international: Tax Aims To Reduce U.K. Landfill Dependence

Adam Read, Paul Phillips and Alice Murphey

Incentive for environmental stewardship in the United Kingdom has arrived in the shape of a new and untested form of environmental regulation - the landfill tax.

Currently, landfilling dominates the United Kingdom's municipal waste industry, accounting for more than 80 percent of all treatment and disposal. Within the next 15 years, though, the majority of active British landfill sites will be filled and used for agriculture or recreation.

The Landfill Tax was implemented in October 1996. The price? Land-fillers now must pay pound7 per ton for non-inert wastes (most household and municipal wastes) and pound2 per ton for inert wastes.

"The money raised by the landfill tax will allow for a further 0.2 to 10 percent matching cut in the main rate of employers' National Insur-ance contributions from April l997," says the Chancellor of the Exchequer. "This will cut employment costs by pound500 million and make it cheaper for businesses to create new jobs."

The Chancellor predicts that the new tax will raise around pound450 million in a year, plus VAT. Additionally, the government intends the tax to force companies and local authorities to improve their environment and cut costs through re-cycling, waste-to-energy, composting and source reduction programs.

For example, recovery and re-cycling of paper and board (which accounted for 8 percent of all the waste landfilled in England in 1994) could potentially save up to pound150 million on disposal and tax costs. Consequently, the new law allows disposers to reclaim up to 20 percent of their taxes - but only if the money is used for local environmental activities such as land restoration and remediation, education, research and/or building maintenance.

Critics of the tax suggest that council tax bills will rise or local government services (collection and disposal authorities, in particular) will be cut, since these agencies are among the largest landfillers in the United Kingdom. It has been predicted that in Ireland, waste will start to flow from Ulster to the Republic where the tax does not apply.

Optimists, on the other hand, see the tax as a significant step towards an ecologically sustainable society since it will generate new labor-intensive recycling schemes and numerous research projects.

Few doubt that the government's fiscal policy and instruments are increasingly being applied to influence behavior in resource management. But, where will the line be drawn? In Denmark, the landfill tax began at 40 kroner in 1987. Next year, it will soar to 285 kroner (pound31) - a 600 percent in-crease.

In the last four years, theBelgian tax has risen by more than 700 percent and now stands at pound50 per ton. If England follows this lead, the result could be a pound25 to pound30 tax by the year 2000, reaching pound50 to pound60 by 2002.

To meet government objectives, waste generators should re-examine their modus operandi and develop strategies to avoid landfilling. The most obvious reduction solution, of course, is to minimize the waste that is being created. However, this requires long-term strategic planning and large-scale reorganization with associated financial costs.

Another alternative is to re-use the materials before they enter the waste stream, though the challenge then becomes finding readily available ways of re-using existing materials. Recycling and other forms of recovery also are viable waste management strategies.

However, these options only will succeed if the necessary infrastructures can be implemented at minimal costs and if markets are available for the materials. The landfill tax will create a core price for legal disposal, which, if properly enforced and policed, will force generators and haulers to find their cheapest disposal outlet. Much then will depend upon how the industry reacts and how it decides to set and pass on these costs.

The problem now is that landfill alternatives simply are not available and that start-up and lead-in times are generally very long, and markets show no signs of even beginning to develop.

Current estimates indicate that approximately 1,400 businesses operating 2,700 sites still need to register with HM Customs and Excise for the tax.