The Welsh Government has launched its third and final consultation on its devolved landfill disposals tax, which is set to come into force in 2018.

The Wales Act 2014, passed recently by Parliament, sets out new fiscal powers for Wales, including the devolution of landfill tax, stamp duty land tax and an element of income tax (subject to a referendum), which will apply in Wales from April 2018.

The Welsh Government consulted on the collection and management of the devolved taxes last year, and is now consulting on how the operational priorities and processes of the tax collection and management system can be developed.

It is expected that the government will bring forward an assembly bill in summer 2015 setting out its final proposals. This will enable the next Welsh Government to introduce legislation on these taxes soon after its next election (5 May 2016).

It is hoped that the powers will ‘develop an approach which is better suited to Welsh circumstances and priorities’.

Landfill tax history

The Landfill Disposals Tax Consultation outlines that the incremental rises in UK landfill tax (first introduced in 1996) has contributed to a ‘significant reduction’ in the proportion of waste sent to landfill, with the total tonnage landfilled in Wales falling by 52 per cent between 2001 and 2013.

However, revenue raised from the tax in Wales has, to date, been paid to the UK government. Under the new proposals, any monies raised from the landfill tax in Wales (which in 2013/14 accounted for £50 million) would instead go to the Welsh Government, and – like the current Landfill Communities Fund – could be used to help fund community wellbeing projects.

The Welsh Government has said it will be seeking to ‘modernise’ the tax, and use it as an additional lever to support its waste policies, such as its goal to send less than five per cent of waste to landfill by 2025.

‘Those who illegally dispose of waste will be required to pay the tax twice’

Launching the consultation yesterday (24 February), Finance and Government Business Minister Jane Hutt said: “The existing landfill tax has been around for almost 20 years, and we are keen to explore ways in which we can modernise the administration of the tax, enabling it to operate more efficiently, minimising the burdens on business. However, we are not looking to introduce changes where they are not warranted and recognise that there may be areas where it is preferable to maintain consistency with England and Scotland.”

Touching on landfill tax evasion, avoidance and fraud, Hutt said: “I want to ensure that all those who have waste to dispose of comply with the tax fully and properly… I want to find ways to realign the balance of risk so that the consequences of being caught outweigh the profit to be made. I am consulting on the possibility of including illegal deposits of waste within the scope of the tax. This means that those who illegally dispose of waste will be required to pay the tax twice – firstly at the point where they disposed of it illegally, and again when it is deposited at a licensed landfill site.”

She added that members of the public and third-sector organisations should also respond to the consultation, as it considers “whether and how [the Welsh Government] might use a proportion of the landfill disposals tax to enhance and deliver benefits to communities”.

The consultation has been welcomed by members of the waste and resources industry, with Sam Corp from the Environmental Services Association (ESA), which is represented on the Welsh Government Landfill Disposals Tax Expert Group, adding that he “look[s] forward to further detailed engagement to help develop the best tax possible for Wales, including a robust compliance framework to ensure a level playing field for all operators”.

Consultation details

The Welsh Government is calling on businesses, stakeholders and members of the public to submit their views on a range of proposals, including whether:

• standard and lower tax rates should be less, more or in line with UK landfill tax rises;
• the tax return period should be aligned with the financial year and the system ‘simplified and modernised’;
• there should be a proportion of landfill disposals tax revenue used to ‘enhance the wellbeing of communities’ (such as supporting waste crime enforcement or biodiversity initiatives);
• the UK’s current landfill tax exemptions (such as waste from visiting (NATO) forces) and discounts (such as the water discount relief) should be removed or modified – and whether there is a case for introducing any new exemptions or discounts;
• a Welsh loss on ignition (LoI) test should be introduced to prevent waste misclassification of fines from mechanical treatment plants (akin to the proposed test coming into force in the UK in April);
• there should be any changes made to the list of materials qualifying for the lower tax rate, and on what basis;
• there would be practical implications of legislating on the basis that all material entering a landfill site (other than that which is specifically exempt) is subject to tax;
• there would be practical implications of placing an obligation on landfill site operators to use a weighbridge where one is functional and available on the landfill site or within close proximity of the site, with a corresponding penalty for failure to do so;
• there would be practical implications of extending the definition of landfill sites to include illegal deposits of waste within the scope of the tax (so that fly-tippers pay for illegally depositing of waste and also for the cost of legally disposing of it at landfill);
• the current penalty system for landfill tax evasion or fraudulence needs to be addressed (and whether the Welsh Government might take further actions to use its new tax powers to improve compliance and enforcement and minimise the impact of landfill disposals tax evasion); and
• there is a need for increased compliance activity on the ground (rather than desk-based).

The closing date for responses is 19 May 2015.

Find out more about the consultation on the landfill disposals tax.