Press Room
Plastic bag tax could net treasury £130 million per annum
says Grant Thornton
Wednesday 21 November 2007
"Plastax" would have negligible effect on Treasury
coffers; revenue should be ring-fenced for green initiatives.
Leading business and financial adviser Grant Thornton says Gordon
Brown's promise to tax plastic bags into extinction could net the
Treasury an additional £130 million* in its first year if a
conservative 10p per bag tax was charged.
Using the Ireland "plastax" experience as a model**, the Government
could realistically expect a 90 per cent reduction in plastic bag
consumption within three months of implementation and revenues from
the charge to plateau at approximately £10.8 million per
month.
Maurice Fitzpatrick, a tax expert at Grant Thornton, says the
Ireland plastax model provides compelling evidence of the potential
for a tax on plastic bags to succeed in the UK.
However, despite its success, Fitzpatrick warns that the public
will only accept the introduction of yet another green tax if there
is either cash incentives for individuals or revenue from the tax
is seen to be directly funnelled into grants or initiatives that
contribute to reducing the UK's carbon footprint, as has been done
in Ireland through an Environment Fund - a fund controlled by the
Minister of Environment and utilised only for environmental
purposes.
"The public aren't going to stomach yet another revenue raiser in
the guise of a green tax, but if the carrot on the other side is
immediately obvious, such as rewarding individuals for using
reusable or biodegradable bags with a cash incentive, then the
plastic bag tax could definitely gain the public's acceptance,"
says Fitzpatrick.
"Plastax had an immediate effect in Ireland with plastic bag
consumption dropping by 90 per cent within three months. If this
experience was to be repeated in the UK, then the Government could
expect the use of plastic bags to drop from around 1.1 billion per
month to about 110 million per month after one quarter."
The expected cost of fighting climate change in the UK has been
estimated at anywhere between £1.6 billion to £12 billion per
annum***. For the Government to help fund that fight, it will
require a steady stream of income and as a result, the UK public
should expect constant tweaks and turns to green tax policy in the
future as it is one of only a few taxes that can be a "victim of
its own success".
"The reality facing the Treasury is that an appropriately levied
green tax will result in a change in behaviour which then decreases
revenue from that tax, and as revenue decreases and the goalposts
change in the fight against climate change, so too will the target
of the taxes. Today it's plastic bags, but tomorrow it might be car
tyres."