£200m landfill tax gap sparks call for reform

£200m landfill tax gap sparks call for reform

Apr 24, 2024

Waste crime costs over £1bn annually caused by the ‘massive gap’ in rates of landfill tax

A new report by think tank Localis called for reform of landfill tax to ‘cut down on waste crime’, including the involvement of organised crime.

Jonathan Werran, Localis chief executive, said: ‘Waste crime is toxic in that it spoils our natural environment, imposes costs on already cash-strapped councils and robs the Treasury of tax revenue.

‘Any serious attempt at place-based reform must look to addressing the iniquities and imbalances of how we tax it and then move to rigorous enforcement and prosecution of organised gangs.’

Landfill tax rates increased from 1 April to a standard rate of £103.70 per tonne and lower rate at £3.30 per tonne.

Since 2015 waste crime has risen in cost by 55% to an astonishing £1bn a year, with the report claiming organised gangs were exploiting the system or considering trivial fines they were handed as business costs.

In 2021 the gap in landfill tax was £200m (22.7%), showing that the tax collection system was not working efficiently, although the rates have increased significantly since the tax was introduced in 1996.

Receipts for landfill tax have also halved over the last decade due to the increase in ‘recycling and recovery technology, including increased capacity for energy recovery, which has led to a diversion of waste from landfills’, according to Localis.

However, the huge tax gap also suggests tax evasion and avoidance, with the ease of being able to misclassify waste, and the volume of it, as well as fly-tipping.

‘The simplicity and supposed fairness of a two-band system come at the cost of economic distortions, including market fragmentation, and a decrease in tax revenues,’ the report stated.

The Chartered Institution of Wastes Management (CIWM) suggested a middle rate of tax or closing the gap between the higher and lower rates, as it states the two bands ‘oversimplify’ the complex area and incentivise people and businesses to misreport waste.

Callin Linden, researcher at Localis, and author of the report, said: ‘Waste is not homogenous enough for two broad categories to be sufficient; by not differentiating between waste types of varying environmental impacts, the two tax bands oversimplify this complexity and fail to incentivise the separation and appropriate treatment of semi-polluting wastes.’

The amount of money spent on waste management by local councils has increased from just over £4bn annually to £5.2bn in 2023, funded by residents’ council tax.

As well as recommending a new waste tax band, the report points to research and development (R&D) funding, saying: ‘There is also a need to allocate a portion of landfill tax revenues to fund research and development aimed at advancing technologies for waste, recovery, reuse, and recycling.’ Additionally, funding towards the prevention of waste crime is an area that needs improvement.

To deter tax evasion Localis also called for strong powers for local authorities when enforcing taxes on waste and fines when it comes to fly-tipping, saying that the government must ‘increase transparency and efficiency in tax collection’.

John Rauch, chief executive officer, Augean, said: ‘Landfill tax has been a very important tool to divert waste away from landfill and to promote re-use, recycling and energy recovery.

‘We welcome this independent report, which acknowledges that some hazardous materials will always have to go to landfill. The report is an important contribution to public debate about the future of the landfill tax in sustainable waste management.’