Could Commission VAT plans provide a boost for secondary material markets?

Products with high recycled content could be given lower VAT rates to stimulate demand in secondary markets, following a new proposal by the European Commission.

Last month, the European Commission proposed that member states should have more flexibility in changing the VAT rates they apply to different products, and FEAD, the European federation that represents the private waste management industry across the continent, says that this gives nations an opportunity to pursue the EU’s environmental objectives.

The body, which has a membership of around 3,000 companies, says that while the Commission is exploring several routes to boost the demand of recyclates, it believes that fiscal incentives, like lower or zero VAT rates on products with recycled content, should be considered, and could be enabled by this proposal.

In a statement, the organisation said: ‘The new proposals on VAT will enable Member States to put in place, upon national choice, reduced or zero VAT rates for their selected categories of products. FEAD advocates such a choice to be left to member states, allowing products with recycled content to be possibly selected amongst those benefiting from reduced VAT rates.’

The UK Government announced in November plans to investigate the possibility of introducing a tax on single-use plastics (though as Environmental Audit Committee (EAC) Chair Mary Creagh noted this week no call for evidence has been forthcoming), but with pressure on the domestic recycling industry being ramped up by China’s ban on waste imports there is a pressing need to develop secondary markets for recycled materials.

Resources Minister Therese Coffey suggested at a meeting of the EAC at the end of January that Defra is “considering whether we should set regulatory limits on the proportion of recyclate going into materials”, which the Commission’s proposal could facilitate.

The European Council, which has yet to confirm the terms of the Circular Economy Package’s legislative amendments, now has to agree with the Commission’s proposal.

FPA calls for taxes to be used to increase recycling

Elsewhere on the subject of tax, the Foodservice Packaging Association (FPA) has called for all taxes raised to be directed to increasing recycling and reducing litter. At its annual Environment Seminar, the organisation discussed packaging responsibility reform, saying that changes to the UK’s current system should play a significant role in the government’s review of packaging taxes or charges.

Speaking at the seminar, Lord Deben, Environment Secretary from 1993 to 1997, emphasised that reform through the PRN systems would be fast, effective and cost less than levying new taxes or charges: “We can use this opportunity to great effectiveness and use the money collected to create a fund to do two things. Firstly to create a resource for local authorities to bid for, so that they can create infrastructure for on-the-go collection and recycling, particularly in town centres, leisure facilities and places of natural beauty. Secondly, to kick start recycling facilities, because we are going to need more facilities to cope with increased recycling and we need consistent infrastructure and labelling.”

Martin Kersh, Executive Director of the FPA, added: “With this reform, all taxes and charges can be channelled indirectly, without the need for a cup tax, DRS or a tax on single use plastic. We are also calling for national standardisation of recovery and recycling materials to make things simpler and easier for the consumer to understand.”

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