The packaging tax scandal in Romania pins local food producers against the Environment Ministry

A tax of RON 2 (EUR 0.44) for each kilogram of recyclable packaging placed on the market and unrecovered has created a big debate in Romania, pinning the local food producers against the Environment Ministry and local environment organizations. The new tax became effective on January 25. The food producers have been complaining in the past weeks that this tax would significantly increase their costs and will result in food price increases of up to 30%. Many producers, especially those in the canned food industry, would go bankrupt due to this tax as their thin profit margins would disappear, the producers’ associations claim. The Environment Ministry, however, claims that this tax is only aimed at encouraging an efficient recycling system in Romania as the country currently has the lowest recycling rate in the European Union and risks infringement and penalties for this. The environment organizations support the ministry’s position on this topic. They say that this tax has existed for many years, but that the producers haven’t paid it because of an existing scheme that worked in the local market that passed on the responsibility of recycling the packaging to third parties. According to the law, which applies throughout the EU, each producer that places packaging on the market has to make sure that the respective packaging is recovered after consumption. The law also allows companies to organize themselves into so called Responsibility Transfer Organization, which take on the responsibility of recovering the packaging. If the companies don’t fulfill their recycling targets, they have to contribute to the Environment Fund by paying a RON 2 tax for each kilogram of packaging unrecovered. This law has existed in Romania for ten years. During this period, ten Responsibility Transfer Organizations (OTR) have been created and the system seemed to work, as these organizations have been reporting that they had fulfilled their recycling targets and nobody had to pay anything extra. Controls carried out by the Environment Fund Administration (AFM) at these OTRs last year showed several flaws in the system. The most serious problem was that six of these OTRs have reported fictitious quantities of recycled packaging that, in fact, had never been recycled. The AFM penalized the six OTRs with EUR 19 million and signaled the fraud to the prosecutors. The prosecutors’ investigation revealed that about 120,000 tons of packaging had been recycled only on paper and found that the taxes that should have been paid for this amount of waste totaled EUR 54 million. This was in November 2015. The AFM then went after the producers to recover the unpaid taxes for the packaging that had never been recovered. And that’s when the scandal broke. The producers have asked for a fiscal amnesty, claiming that they had respected the law by participating in a system that was sponsored by the authorities. They also asked for the tax to be lowered. The Environment Ministry, however, rejected the proposals saying that the fiscal amnesty and the lower tax would only maintain the current situation and prevent Romania from reaching its recycling goals. This would lead to an infringement and penalties of up to EUR 200,000 per day for the Romanian state. On the other hand, local food producers complain that they have to support costs of EUR 700,000 per day or more than EUR 250 million per year. They claim that many factories will be closed and jobs will be lost. The producers also say that they may start street protests if they demands aren’t heard by the authorities.