Colombia plastic industry still skeptical on single-use plastic tax – trade group

SAO PAULO (ICIS)–Despite Colombia’s Supreme Court ruling correcting some aspects of the tax on single-use plastics approved by Congress, the industry is still largely skeptical about the tax’s principle or about a smooth implementation, according to the president at plastics trade group Acoplasticos.

Daniel Mitchell added that the regulations put a burden on companies’ finances and may, in the medium and long run, affect their ability to invest in new technologies and processes to make the circular economy a reality.

Since President Gustavo Petro took office, Colombia has passed two significant regulations affecting the plastic chain: the tax on plastics, and the progressive elimination in the market of single-use plastics.

The first law, the tax on plastics came into effect at the end of 2022 but legislators left some open questions as to who would pay the tax. So much so that Colombia’s Supreme Court ruled in November correcting some aspects of the law, although it did not question the principle of the tax.

In August 2023, the head of chemicals at Colombia’s industrial trade group Andi, Daniela Sotello, had already said in an interview with ICIS that the tax’s implementation had proved troublesome and explained how, at the time, many players in the chain were still uncertain of who would pay the tax.

SUPREME COURT RULING
It is good there is more clarity now, not least because the first phase of the tax on single-use plastics is coming into force on 7 July, as planned in the original regulation’s text. A second phase in the mid-2022s will start implementing recycling targets and the regulation should be fully implemented by 2030.

“Thankfully, there is more clarity now on who should pay the tax, with the Supreme Court ruling it must be absorbed by producers and not users of the plastics. However, this brings yet another confusion to the table: is it the producers of plastics, the polymers producers, or the producers of the products packed in those plastics?” said Mitchell.

“We lived with the initial confusion [producers paying or users paying] for 11 months, until November 2023 ruling. The first payment of the tax was done at the end of the fiscal year in February 2024, as planned.”

In the end, players managed to muddle through the confusion and managed to pay the tax, although Mitchell says it did cause a slight uptick in prices which, he concedes, is obviously the purpose of the tax so consumption is reduced.

But then, some particularities in the Colombian law are striking. For instance, the prices of soft drinks in plastic bottles are not included in the tax: according to the law, Coca-Cola and others are included in the so-called “basic family basket”.

According to Acoplasticos, prices for the final products with plastics which were included in the regulation have increased between 0.5% and 4% due to the plastic tax.

“In sophisticated packaging, cosmetics and the likes, prices of the final product have risen around 4%, although in that chain the impact can go up to 6% in some cases. In most cases, the increases in prices have been between 1% and 2%,” said Mitchell.

“For the consumers, the price rises have not been as noticeable as some feared. To give you an idea, the tax collected in its first year Colombian pesos (Ps) 70 billion ($17m). I imagine that amount, when divided by the 45 million Colombian consumers, was not that noticeable in their pockets, but the tax has put a burden on plastics producers and its customers, not least for the chaotic implementation.”

THE PLASTIC PROBLEM
Clarified the first hurdles, the more meaningful debate. A trade group representing plastics producers will invariably oppose a tax on their operations, but the plastics industry remains on the eye of the storm in the debate about sustainability.

Plastics producers have for decades operated with healthy profits most years. Meanwhile, plastics pollution has grown in little more than half a century into a problem which is causing most humans, according to several studies, to carry plastics in them: homo plastic so to speak.

While no producer will accept direct responsibility in the pollution problem, some sources within the chain in Latin America say the industry could have at least done one thing better.

According to the CEO of Chile’s plastics trade group Asipla, Magdalena Balcells, producers knew a long time ago the plastic pollution problem was becoming serious, and either were late to talk about it and alert the authorities, or ignored it completely.

“Obviously, a company producing plastics has no competencies about the plastic waste, which falls on the authorities. Plastics have a big demand and are indispensable in so many applications. The debate has really taken off, rightly so, in the past 15 years – before that, the talk was mostly about how plastics were so useful and almost a win-win for all elements in the chain,” said Mitchell.

“Things have changed, and I really think the circular economy is taking off. This is due to a combination of regulation, private sector initiatives, and more engagement from consumers. We need to reach a system where there is not waste, full stop.”

– But in such a scenario, plastic producers of today would effectively run out of a business? If everything is recycled, there would not be a need to produce virgin material?

– You will always have a small number of applications in which, at least for now, you cannot use recycled materials. Also, I think that while we may aim to recycle all plastics, the demand for plastics will always be larger than that supply of recyclable material.

($1 = Ps4,172)

Interview article by Jonathan Lopez

Front page picture: Plastic bottles and plastic rubbish are shredded and pressed; archive image
Source Jochen Tack/imageBROKER/Shutterstock