under your chairmanship, Mr Davies;
there has been a swift change of Chair in the last three and a
half hours. I am grateful to everyone who has come back after the
short interval for this crowd-pulling debate.
Before we disappeared, I was trying to convince the Government
that, with a bit more work, they could raise extra tax, protect
jobs in the UK and help achieve their environmental objectives.
My case, which I hope is relatively uncontroversial, is that if
we can find a bit more resource for enforcement, there will be
significant potential advantages.
It is not that we do not know what we should try to do. HMRC
published guidance for people involved in the supply chain of
plastic packaging components containing 30% or more recycled
plastic. They should be making checks, including
“checking that the price you pay for packaging components
reflects the current market value—if components are offered at a
lower market value, you should find out the reason for the low
cost”.
That sounds quite reasonable. Checks also include
“getting copies of any certifications or audits that have been
conducted on your suppliers, or the re-processors of recycled
plastic”—
that is, looking for real evidence—and
“conducting physical inspections or audits on your packaging
supply chain to prove information given by suppliers or
customers”,
as well as
“checking details provided against other sources, such as
supplier and customer websites”.
Those are all reasonable things that large companies buying these
materials should have the resource to do. It would be helpful if
the Minister could answer this, if he has the data from HMRC: in
how many audits has HMRC found that people have been importing
what they believe, or claim, to be recycled plastic, but are not
paying the correct tax? How many of those audits have resulted in
any kind of investigation or penalties being issued? How much are
those penalties? How much extra tax has been collected?
The feeling across the sector is that there has been far more
compliance enforcement against UK manufacturers —not unreasonably
for a new tax—than there has been against the imports. However,
it seems that the biggest risk to revenue leakage is from those
imports. Perhaps the Minister could consider whether HMRC could
do anything more to publicise the rules, and to really make it
clear to the industry that the rules are there, that there are
significant penalties, and that there are things that industry
should be doing to protect its reputation and ensure that it
complies. There is just a general lack of awareness. Given that
there is a 20% cost saving available here, and given that times
are quite tight, we can understand that people may get a bit
tempted to not look too closely if we are not careful.
This is not a small problem. Roughly half of all stretch film
that goes on the market in the UK is imported, either as rolls of
film or on finished products. We are not talking about a small
quantity. Think of the scale of the problem if we get enforcement
wrong; there is a very large market out there that could end up
avoiding tax in the UK. We really do not want that. I accept that
it is early days for the tax—it has been around for only 18
months—and we must all learn how to comply with the processes,
but hopefully there has been some use in having this debate to
flag up something that seems to be going slightly awry. The issue
is causing industry significant concern. If we cannot find a way
of fixing this, it could cost us revenue and jobs, and securing
the investment that we want in getting more plastic recycling
will be very hard if business cannot see a viable market.
I suspect that the Government will want to increase the 30%
requirement up to 40%. I think that the EU wants 70% by 2040, so
I am sure that we will go in that direction. However, we can get
there only if industry is prepared to invest, and we need to give
it the confidence to do so. I hope that the Minister will be able
to give the industry encouragement that it is worth investing in
the sector.
8.22pm
(Coatbridge, Chryston and
Bellshill) (SNP)
It is a pleasure to see you in the Chair this evening, Mr Davies.
I thank the hon. Member for Amber Valley () for securing and leading this
important debate. The focus of all Members across the Chamber
should be on ensuring that the implementation of
the plastic packaging
tax aligns with our shared goal of reducing the quantity of
virgin, non-recycled plastic in use in the United Kingdom by
guaranteeing that importers will face the same tax rates as
domestic producers.
It is an undeniable fact that PPT is a valuable tool in
encouraging firms into a transition away from virgin plastics; I
think we are all agreed on that. However, data released by HMRC
in August reveals a stark discrepancy. Yes, it is indeed early
days for the tax, as the hon. Member for Amber Valley said;
however, although it was estimated that 20,000 businesses across
various sectors would be affected by the PPT, only 4,142 had
actually registered to pay by 8 August 2023. That is one fifth of
the total expected. That raises a vital question: what has gone
wrong with the roll-out of this scheme? We look forward to the
Minister informing us of that.
Industry leaders have expressed the concern that many of us feel
that certain countries’ businesses are exempt from paying PPT. Of
course, that is just one concern, but it is one that creates a
risk of importers undercutting our domestically produced goods
and undermining the competitiveness of our home-grown industries.
We must ensure that PPT is levied fairly, and make sure that tax
is paid on all imported products without exception. The UK
Government must address these concerns and provide industry
leaders with the assurances that they clearly seek.
Furthermore, PPT is failing to encourage firms effectively to
reduce their plastic usage, primarily due to the gaps that we
find in the regulations. Firms are using recycled plastics
created through chemical recycling, which is a process that poses
serious environmental and pollution challenges to the Government.
We cannot afford to overlook the carbon-intensive nature of this
process either. Plastics created through chemical recycling
should not be exempt from taxation.
Although the threshold of 30% recycled material is a positive
step, we believe that it is unambitious when compared to the
European Commission’s approach, which levies a uniform 80 cents
per kilogram for non-recycled plastic. Perhaps, to drive a
substantial transition towards 100% recyclable materials, we
should consider increasing the threshold. I look forward to
hearing the Minister’s views about that.
We know that PPT raised £276 million in the financial year
2022-23. However, although that revenue is welcome, it is
imperative that we reinvest it in increasing the supply of
recycled packaging alternatives that are available to consumers.
Of course, the tax is designed to provide an economic incentive
for businesses to use recycled plastics and we must ensure that
the revenue generated by it supports that primary goal. The lack
of supply of packaging materials is hindering the transition away
from virgin plastics, so we must reinvest in creating high-value
jobs, increasing wealth and reducing the amount of plastic sent
to incineration, or indeed landfill.
We cannot ignore the substantial concerns surrounding PPT and its
effectiveness in achieving its intended purposes. We must address
the issues with the scheme’s roll-out, ensure that there is
fairness in taxation for imports, eliminate exemptions for
chemical- recycled plastics and raise the threshold to encourage
greater use of recycled materials. It is our collective
responsibility to safeguard our environment and economy through
smart and effective policies.
8.27pm
(Ealing North) (Lab/Co-op)
It is a pleasure to speak with you in the Chair, Mr Davies.
I congratulate the hon. Member for Amber Valley () on securing this debate on
HMRC’s enforcement of the plastic packaging
tax on imports. I am pleased to respond on behalf of the
Opposition.
As Opposition Members made clear throughout the introduction and
implementation of the plastic packaging tax
we support it as a tool to tackle plastic pollution. The tax was
introduced in April last year to provide an economic incentive
for businesses to use recycled plastic in the manufacture of
plastic packaging. By applying a tax on products that contain
less than 30% of recycled plastic, the tax was expected to create
greater demand for recycled plastic, which in turn would
stimulate increased recycling and collection of plastic waste,
diverting it from landfill or incineration.
Of course, today’s debate has focused on the enforcement of the
tax on imported plastics by HMRC. I understand that in 2022-23,
the first year in which the tax applied, 48% of the plastics
declared as being subject to it were flagged as plastics imported
into the UK, so I would be very interested to hear the Minister’s
response to the points made by the hon. Member for Amber Valley
about ensuring that the tax is applied correctly to imports and
making sure that there is a level playing field for UK
businesses.
More widely, as we make the transition to more sustainable
plastics, we know that concerns have been expressed in the
agricultural sector, among domestic manufacturers and in the
wider business community about how they will adapt to the
changing policy context. Indeed, I know that the hon. Member for
Amber Valley has spoken before about his concerns about the way
in which silage film was unexpectedly added to the list of items
caught by the plastic packaging
tax in guidance published in late 2021. He pointed out at
the time that that meant that industries had not prepared for the
change and that the cost would fall directly on farmers at a very
difficult time for them. That point was also made by the National
Farmers Union, which successfully secured a change of course by
the Government, with HMRC concluding early in 2022 that silage
film fell under an exemption from the tax.
Clearly, it would have been less disruptive if the Government had
taken their ultimate position in the first place, rather than
publishing guidance and then changing their mind. I would be
grateful if the Minister could set out some detail about what the
Treasury and HMRC have learned from the experience, and what they
are doing more widely to work with the agricultural sector and
businesses in the broader economy to assist with the transition
to more sustainable plastics.
Furthermore, although it is important to tackle less sustainable
packaging products from overseas, it is also important that we
build resilience here in the UK and have a clear, stable policy
environment to encourage investment in our country. I was
therefore concerned to note that, in response to the Government’s
recent announcement that they would consult on a new,
mass-balance approach to chemical recycling, the British Plastics
Federation noted that a
“lack of clarity to date has prevented companies from investing
in the UK and some have looked elsewhere to build
facilities.”
As the shadow Chancellor, my right hon. Friend the Member for
Leeds West (), set out last week, we
believe that Britain must rebuild its domestic resilience across
the economy. We must make more here in Britain while developing
robust supply chains so that we are less exposed to global
shocks. 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.
8.31pm
The Exchequer Secretary to the Treasury ()
It is a great pleasure to see you in the Chair, Mr Davies.
Let me congratulate my hon. Friend the Member for Amber Valley
() on securing this debate on
the plastic packaging tax
This world-leading environmental tax is designed to incentivise
businesses to use more recycled plastic packaging in their
production. As has been said, the manufacturers and importers of
plastic packaging that does not contain at least 30% recycled
plastic are liable for a new tax.
The plastic packaging
tax is one of a series of measures to drive more collection
and recycling of plastic waste, helping us to reach our ambitious
target to eliminate all avoidable plastic waste by 2042. However,
I recognise that some people make false claims about recycled
content in packaging and do not pay the taxes they owe, and they
not only undermine important environmental objectives, but create
an unfair and uneven playing field for businesses that are trying
to do the right thing. That was why we consulted extensively to
get all aspects of the tax design right, including taxpayer
obligations and the evidence required to back up claims of
recycled content. It is also why, since the plastic
packaging tax was introduced in April last year, HMRC has
been actively helping businesses to understand their obligations,
and developing a comprehensive enforcement and compliance
response to identify and tackle any non-compliance.
As I have mentioned, the tax applies to plastic packaging that is
either manufactured in or imported into the United Kingdom,
including plastic packaging that is already filled at the time of
importation. 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.
I want to address some points about evidence requirements. In
designing the tax, it was important that we struck the right
balance to ensure that claims were credible, while avoiding
placing a disproportionate burden on businesses. Essentially, the
challenge is that there is no scientific test to determine the
recycled plastic content of packaging. For that reason,
businesses are legally required to hold a body of evidence that
shows the origin and content of recycled material, the details of
manufacture or import of the individual plastic packaging
components, and the proportion of recycled plastic in the outputs
from the recycling process. As there is no one-size-fits-all
approach, the type of evidence required is not prescribed—there
is not one certificate. There can be a range of evidence, such as
contracts, certificates and purchase orders.
Let me directly address some of the specific comments made by my
hon. Friend the Member for Rugby (), who spoke about importers, as
did the shadow Minister, the hon. Member for Ealing North (). We recognise that importers
are a higher risk and must demonstrate the same standard of
record keeping as UK manufacturers. Where businesses do not have
or hold sufficient evidence for us to inspect, they must not
declare that their packaging contains at least 30% recycled
plastic, and they must pay PPT.
In addition, HMRC has a range of enforcement and inspection
powers at its disposal, as well as sanctions and penalties, but
the Government have also gone further by improving the
legislative environment to introduce criminal offences for
businesses that evade PPT. In a minute, I will come on to what
action HMRC has already taken in that area, because several
colleagues have asked for that information.
The Minister has acknowledged that, for reasons of safety, food
contact applications cannot, by their very nature, include
recycled material. I wonder whether he would accept that
the plastic packaging
tax should automatically apply to any imports of material
used where food contact is involved.
To be clear, the presumption is that businesses need to
demonstrate that they meet the threshold to have relief from the
tax. If they cannot do that, they must pay the tax. That is
clear, and I hope that that answers my hon. Friend’s
question.
Businesses are also required to carry out due diligence on their
supply chains and to demonstrate to HMRC what checks have been
carried out in their supply chains. HMRC can and will challenge
claims from businesses, and is doing so, and anyone in the supply
chain can be held liable. When assessing that liability, HMRC
will consider due diligence checks undertaken to ensure that the
supply chain has taken appropriate steps.
My hon. Friends the Members for Rugby and for Amber Valley both
talked about false and fraudulent claims. We are alive to that
issue, particularly as it relates, as they pointed out, to the
content of recycled plastic. We understand that that is a serious
impact for businesses that are just trying to do the right thing,
as I said at the beginning.
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. Recognising that some
businesses may need more time to fully understand their
obligations under the new tax, HMRC went even further and allowed
a 12-month soft landing period, during which the focus was on
education and support for businesses.
Now that that period has ended, businesses must ensure that they
have gathered appropriate evidence, filed their returns and paid
on time. Although HMRC continues to support businesses, it is now
also focusing its efforts and targeting its resources on the
areas of highest risk and non-compliance. The tax has been in
place for 18 months, so HMRC now holds more data from tax returns
to inform risk profiling and emerging trends. Its data-driven
approach will help to identify and target instances of error and
non-compliance. I will come on to what action has been taken in a
second.
As with general taxation, HMRC’s compliance activity for PPT
draws on a test and learn approach. That moves through various
phases, and approaches can change depending on what HMRC learns
along the way. Largely, it has concentrated on targeting
unregistered businesses that may have a liability and on
developing a better understanding of the plastic
packaging tax population, particularly given the tax is so
new, to build a risk compliance approach.
I want to address the question of registration. To reiterate,
over 4,000 businesses have registered for the tax in 2022-23. We
concede that that is lower than the initial estimate of 20,000,
but that estimate was made before the final policy decisions on
the tax were made. We were very clear that the estimate was
always subject to a lot of uncertainty. HMRC continues to engage
with businesses and hold them to account. I am pleased to say
that, since the tax was launched, 250 additional businesses have
now registered with HMRC.
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. They can also face
legal action to recover the tax; in the most serious cases, as I
have said, criminal prosecution may take place. My hon. Friend
the Member for Amber Valley asked for statistics on this. I can
tell him that so far HMRC has contacted 2,000 businesses
proactively and conducted 400 interventions on compliance since
the tax went live. So far, £3 million has been recovered as a
result of that action. I point out that HMRC will always be open
to receiving any information or evidence where businesses or
individuals feel that compliance is not in order.
I do not know whether the Minister knows this, but was the
enforcement action against the importer or against somebody
further up the supply chain?
I had anticipated the question, but was unable to obtain the
information in time. If we have that information, I will be happy
to follow up and write to my hon. Friend on the breakdown,
because he is focused on importers and it is a reasonable
question.
I will finally address the point on mass balance and chemical
recycling. I should point out that we have launched a
consultation on this matter. We are looking at it carefully and
will respond to that soon, so watch this space on that point.
As in other areas of tax fraud, the Government are committed to
taking strong action across the tax system to address any
activity that is unfair and that undermines businesses that are
doing the right thing. The plastic packaging
tax revenues in the first year, as has already been said,
were £276 million, which is broadly in line with the Office for
Budget Responsibility’s forecasts. That indicates that the amount
of plastic packaging subject to the tax is in line with
expectations. However, as hon. Members will have heard, work to
ensure that all obligated businesses are registered and compliant
with the tax continues to this day. If a business or individual
has specific concerns or, I reiterate, intelligence about tax
non-compliance, I encourage them to report it to HMRC through the
normal channels, so that we can ensure a level playing field for
everyone. Everybody in this Chamber has expressed a desire to
achieve that.
8.42pm
I have half an hour, Mr Davies, so I can wind up at great length.
I thank everybody who has taken part in the debate. Hopefully, it
has given us a chance to illuminate the issue and to give some
profile to the importance of getting this right. I think we all,
on all sides, want this tax to deliver its objectives; we all
want to see more recycling of plastic packaging. There has to be
a role for chemical recycling, because when it comes to anything
that comes into contact with food, we cannot use recycled content
through the manual route. That is a large percentage of the
plastic packaging going on the market, so more progress will be
needed in that direction.
I thank the Minister for the information he has given. I
certainly hope that HMRC will be alert to this issue and try to
ensure that the tax works as intended and achieves all the
objectives that we want it to achieve.
Question put and agreed to.
Resolved,
That this House has considered HMRC enforcement of plastic packaging
tax on imports.
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