High landfill tax rates increase illegal waste disposal

18 February 2021

High rates of landfill tax are an incentive for some operators to misclassify waste as inactive or inert, or to dispose of waste illegally, according to new report.

The report, published by the National Audit Office, says landfill tax has reduced the use of landfill sites significantly, contributing to a 65% fall in total waste to landfill by 2014. But the report also reveals that rising tax rates has led to people trying to evade taxation by disposing of waste “in harmful and illegal ways”.

Commenting on the report findings, Gareth Davies, the head of the NAO, said: “Taxes are one of the tools available to government in pursuing its ambitious environmental goals. While there is some evidence of the positive impact that taxes can have on the environment, too little is known about their effect.”

The landfill tax was introduced by the Treasury in 1996 as an environmental tax to help reduce the amount of waste going to landfill. Between 1998 and 2014, HM Treasury increased the standard rate of landfill tax by 700% in real terms from £7.00/tonne to £91.35/tonne last year. The rate for inert and inactive waste stands at just £2.90 per tonne.

HMRC has reported an estimated fall in tax receipts of 9.4% in 2018 to 2019, amounting to around £275 million shortfall as a result of misclassification of waste at authorised landfill sites and waste illegally disposed of at unauthorised sites.

In 2018, the tax was extended to unauthorised landfill sites with the aim of reducing the tax advantage that criminal operators of these sites had over legitimate operators. Last year, the Government also established the Joint Unit on Waste Crime in the Environment Agency, in partnership with HMRC, the National Crime Agency and others, to tackle organised waste crime.

The report findings are part of a wider NAO study into environmental tax measures, which concludes that the Treasury is more focused on tax revenues than the environmental benefits they are meant to achieve.