Plastic Packaging Tax on Imports: HMRC Enforcement

Debate between Nigel Mills and Philip Davies

Tuesday 17th October 2023 Westminster Hall

[Philip Davies (in the Chair)]

The sitting is resumed! The debate may continue for another 52 minutes, which will take us to 9.10 pm.

[Nigel Mills]

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.