TaxIndustry has significant concerns surrounding increased government intervention in waste management regulation and the imposition of a waste management charge or tax.

The Waste Management Amendment Act of 2014 requires an Act of Parliament to give effect to a national pricing strategy for waste management charges. A discussion document was published by the Department of Environmental Affairs (DEA) last year in this regard. The strategy aims to explore the implementation of economic instruments as part of a basket of policies to mainstream Extended Producer Responsibility (EPR), reduce the generation of waste, increase the diversion of waste from landfill and support the growth of a regional secondary resources economy.

According to Packaging SA, the Pricing Strategy discussion document that was gazetted last year alludes to the fact that the EPR scheme will become government managed as well as to the introduction of a SARS collected “waste management charge”. It also suggests that existing schemes in place will have two years to align their funding models to the Pricing Strategy and the Act and that industry will have to apply for its funding through a newly created entity within the DEA called the Waste Management Bureau (WMB).

 

Industry response

While Packaging SA agrees firmly with the premise of cleaning up the environment, maximising the diversion of waste from landfill, promoting recycling and creating employment and a growing the second resources economy, the organisation has raised a number of concerns around this proposed new policy.

For starters, the local converting industry, in the main, is not in good economic shape. Additional costs in the form of taxes will likely make matters worse and this may lead to increased automation and job losses, explains Charles Muller, executive director of Packaging SA. Imports of packaging and packaged goods in all likelihood will increase and taxes will further place local industry at a structural competitive disadvantage to foreign packaging companies.

Furthermore, revenue collected by Treasury via SARS will not be ring-fenced and consequently other governmental spending priorities such as education, healthcare, and infrastructure may result in funding not becoming available to run the existing initiatives.

“Industry could also abdicate responsibility for all the voluntary and successful initiatives that are currently in place – they certainly won’t pay a mandatory tax as well as continue to voluntarily support the initiatives that they currently fund,” says Muller. “There could be another Buyisa-e-bag debacle where plastic bag taxes destined for environmental activities have seldom materialised.”

In addition to this, lack of or delays in funding through the WMB may result in the collapse of the existing successful Material Responsibility Organisations (TGRC, COLLECT-A-CAN, PETCO, POLYCO, PSPC, SAVA, PRASA) who are currently responsible for thousands of jobs.

South Africa’s paper and packaging collection rate is currently in excess of 52% (and increasing) and compares very favourably with many first world countries. However, Muller fears that there may be a regression in recycling rates such as the ones that occurred in Hungary and other parts of the world where the government has introduced taxes.

 

Building a partnership

Packaging SA’s stance is that there should be a trusting, collaborative partnership between government and industry. Government must be part of the solution but cannot be the solution. The EPR scheme should be industry managed, low-cost, simple and transparent.

In addition to this, Packaging SA wants a mandatory separation-at-source of paper and packaging in households. “We cannot meaningfully get the rates up without this,” says Muller. Moreover, in order to reduce littering and to encourage the responsible disposal of litter, education and awareness programmes should be implemented for consumers, at places like schools.

“Packaging is an integral part of protecting, preserving and containing food – society can ill-afford any unnecessary interference on its supply. All cost increases within the value chain will be passed on to consumers and, as a large part of packaging is used in basic foodstuffs, the lower income groups will unfortunately probably suffer the most. Consumers at large just cannot afford any further taxes,” concludes Muller.