Tax on plastic packaging causes jitters among Italian players

An increased number of players in Italy are now discussing the recently approved tax on plastic packaging that will take effect as of June 2020. They argue that the new tax will have a knock-on effect on the entire plastic industry of Italy, where Europe’s second largest plastics manufacturing takes place.

Italy to tax plastics by 2020

According to media sources, the Italian government approved a new tax on plastic packaging as of yesterday, October 30, prompting companies to pay €1000 levy per ton of plastic produced. This new tax has already been included in 2020 budget and will be presented to parliament in the coming days, which is expected to be approved by the end of the year.

If the parliament does not modify the proposed tax on disposable plastic packaging, a new tax equal to €1 per kilogram will be added to the Conai environmental contribution paid by producers and importers, the sources reported. This will increase the cost burden not only on the producers’ side but also on the end consumers’ side.

Packaging sector to face an uphill battle in Italy

Ranking as the second after Germany in terms of plastics manufacturing, Italy also ranks as the second largest consumption market as it makes up for the 14% of European plastic converter demand, which stood at 51.2 million tons in 2017, according to PlasticsEurope Market Research Group.

In segment distribution, the packaging industry forms the largest segment of plastic converter demand with a 40% share. Accordingly, the proposed tax is expected to hit the packaging sector in Italy to a large extent.

3 European plastics industry associations to oppose proposed tax

European Plastics Converters, PlasticsEurope and Plastic Recyclers Europe have agreed to oppose the Italian government’s tax proposal on plastic packaging recently. The motive behind their latest decision was the possibility of its adverse effects including job losses, revenue cuts and subsequently a slower economy.

PP, PE, PS and PET to take a knock from the tax

A manufacturer producing insulation products reported, “Our end product business is 50% related to packaging, which is deeply affected by the tax proposal for next year. Our clients might decide to switch to other packaging solutions instead of EPS.”

Opposing this idea, an EPS buyer reported that the plastic tax will not discourage people from using packaging as there are not many alternatives or they are not as handy as plastics for the time being. He added that it would only add costs.

Several distributors concurred, “This will exacerbate slowing markets at a time when fragile economic conditions across the board already put a lid on the downstream buying appetite. Demand will continue to decrease given the ban on disposable plastics.”

A buyer summarized the current situation by saying, “The PE outlook for 2020 comes under the pressure of the recent tax proposal by the government. The entire plastic industry will be negatively affected from the machinery to the end users as a cost increase of 10% will be reflected on the final product. This will weigh on the overall plastic consumption and lead to several job losses.”

Italian converters wary of losing competitive power

Italian manufacturers reported that this tax might harm their export businesses as other countries in the EU will have a competitive edge from scratch.

A buyer in Italy lamented, “Our export business will be affected as Italian converters will be charged with an extra tax while other European competitors will be exempt from it.”

“Our customers in Italy are worried about the draft tax on plastics proposed by the government. This would have a significant impact on the Italian market while PET prices may fall sharply below early 2019 levels,” a preform maker in Belgium reported.