Adopting plastic tax the way to go

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plastic-litter-shutterstock_1154290572Khotso Mosola

IN 2003, the South African government introduced a levy or a tax on plastic bags and Botswana followed suit with a similar measure in 2007, thus joining a handful of countries in Africa and across the world which have adopted a combination of measures to curb high rates of plastic litter. The main purpose of this kind of intervention might be obvious; that of reducing plastic litter and thereby decreasing pollution, but there is arguably also an economic benefit that can accrue from such a policy intervention. Therefore my argument in this article is simple; Lesotho should consider adopting plastic tax, first, as a measure to bolster tax revenue collection in the face of projected dwindling Southern African Customs Union (SACU) revenue, second, as a mechanism for proper waste management.

At the moment, it might seem naïve to suggest this kind of a policy intervention given the small size of Lesotho’s economy but obviously this is not an unfeasible a policy idea that can be ignored in the current environmental and economic situation that Lesotho is in. As will be observed, the benefits of plastic tax can be observed in the long run particularly when implemented in conjunction with other mechanisms such as those proposed in the budget speech of 2016/17 by Finance Minister ‘Mamphono Khaketla especially when the objective is to bolster tax revenue.

Lesotho’s economy has seen modest growth rates in the last decade and so has the purchasing power of its consumers particularly the working class. This can casually be observed by taking into account the following factors; an expected consumerism that has so defined the town folks in Lesotho and the opening of the two biggest shopping malls in Maseru augmented by South African retail stores and eateries which presumably have increased demand for consumer goods and in turn demand for plastic shopping bags. This assertion, however, is not backed by any research. Therefore, the resultant effect of this demand in plastic bags, I would argue, has been the high volume of plastic bag garbage that’s so easily get blown by wind only to hang on fences and trees which normally get washed away during heavy rains, which ends up  blocking drainage pipes and culverts.

Undoubtedly, the foregoing is a scenario that needs the serious attention of policymakers mainly because of the benefits that this kind of policy can have on the environment and concomitantly as a measure to enhance tax revenue. Interestingly, studies have been carried out in the SADC region to assess the impact of the implementation of plastic levy or tax (Dikgang, Wiser 2010, 2012). The findings of these studies are actually fascinating for policy makers to deliberate on so as to make a decision as to which appropriate model and regulatory framework to adopt that best suit the case of Lesotho.

Plastic bag tax in Botswana and South Africa

If one looks at the literature on policies that were adopted by South Africa and Botswana in trying to curb the demand for plastic bags, it becomes apparent that the target of those countries policies has largely focused on food and retail stores or supermarkets. This intervention has, by design, excluded other sectors such as the clothing sector. It might be understandable to target sectors such as food and retail stores given their presumably high number of plastic bag usage per customer and the propensity for customers to request for more plastic bags.

In order for a policy on plastic tax to be deemed effective, it must be able to meet the required objectives otherwise it might be a fruitless exercise. If the purpose of plastic tax legislation is to reduce litter and after its introduction the evaluation shows that litter is significantly reduced to the set target, then the policy will be deemed to be working. The aforementioned cases of South Africa and Botswana are very instructive in this regard. For instance, in the case of Botswana, according to Dikgang and Wiser (2010) the introduction of plastic tax in the economy was meant to curb the demand for plastic bags in order to reduce its negative impact on the environment. The objective was not to entirely wipe out the existence of plastic bags but the government also wanted to encourage recycling of plastic refuse.

The Botswana legislative framework entailed the following elements:

  • It regulated the thickness of plastic bags;
  • It prohibited the manufacture and import of plastic bags thinner than 24 microns;
  • Any violation of the Standard Act by any firm or individual was punishable by a prison sentence or a fine;
  • The cost of plastic shopping bags had to be transparent and disclosed publicly;
  • It imposed support for environmental initiatives
  • Individual bags or consignment slips had to indicate clearly in English and/or Setswana the name and country of origin of the importer, producer or distributor.(Dikgang, Wiser 2010)

The impact analysis of this policy intervention in Botswana shows that it became effective mainly because the levy has been consistently high from the onset. This analysis is very fascinating because it made a comparative analysis of this policy intervention by looking at different income groups, namely high income earners to low income earners. This was achieved by targeting specific retailers which caters for these income groups.

The South African case in this regard is also instructive; the policy intervention was more or less the same. The major difference of this intervention from that one of Botswana is that the levy was not too high as it was a modest 3 cent per bag when it was introduced. In 2015, the then Minister of Finance in South Africa Nhlanhla Nene reported a staggering R1.1 billion tax collection from 2003 up to 2015, with R41 million collected from the 2004/05 when the tax was introduced, while in the fiscal year 2009/10 this rose to R110 million and R169 million in 2013/14.

However, one should hasten to emphasize that the South African economy is the largest in the SADC region has export markets in all the countries in the region. This means that it was able to combine a host of measures in this regard, such a charging tax on locally-consumed plastic bags as well as creating recycling companies which have thus far largely benefited from collection of plastic refuse even from neighbouring countries such as Lesotho.

Conclusion

It is without a doubt that any policy has externalities; that is negative or positive effects/impacts. Therefore this means that while it may have a desired effect and bring about a solution to the problem at hand, it can affect both the retailers and consumers in a certain way. For instance, in the above mentioned cases, the negative externality was that lower income consumers were found to be hit hard by the introduction of taxes which is also a likely scenario in Lesotho as the structure of the economies of the three countries, that is Botswana, Lesotho and South Africa are arguably the same given the same economic history they have. However, the imperative to protect the environment and to bolster tax revenue puts a country at the crossroads; therefore it will be highly beneficial to adopt a tax on plastic bag.

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