Eco-tax to encourage product return schemes

The government yesterday insisted that the new eco-tax levied on a number of products was not intended as a revenue-generating exercise but was a drive to convince operators to introduce product return schemes.

The Parliamentary Secretary in the Finance Ministry, Tonio Fenech, told The Sunday Times that the government was determined to go ahead with the implementation of the environmental tax in a fortnight and dismissed comments that it would create upheaval among operators.

Last Wednesday the government announced the introduction of an eco-contribution intended to raise money partly to offset the cost of waste management and to help nurture a national conscience to produce less waste. The tax ranges from 1c for some bottles to 10c per battery to Lm15 for colour TVs.

As expected, the initiative has triggered a chorus of disapproval, most notably from the GRTU - the Chamber of Small and Medium Enterprises.

But in an interview yesterday, Mr Fenech said it was high time to introduce the "polluter pays" principle.

"We cannot keep talking about improving the environment, the need to avoid another Maghtab landfill and the building of engineered landfills, but then we're not willing to put our money where our mouth is," Mr Fenech said.

The government's first intention was to reach an agreement with the private sector to introduce returnable schemes so that a product placed on the market would eventually be returned to the supplier rather than thrown into the waste system, he said.

The first sector tackled was bottling. However, while the local bottlers were keen to introduce schemes to reuse and recycle their bottles they had failed to find sufficient support from the importers, Mr Fenech explained.

It was important for all stakeholders to participate in such schemes to avoid the risk of market distortions, he said.

The government therefore decided to forge ahead with the legislation, which showed that whether people participated or not in the system, they still had to pay for their waste.

However the law allows for subsidiary legislation to ensure that if the private sector does come together for reuse schemes, the government can remove the eco-contribution for those particular products.

Asked why the government did not opt to introduce the tax as a percentage of the product price, rather than a fixed rate, irrespective of its cost, Mr Fenech said this had been contemplated.

"We made an assessment of how much it would cost to dump an item into the waste stream and draw up a cost. But ultimately the cost of dumping a fridge, for example, is the same, no matter how much the item costs."

He insisted that most of the taxes levied (especially on mineral water bottles) would not even compensate for the cost of the waste process the items generate.

Initially the plan was to impose a 2c eco-tax on beverages (instead of 1c), but the Federation of Industry agreed on a four-month time-line to bring the stakeholders together and devise a returnable scheme.

If the private operators agreed how the system would operate in the upcoming working committees, then the eco-tax system would be shifted to the private sector.

Mr Fenech said he was unimpressed by claims that the government was taxing the people on essential products.

"In reality the items we selected are not items one can't do without. Fine there are some white goods, but how many fridges does one buy in a lifetime?" he asked.

It was estimated that the tax would only have a minimal effect of 0.84 of a percentage point on the Retail Price Index.

Mr Fenech said the scheme encouraged the consumer to use more eco-friendly products, like beverages bottled in glass, and rechargeable batteries. At the same time, items like vehicle tyres were a huge cost to the waste stream.

He insisted that the Lm4 million to be raised through the eco-tax would only partially offset the waste bill. In effect, the government was still out of pocket where waste collection was concerned.

It was worth pointing out that within the legal structure there were already obligations that operators have to recollect a certain portion of their waste, something that has been ignored for years, he said.

Mr Fenech rebutted the GRTU's claims that the system will be hard to implement.

Small businesses and retailers have been excluded from the system and the tax would mainly effect importers and the producers, both of whom fill VAT returns.

They will now be asked to submit another return, which requires them to list what they would have imported and in what quantities, data that can be obtained at the touch of a button, Mr Fenech said.

"It's definitively not a cumbersome system and certainly does not provide a barrier to any trade."

Asked to respond to protests that the tax would ultimately burden the consumer further, Mr Fenech did not mince his words:

"We still have a Lm95 million deficit and we are still living beyond what we can afford. There is a cost to everything. If we don't want to increase our deficit and don't want another Maghtab landfill then we have to pay for it. The EU is paying more than 70 per cent of the capital expenditure to create engineered landfills and other projects. But we are still footing a huge bill for the recurrent expenditure."