INTRODUCTION
1. The Welsh Local Government Association (WLGA) represents the 22 local authorities in Wales. The three fire and rescue authorities and the three national park authorities are associate members.
2. It seeks to provide representation to local authorities within an emerging policy framework that satisfies the key priorities of our members and delivers a broad range of services that add value to Welsh Local Government and the communities they serve.
3. The WLGA welcomes the opportunity to comment on this consultation by the Finance Committee on the Landfill Tax Disposal (Wales) Bill.
4.
Comments on the items for discussion listed in the terms of
reference are provided below.
General principles of the Bill and the need for legislation
5. The WLGA supports the principles of the Bill and agrees there is a need for such legislation. Given that current Landfill Tax will be dis-applied in Wales from April 2018, the absence of such a tax could undermine the work undertaken to date to encourage more sustainable forms of waste treatment. Also, whilst there inevitably will be a downward trend in terms of tax yield as landfill tonnages continue to decrease, the tax income will still make a contribution towards the costs of public services. Since the Welsh Government’s block grant will be reduced to reflect devolution of the tax, it is important that this potential income is not lost at a time when public services are under severe financial pressure.
Potential barriers to implementation of these provisions
6.
The extensive documentation demonstrates that the provisions in the
Bill have been considered and planned in-depth. Many of the
potential barriers (e.g. relating to non-compliance,
avoidance/evasion, public opposition) have been considered and
addressed by measures already taken and/or included in the Bill
(e.g. extensive consultation on the proposals, use of penalties,
identification of cases where exemptions and relief are
appropriate). The fact that the tax is in large part a continuation
of a previous tax, as opposed to the introduction of a new one,
should also help to achieve a smooth roll out.
Unintended consequences
7.
The provisions in Part 4 regarding the imposition of tax on
unauthorised disposals are welcome but, as the Explanatory
Memorandum make clear, the “provisions complement the
existing environmental law and enforcement regime, they are not a
substitute for it” (page 28). There is a risk that public
expectations will be raised in relation to the impact the tax will
have on fly-tipping. To have a deterrent effect there would need to
be some high profile instances of offenders being identified and
subjected to the tax. However, identification requires a commitment
of resources to surveillance and examination of unauthorised
disposals. Whilst this may be cost effective where large scale
tipping is occurring it is harder to justify for minor instances.
This could encourage fly tippers to seek to minimise their risk of
being subjected to the tax by depositing in small quantities but in
multiple locations, putting additional pressures and clean-up costs
on local authorities[1].
Financial implications
8.
The Regulatory Impact Assessment identifies that funding has been
allocated to NRW to carry out delegated compliance and enforcement
functions. This has been included in the operating cost
figures.
9.
Whilst the WRA is not formally delegating functions to local
authorities in the same way there could be cost implications for
them. The new Act could result in pressure from residents for local
authorities to investigate the small scale instances of
unauthorised disposals for which they, rather than NRW, are
responsible. Should there be an increase in small scale tipping to
minimise the risk of becoming liable for tax (as suggested in para.
7 above) this would create additional resource pressures on local
authorities at a time when environmental services are already
struggling to cope with reducing budgets.
10.
Whilst this is hard to quantify as the scale of any such impact is
impossible to gauge at this stage, it is an issue that should be
monitored once the Act is implemented. It could require, in future,
that some funding is made available to local authorities to support
their enforcement activity.
Powers to make subordinate legislation
11.
The proposals in relation to powers to make subordinate legislation
provide flexibility to respond to experience and to changing
circumstances. Individually each of them is understandable. It
should be noted, though, that these powers are open-ended and,
collectively, they give Welsh Ministers the ability to change the
nature of the legislation substantially. Some of the changes could
have major implications for local authorities (and other interested
parties) – e.g. powers to change discount in relation to
water content; relief in relation to dredging. Whilst the
affirmative procedure has been prescribed in most cases to approve
any such changes, consultation with stakeholders before exercising
these powers should also be a requirement.
Whether the principles for devolved taxes have been followed
12.
LDT rates will not be announced by the Welsh Government until
autumn 2017, in readiness for implementation in April 2018.
However, in the Explanatory Memorandum Welsh Government
acknowledges the need for consistency. It would be unfair to
businesses if there were to be sudden and significant differences
between the tax rates between Wales and England. Extending the tax
to unauthorised disposals also helps to ‘level the playing
field’ for those who comply with the tax obligation and those
who seek to avoid it.
13.
There is also evidence of effort being made to simplify
arrangements under the new tax, with clarification in areas such as
the weighing of materials, the availability of exemptions and
reliefs, application of a water discount and the ability to operate
non-disposal areas within landfill sites. The Explanatory
Memorandum is very helpful in setting out these matters.
14.
The Landfill Tax forms an important part of wider efforts to move
towards zero waste and to develop a circular economy. The latter
has the potential to support sustainable forms of growth and
jobs.
15.
Therefore, the principles do appear to have informed the
development of the tax. On the issue of stability and
certainty a key consideration is the extent to which the
subordinate powers will be used. As noted in para 12 above, these
powers provide the opportunity for Welsh Ministers to revise
elements of the legislation in substantial ways. Clearly, were they
to be used to any great extent they could destabilise arrangements
and create uncertainty. Whilst some change may well be needed, to
deal with issues that arise and with change over time, these should
be kept to a minimum.
Definition of a ‘taxable disposal’ and ‘qualifying materials’
16.
The four conditions that have to be met in order for a disposal to
be taxable are clear. There are also specified landfill site
activities that are to be treated as taxable disposals whether or
not the conditions are met.
17.
The materials involved in some, at least, of these landfill
activities should continue to be subject to the lower rate of tax.
They provide important on-site benefits (e.g. bund formation;
temporary road) representing a form of reuse. As the qualifying
materials are to be listed in regulations, though, it is not
possible to say at this stage what they will be. It is therefore
difficult to comment on the definition of qualifying materials as
they are, in effect, still to be defined.
How the tax will be calculated?
18.
As above, until the regulations are produced it is difficult to
comment on how the tax will be calculated. 14(7) of the Bill
(page 7) states that the regulations “may prescribe different
rates for different descriptions of material”. Whilst the
presumption is that there will be one higher rate and one lower
rate the potential is there to specify multiple rates, which would
be more complex.
19.
14(5) (on page 7 of the Bill) refers to: “The amount of
tax chargeable on a disposal of that description”
(emphasis added). ‘That description’ appears to relate
to 14(4) (i.e. qualifying materials or a qualifying mixture of
materials) but this could perhaps be clarified.
20.
The provisions regarding calculation of the taxable weight (via
weighbridges wherever possible) and water discount (encouraging
landfill operators, where relevant, to have appropriate contract
terms and processes in place with customers) are sensible.
Implementation of tax rates and flexibility to deal with change
21.
The Explanatory Memorandum explains that tax rates for LDT will be
set in secondary legislation and that a separate impact assessment
will need to be completed. With regards to the flexibility to
change, the powers to make subordinate /secondary legislation
provide scope to make a wide range of changes to rates. Clearly, it
will be important for Welsh Ministers to be able to vary rates
should these be changed elsewhere in the UK, not least to avoid
potential ‘waste tourism’.
22. Paragraph 3.54 of the Explanatory memorandum states: “In exercising their powers to set LDT rates, the Welsh Ministers will be able to set different standard or lower rates for different descriptions of materials. This further flexibility will allow the Welsh Ministers to accommodate future circumstances and policy changes” (p.20). Again, any use of this flexibility to introduce multiple rates would be likely to complicate arrangements and could encourage cross border movements of waste.
Proposed exemptions and reliefs
23. The proposed exemptions and reliefs – and their general consistency with the rest of the UK – are all sensible. The fact that they would not apply to unauthorised disposals makes is supported.
Inclusion of unauthorised disposals
24.
WLGA welcomes the inclusion of unauthorised disposals at places
other than authorised landfill sites. Whether the threat of being
taxed will change behaviour is debatable, especially as there is
already the possibility of being fined or imprisoned[2].
25.
Their inclusion does, though, raise issues of enforcement. Whereas
resources are being made available to NRW to assist them with
compliance and enforcement activity no such provision is being made
for local authorities, who deal with the smaller scale instances of
fly tipping. This is an area that will need to be kept under
review.
Inspection of premises to ascertain liability and sharing of information between, WRA, NRW and local authorities
26.
Section 59 of the Bill will allow local authorities and NRW to pass
information to the WRA for use in a tax investigation or
enforcement action. This is likely to be primarily related to
unauthorised disposals. In cases where it proves possible to
identify persons responsible for the disposals inspection of
premises could be a contentious issue requiring a multi-agency
approach. The requirement to obtain prior consent “from the
relevant person or authorisation from the Tax Tribunal” (page
95 of the Explanatory Memorandum) is likely to build in delays
which would reduce the likelihood of being able to access relevant
material that would assist in any enquiry.
Duties and penalties
27.
The UK approach to the payment of tax has been broadly replicated
so should be familiar to the relatively small number of those who
will be required to make payments (principally the landfill
operators).
28.
The actual amounts of the various penalties proposed are stated in
the Bill. These will obviously be subject to inflation, reducing
their impact over time. However, the Bill does include powers for
these to be changed using secondary/subordinate legislation.
Treatment of companies, partnerships and unincorporated bodies
29.
No comment.
Landfill Communities Scheme
30.
Given that revenue generated by the LDT is expected to reduce
gradually over time as landfill tonnages continue to decline, the
administration costs of a scheme based on tax credits would become
increasingly disproportionate. In WLGA’s submission during
the consultation in May 2015 we suggested that any funding should
be used to support waste awareness activity, helping in the wider
effort to encourage households to take part in efforts to reduce
waste and recycle as much as possible of the waste they do
create.
31.
As a decision has been taken to operate a scheme, developing it
outside of the Bill is a sensible way forward and will hopefully
enable it to be kept as simple and flexible as possible.
Consideration could be given to making the scheme available to
communities that have suffered from repeated instances of
unauthorised tipping if tax is successfully charged.
For further information, please contact:
Tim Peppin, Director of Regeneration and Sustainable Development
Welsh Local Government Association
Local Government House
Drake Walk
Cardiff
CF10 4LG
Tel: 029 2046 8669