The willingness to look at the PRN regime and offsetting was signalled in the government’s response to an Environmental Audit Committee’s report published in July this year. In that report, ‘Growing a circular economy: Ending the throwaway society’, (see letsrecycle.com story), MPs called for lower VAT rates for products with a high recycled content.
In its response to the recommendations of the report, published on Saturday (November 1), the government said that it was unable to offer differential VAT rates based on the environmental impacts of products due to European law and the difficulty in securing EU-wide agreement for change.
It stated: “Member States are allowed to implement a reduced rate of VAT for certain goods and services, as listed in Annex 3 of the VAT Directive. However, there are no specific provisions that allow for actions to encourage the use of recyclable materials and therefore any changes would require amendments in EU law… Recent discussion in this area makes it clear that it would not be possible to reach such agreement.”
But, the Committee looks likely to continue to badger government over the VAT concession. Responding to the government’s line on this, Environmental Audit Committee chair Joan Walley, the MP for Stoke-on-Trent North, called for it to push harder for VAT reforms within the EU.
She said: “If the government is unable to introduce differential VAT rates on recycled products under existing arrangements, ministers should make the case for a change in the rules at an EU level as part of the discussions due to take place on the Commission’s Circular Economy proposals.”
Incentives
Despite reluctance to pursue incentives through revised VAT rates for products, the government did indicate that the option of a reform of the Packaging Recovery Note system could include looking at an offset for the use of recycled products.
It added that it would seek to ensure that the producer responsibility system provides a ‘fair distribution of costs’ which encourages innovation and ‘incentivises collaboration, where this enhances value in recyclate’.
“This may include incentives for manufacturers to produce recyclable goods, and/or for end-users and the waste management industry to preserve value.”
The Environmental Audit Committee also called on the government to set out regulations to phase out products that are made from materials which cannot be recycled and explore a requirement for extended warranty periods for products. However, the government stated that it agreed with the proposal ‘in prinicple’ but said that the measure is likely to represent a ‘direct cost’ to businesses and must not undermine the statutory rights of consumers.
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