Law replacing landfill tax introduced

(Pic : South Wales Argus)

Earlier this week, Finance & Local Government Secretary, Mark Drakeford (Lab, Cardiff West), introduced the second Bill to establishes a new Welsh tax. It followed hot on the heels from the law to replace stamp duty – which was introduced in September.

The Landfill Disposal Tax Bill will (unsurprisingly) replace landfill tax in Wales from April 2018.

In 2015-16, Wales raised £44million in landfill tax, while recycling rates continue to climb. At the same time, the number of landfill sites/tips are expected to fall from 25 in 2016 to just 10 in 2020 as more unrecyclable waste is incinerated to generate energy and/or the amount of waste sent to landfill falls.

The Welsh Government have long had a goal of a "zero waste Wales", setting targets for recycling rates to hit 70% by 2025 and reduce overall waste generation by 27% compared to 2007. It's one of the few policy areas where Wales leads the way in Europe, not just the UK.

There have been concerns that current landfill tax is susceptible to, and even incentivises, tax evasion (such as the big difference between standard and lower rates), while it's also been open to fraud. So there was a need for a modernised, easier to understand version of the tax.

What does the Landfill Disposal Tax Bill propose?

Bill (pdf); explanatory memorandum (pdf).

The Tax, Exemptions & Reliefs

• The tax will apply to "taxable disposals".
• "Taxable disposals" includes anything which is deposited – whether in a container or not - on the surface or underground as waste (the meaning of which can be modified by regulations) at an authorised landfill site, subject to an environmental permit.
• Exemptions (which can be modified via regulations) include:
• Temporary use of material
• Multiple disposals of the same material at a single licenced landfill site (which will count as one disposal)
• Waste-to-energy generation (biomass or incineration)
• Domestic pet remains
• Tax reliefs will be available for:
• Dredging
• Mining and quarrying material
• Re-filling former quarries
• Site restoration

Who pays the tax? How much?

• The operator of an authorised landfill site will be responsible for paying the tax.
• The amount of tax payable will be calculated by multiplying the number of metric tons being disposed (measured via an officially-approved weighbridge) by the standard rate.
• The rate of tax applied will be determined via regulations (the standard rate is currently £84.40 per metric ton, with a lower rate of £2.65 per metric ton for less-hazardous waste). Any regulations will need the approval of the National Assembly.
• What material qualifies for the standard rate or the lower weight will also be determined in regulations, subject to Assembly approval.
• Discounts can be applied for water present in the disposed waste.

Tax Collection & Management

• The Welsh Revenue Authority (WRA) will be responsible for maintaining a register of all taxable operators, while anyone undertaking taxable activities will have a duty to register and notify the WRA of any relevant changes in circumstances (like ceasing operations).
• Tax returns must be submitted to the WRA on a quarterly basis.
• Arrangements for payment are as set out in the Tax Collection & Management Act 2016.

Fly-Tipping & Non-Disposal Areas

• Landfill disposal tax will be applied to "knowingly" unauthorised disposals (meaning any disposal made anywhere other than an authorised landfill site aka. "fly-tipping").
• Those subject to tax under these circumstances will be allowed to appeal, but will need to prove to the WRA or a tribunal that they didn't knowingly dispose, or knowingly permit disposal, of waste at an unauthorised site.
• The rate of tax applied to unauthorised disposals will be set via regulations but is likely to be significantly higher than the standard rate to discourage tax evasion and increase the financial penalties for fly-tipping.
• These measures will be in addition to, not a replacement for, existing environmental laws and punishments related to fly-tipping.
• The WRA will be able to designate areas of authorised landfill sites as "non-disposal areas" where material that isn't going to be disposed as waste can be kept and recorded (i.e. pre-recycling and incineration sorting areas, storage for site restoration).

Offences

All fines will need to be paid within 30 says of a penalty being issued; these are on top of fines and penalties included in the Tax Collection & Management Act 2016:

• Failure to determine weight of disposal properly – fine of up to £500.
• Applying water discount incorrectly – fine of up to £500.
• Carrying out taxable operations whilst unregistered – £300 fine, plus an additional £60 a day for each day they continue operations if they don't register within 10 days of the first fine.
• Failure to properly record what's stored/kept in a non-disposal area – fine of up to £5,000.

Costs & Benefits

If Wales had opted not  to introduce a replacement for landfill tax, it would've almost certainly led to increased "waste tourism" from England, and blown a £20million+ hole in the Welsh Government's budget. Also, it's claimed a difference in tax rates with England of as little as £10 a metric ton would  fuel "waste tourism" too – so landfill tax rates in Wales are either likely to be the same as, or higher, than in England.

It's expected the up-front costs – in terms of policy familiarisation, and the costs of establishing the WRA – will be in the region of £5.82-7.32million over five years. The cost of collecting the tax itself is expected to be between £2.8-4million a year from 2018-19.

The UK Office of Budgetary Responsibility (OBR) estimates landfill disposals tax will raise £27million a year for the Welsh Government in 2018-19, falling to £23million in 2021-22 – so regardless, the measures will generate more money than they cost.

It's been hinted by the Cabinet Secretary that at least some of the money raised will be used for environmental and community projects in areas negatively-affected by landfill.

As for why the future estimates are significantly lower than the amount currently raised in landfill tax, that's due to forecast increases in recycling rates, meaning less rubbish being sent to landfill and less tax generated.

To put things in perspective and show you what a mighty fiscal lever this is - benevolently and graciously granted by our betters in London - it's about 0.2% of Wales' annual devolved budget.