Taxation is a subject guaranteed to get the blood boiling over dinner and boardroom tables everywhere.
The recent CBI Business Environment briefing docu-ment ‘Green Taxes – Rhetoric and Reality’ amply demon-strated that the rhetoric surrounding the implementation of taxes in general had very little to do with the practical reality of business in particular.
In fact, it highlighted what we all have known for decades – all taxation has very little to do with its particular title but a lot to do with swelling the Chancellor’s political and financial coffers. Ask yourself does the road tax we pay go on the road system? Of course not, it is a simple collection device.
The same can be said of the so-called green taxes on the packaging industry. Does the Chancellor really think that by imposing environmental taxes on the UK to the tune of £27.8bn, of which business contributes over half, companies will instantly become more fuel and energy efficient? No!
British manufacturing industry is often accused of being inefficient and lacking in investment. This is not the case for the UK packaging industry, a business that is constantly evolving new technologies and modern working methods, totally focused on customer needs in order to both survive and succeed.
In short, the imposition of taxes such as the Climate Change Levy (CCL) is an insult to the tremendous technological advances being made by our industry.
Pack providers and manufacturers have managed some of the best logistical transport solutions and clients such as Sainsbury have designed packs in such a way that more of the product can be loaded into the same space, thereby reducing the number of lorry runs.
“We consider that the approach adopted in the UK is inequitable and particularly harms the competitiveness of UK plastics companies which are not eligible for levy discounts under the IPPC negotiated agreement arrangements.”
With this backdrop, the question of tax harmonisation across the EU and, more importantly the EU Accession States, is highly critical. The EU 1997 average for environmental taxes was 6.7% of total tax revenue per country. In the UK the figure was 8.1% but this was prior to CCL so the position may, in effect, be worse.
The reasoning behind it being ‘worse’ rather than ‘better’ is that the UK’s political premise is to exceed the achievements of the rest of the EU-12.
Group tax manager of the RPC Group Helen Craik further widens the net. “We, like other packaging companies, are a very capital intensive business and the level of tax depreciation allowed on capital expenditure is a significant factor in determining the level of taxable business profits,” she says.
“Currently each country has a different method of calculating tax depreciation on assets resulting in different tax bases. The introduction of CCL in 2001 resulted in increased annual costs of £500 000 for RPC. To counter this there was an NI reduction of £125 000 but even this has now been taken out of the equation.
“We consider that the approach adopted in the UK is inequitable and particularly harms the competitiveness of UK plastics companies which are not eligible for levy discounts under the IPPC negotiated agreement arrange-ments.”
She agrees with the assumption that the CCL has increased the percentage of taxes collected as a total of taxes payable, saying “the current CCL rules penalise RPC compared with businesses operating in mainland Europe. Different approaches and climate change levy rates adopted by other EU countries leave us at a disadvantage.
“The debate on the 6th Environmental Action Programme on IPP and Thematic Strategies on Resource and Recycling has only just begun but the framework in those initiatives exists to introduce some form of material and/or product taxation,”
“Other governments have intro-duced more equitable criteria, enabling businesses to negotiate levy rebates in return for increased energy efficiency.
"Our view is that harmonisation of levy rates and negotiated discount agreements would benefit UK energy intensive manufacturing, enabling us to compete on a more level playing field.”
Ian Dent of The Packaging Federation further reinforced this view. “Any harmonisation of the CCL would benefit the UK,” he said. So what is going on in Brussels concerning the harmonisation of taxes pertaining to the UK packaging industry as a whole?
“The debate on the 6th Environmental Action Programme on IPP and Thematic Strategies on Resource and Recycling has only just begun but the framework in those initiatives exists to introduce some form of material and/or product taxation,” says Mr Dent.
“This would impact on the UK Packaging Regulation system based as it is on laissez-faire economies and could be used as a political weapon to attack products such as PVC.”
Harmonisation is a big issue but a much bigger issue is the imbalance in taxes such as CCL. Is it a can of worms for the packaging industry? No! More like a trawler load of conger eels ready to bite the packaging industry’s hand off!