Plastic Packaging Tax on Imports: HMRC Enforcement

Debate between Nigel Mills and Mark Pawsey

Tuesday 17th October 2023 Westminster Hall

[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 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.

[Mark Pawsey (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?

[Nigel Mills]

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.

[Mark Pawsey]

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?

[Nigel Mills]

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.