Tax on Packaging in Europe

by Rob Kaszubowski, CPP - Chainalytics

On January 1, 2008, the Netherlands implemented a tax on all packaging materials in a push for sustainability and reductions in carbon emissions. The main goal for the tax was to allow for the level of emissions in the packaging to be expressed in the market price to the consumer, as well as create a different standard of thinking in the selection of packaging materials and package design.

The tax is thought to be the first of its kind in Europe and will be used primarily to start a fund to help reduce waste and increase the rate of recycling in the country. Only the manufacturers and importers of pre-packaged products were held responsible for paying this tax.

For example: a Dutch manufacturer of dry cereal would be taxed upon delivery of their product to any retailer or wholesaler in the Netherlands. The manufacturer would be taxed for the plastic bag, paperboard box, corrugated shipper, pallet and any other secondary transport packaging materials.

The story for importers is rather similar. For instance, a U.S. beer maker ships their product to the Netherlands. That U.S. beer maker would then be required to pay the tax on the carton, bottles (or cans), pallets and other secondary packaging materials. This example would equate to an estimated tax of €.221 ($.294) per 24 pack of canned beer.

The tax is based on a calculation of CO² emissions from the production of each kilogram of packaging material. The eight materials included in the tax, in order from lowest cost to highest are: wood, glass, paper & corrugated, other materials, miscellaneous metals, biodegradable, plastic, aluminum. The 2008 rate for wood was €.0228/ kg ($.0138/lb - approximately), while on the other end of the scale, the tax for aluminum was €.5731/kg ($.3458/lb – approximately). These increased taxes are likely passed on to the consumer.

Back in 2002, Thailand had toyed with the idea of a packaging tax, but officials feared it would put their industry at a disadvantage to countries like Vietnam and China, who could supply cheaper labor. In 2003, Ontario, Canada also contemplated about charging additional fees based on packaging weight, yet they did not have the gumption to call it a “tax”. In the 1980’s and 90’s studies had been done in the United States to initiate a form of a packaging tax, but it was deemed that the political and economic implications far out-ranked the financial benefits.

Changes have already begun in the Netherlands 2009 plan to greater define the rules of who and what specific materials are taxed, as they look to standardize the process and calculations. Even with these changes the budgetary numbers for the tax do not expect to change this year. The tax is estimated to generate € 365 Million (Euros), or roughly $484 Million U.S. dollars, in revenue.

Europe has long been a trend setter in many different aspects, with the packaging tax to not be excluded. After the Netherlands initial implementation of the unique tax, Hungary and Belgium have also introduced a similar tax, with Belgium’s revenues expected to be over €300 million ($398 million USD). So far, there have been no further talks of such a tax starting up in the United States.