Introduction of the plastic tax

Multiple countries are enacting legislation with a distinctly ‘green’ agenda. More recently, this year in April 2022 we oversaw the introduction of the plastic tax in the United Kingdom.

Italy is enacting similar legislation with the introduction of the plastic tax on 1st January 2023.

In many respects analogous to its UK counterpart, it aims to incentivise the use of recycled plastic.

The below provides a summary of the main changes:

  • The tax applies to manufactured products for single use (MASCI)
  • All plastic is included with some exceptions (including compostable plastics, recycled plastic and plastic used for medical ends)
  • As in the UK, the tax is not set as a fixed percentage but will be charged at 450 Euros per tonne of plastic
  • The tax must be reported quarterly.

Spain is also enacting similar legislation. Please refer to this month’s Spain compliance updates for further information.

Introduction of the plastic tax

As seen earlier this year in April in the United Kingdom, and more recently in Italy this month, Spain is introducing a new plastic tax, effective from 1st January 2023. This is in line with the recurring trend across Europe to introduce fiscal measures with a distinctly ‘green’ agenda.

To this effect, the Spanish Congress has passed Law 7/2022 dated 8 April 2022. As in the United Kingdom and Italy, the underlying motivation behind this fiscal initiative is to encourage the reduction of non-reusable plastic, as well as promote the recycling of plastic waste.

Key elements of the tax include:

  • The tax applies to non-reusable plastic containers; products made of semi-finished plastic that will be used to create non-reusable packaging and plastic products that are used to close, trade, or display non-reusable containers
  • These components will generally become taxable when delivered to the customer
  • As in the United Kingdom, the tax is not set as a fixed percentage but is expected to be taxed at 0.45 Euros per kg.

Italy is also enacting similar legislation. Please refer to this month’s Italy compliance updates for further information.

Plans for CO2 tax

The Danish government has outlined an ambitious aim of reducing greenhouse gas emissions by 70% by 2030.

To this effect, on 20 April 2022, the Danish government announced some green tax reform measures, including the introduction of a new CO2 tax. This will include a fixed minimum amount per tonne of C02.

The Danish government will implement this across companies in a phased approach, between 2025 and 2030.

Online sales tax for e-commerce

The UK Treasury is considering whether a 1% online sales tax needs to be applied on e-commerce goods and services.

The e-commerce trade has seen a radical increase – fuelled significantly by the Covid-19 pandemic- and it is no coincidence that the government is reviewing its fiscal measures at a time when e-commerce has grown exponentially over the past 2 years.

An open consultation to this effect has been launched from 25 February 2022 until 20 May 2022.

The proposal of the online sales tax aims to rebalance the taxation of the retail sector between online and in-store retail.

Information on the public consultation policy can be found via the following link.

Plastic Tax developments

Our recent compliance updates have shown a sharp increase in countries enacting legislation with a ‘green’ agenda. More specifically, we have seen the introduction of the Plastic Packaging Tax in the United Kingdom from 1 April 2022.

Spain is now promoting a similar incentive. On 9 April 2022, Spain published Law 7/2022 on Waste and Contaminated Soils. This is being introduced to fight climate change and for the preservation of the marine environment.

To achieve this, specifically, Spain is seeking to transpose the following 2 European EU Directives:

  • Directive 2018/851, which aims to modify the Waste Framework Directive
  • Single-Use Plastic Directive 2019/904, which aims to alleviate the environmental impact of certain plastic products.

Aligning with EU regulations is viewed as the most effective way to achieve these goals.

Proposed tax rate reduction for zero-emission technology manufacturers

In the federal budget in Canada, there is a proposal for a temporary reduction in corporate income tax for any entities that qualify as zero-emission technology manufacturers.

This is currently being discussed, and draft legislation to this effect has already been included in a package of draft legislative proposals on 4 February 2022 by the Department of Finance.

New Digital Tax Act

Canada’s department of Finance has released a draft of the Digital Services Tax Act (DSTA). This Act covers a wide array of entities- both residents and non-residents who engage with online users in Canada. The tax is proposed to be set at 3%, and it is expected that this will become payable in 2024, in respect of revenues earned from January 2022.

As this is a draft only, dates are provisional, and we can expect more concrete information in the coming months.

Background to digital tax & proposal of new digital tax

Fiscal measures that countries are deploying also demonstrate how obligations for digital businesses are coming more sharply into focus.

Mexico is planning to enact a 2% Digital Services Tax on commission received by online marketplaces. Funds raised will be spent on improving Mexico City’s infrastructure.

This builds on earlier taxation developments in the digital landscape in Mexico which took place in Mexico in June 2020, where Mexico applied 16% VAT on digital services provided by foreign businesses.

The Mexican Tax Authorities have published a list of non-resident companies that have registered for VAT further to the introduction of Mexico’s new digital VAT obligations in June 2020. There is a wide scope of companies affected, showing the extent of companies affected by the digital VAT obligations.

With digital obligations becoming more prevalent globally, we can expect to see other countries enacting similar measures in 2022.

Introduction of carbon tax

In line with several other countries introducing ‘greener’ tax measures, Austria is implementing a carbon tax from 1 July 2022. This aims to curb greenhouse gas emissions.
Austrians will need to pay 30 Euros per tonne of CO2- this will rise to 55 Euros per tonne in 2025. The incentive behind this measure is to reduce reliance on carbon-intensive forms of transportation and heating, as well as opting for more climate-friendly choices.

Isle of Man Notice on Plastic Packaging Tax (PPT)

The Isle of Man fiscal structure is virtually identical to that of the United Kingdom – and so it isn’t surprising to see that the Isle of Man Treasury have published some guidance on the UK Plastic Packaging Tax (PPT).
This guidance includes a link to the UK HMRC website, which provides detailed information relating to PPT. The link can also be accessed here.

B2G e-invoice mandate

The Australian government has announced to mandate e-invoicing for all levels of government by 1st July 2022 as part of the Digital Business Plan. Australia operates its e-invoicing system based on the PEPPOL framework. To send or receive an e-invoice, a business must connect to the PEPPOL Network through an Access Point. Australia’s Tax Office manages a registry of Access Point servers that have been officially accredited by the tax office.

Vendor registration to open for ‘Qualified Invoice Retention System’ from 1st October 2021

Japan will introduce a new qualified invoice regime for Japanese Consumption Tax (JCT) effective 1 October 2023. Under the current ‘Transitional Invoice Retention System’ (effective since 1 October 2019), in order to claim a JCT input credit, taxpayers are required to comply with certain bookkeeping and invoice retention requirements. This includes the recording of general information, such as the name of the vendor, date of transaction, consideration paid for transactions, etc.
Under the ‘Qualified Invoice Retention System’ (effective 1 October 2023), in addition to similar bookkeeping and invoice retention requirements, a taxpayer will only be able to claim an input JCT credit from a JCT-registered vendor.
To become a JCT-registered vendor and issue a qualified invoice, vendors must submit the appropriate application to the National Tax Agency (NTA). JCT exempt entities will be ineligible to become a registered vendor.
The application for this registration will begin on October 1, 2021, and in order to become a registrant by 1 October 2023, the vendor should file the application with the relevant tax office no later than 31 March 2023. The NTA will publish a list of registered entities on its website.