Due to the increase in domestic and
industrial waste that was being produced, the British government decided to
introduce a tax to encourage consumers and companies to produce less waste and
to recover value from the waste produced e.g. by recycling etc. The tax was
called the “landfill tax”, it was the United Kingdom’s first tax with an
explicit environmental purpose. It was introduced in October 1996.
Originally the tax was to be calculated based
on an ad valorem basis as opposed to a weight basis. However, taking all things
into consideration the ad valorem basis was regarded as being unfavorable to
smaller businesses. Thus in response to pressure from various bodies, the
government decided that that the landfill tax would be calculated based on
weight.
The tax had two main environmental
objectives:
·To ensure that the tax is set at a level
to reflect the environmental cost of the waste, and
·To promote waste management either by
reducing the amount of waste produced or increasing the amount that is reused or
recycled.
At
the time of the introduction of the tax, the rate was set at a level to reflect
the costs of the externalities imposed by landfill which are not reflected in
the price charged by site operators to waste producing
companies.
When the landfill tax was first introduced on
October 1, 1996, inactive waste was taxed at £2 a tonne and all other waste at
£7 a tonne. On March 17, 1998 the Chancellor of the Exchequer increased the
standard rate of landfill tax from £7 a tonne to £10 a tonne, effective from
April 1, 1999. The lower rate was frozen at £2 a tonne.
It
was also announced that the landfill tax standard rate would be increased
annually by £1 a tonne for at least
5 years, thereby the rate would be £15 a tonne in the year 2004. This annual
increase is designed to encourage companies and individuals to look for more
ways to recycle waste.
As
mentioned above there are two rates of tax. The lower rate of tax applies to
inactive waste which is broken down into nine groups. The nine groups are as
follows: - rocks and soils, ceramic or concrete materials, minerals, furnace
slags, ash, low activity inorganic compounds, calcium sulphate, calcium
hydroxide and brine, and water. There is then a detailed listing of what waste
actually falls into each of the groups. If the waste is not listed under any of
the nine groups it is subject to the standard rate of
tax.
Originally there were four categories of
waste that were exempt from tax: domestic pets buried at pet cemeteries;
dredgings removed from inland waterways and harbors; mining and quarrying waste;
and waste arising from the reclamation of contaminated land. Pet cemeteries are
addressed above as there is a quirk in environmental law that requires pet
cemeteries to be licensed as landfill sites. There have been two additional
exemptions from the landfill tax which have been added to the original four.
These additional exemptions are effective from October 1,
1999.
The exemptions are for inactive waste defined
within one of the above nine groups which is used for the following
purposes:
·Restoring to use a landfill site or part
of a landfill site, or
·Filling new, existing or former
quarries.
These additional exemptions were the
result of a shortfall in the
availability of suitable inactive materials to fill in working and old quarries
and the restoration to use of landfill sites. This shortfall of suitable
materials was found to be a direct result of the landfill tax.
All landfill site operators are required to
register for the landfill tax regardless of the amount of taxable disposals that
they make. It is the landfill site operator’s to file a return normally on a
quarterly basis and pay over the landfill tax to Customs by the due date. In
general, the due date is the last working day of the month following the end of
the return period.
However, the government did set up a tax
credit scheme for landfill operators called the Environmental Bodies’ Scheme.
The environmental bodies credit scheme allows landfill operators to claim up to
90 per cent landfill tax credit against donations they make to environmental
projects, subject to these credits not exceeding 20 per cent of their annual
tax bill. These donations must be
spent on approved environmental projects. The scheme and the projects that the
donations are spent on is regulated by ENTRUST, a non-profit-making private
sector company appointed by Customs.
On
September 6, 1999, HM Customs and Excise issued an Extra Statutory Class
Concession to allow credits from certain qualifying contributions to be claimed
early. This change was introduced to improve the cash flow of businesses by
enabling operators who are enrolled in the scheme an additional month every
quarter to claim their tax credits. The Government hopes that this change will
encourage more operators to join the scheme and increase donations to approved
environmental projects.
There is evidence that the landfill tax has
reduced the amount of waste that is tipped, and more waste is now being reused
or recycled. However, there has been an increase in fly-tipping, which is deemed
to be a direct result of the landfill tax.
It
is worth noting that the British Government is taken a hard-line approach to
environmental issues. On November 4, 1999, Andrew Harris a haulage contractor
and farmer from Wales was sentenced to 12 months for knowingly fraudulent
evasion of landfill tax.
Sources:
Review of the
Landfill Tax: Report March 1998 HM Customs &
Excise.
HM Customs
& Excise: Notice LFT1: A general guide to landfill tax, June
1997.
HM Customs
& Excise: Landfill tax information note 1/99 31 July 1999, Restoring
Landfill sites and filling quarries.
HM Customs
& Excise: CE9 17 March 1998.
HM Customs
& Excise: CE5 9 March 1999.
HM Customs
& Excise: Landfill tax briefing 6 September 1999.
HM Customs
& Excise: News release 38/99 6 September 1999.
HM Customs
& Excise: News release 4 November 1999.
Accountancy
Magazine January 1995 and March 1997
issues.
