Thursday, December 12, 2024

Deposit System in Poland Gets Closer: VAT Exemption, Tracking Mechanism Proposed

LAWDeposit System in Poland Gets Closer: VAT Exemption, Tracking Mechanism Proposed

The Polish Parliament (Sejm) is soon to address a new bill concerning the deposit system, the launch of which is planned for January 2025. Proposed changes by the Ministry of Climate and Environment include, among others, the exemption from VAT and the introduction of a so-called deposit-tracking mechanism for products. “We assess all these changes very positively; they are essential for the proper functioning of the future deposit system,” says Aleksander Traple, CEO of Zwrotka SA. He emphasizes that further postponing the implementation date of the deposit system is unjustified, as waste management companies, retailers, and various other entities have been preparing for its implementation for some time now.

The new leadership of the Ministry of Climate and Environment conducted an analysis of the planned regulation and consulted its shape again with the food industry, entrepreneurs, local government officials, and environmental organizations to refine its provisions. As a result, the ministry presented several proposed changes that are now to be submitted to the Sejm.

“The Ministry of Climate and Environment presented the most important changes it intends to make to the deposit system. The first of these is the exclusion of deposits from VAT, which is quite significant so that consumers do not have to bear the cost and then settle that VAT. Another change concerns elements that lead to tightening the system. Issues related to settlements between operators were analyzed, and the ministry intends to introduce facilitations, regulations to make the system more airtight,” says Aleksander Traple to Newseria Biznes, CEO of Zwrotka SA, a Polish company building the deposit system.

The Ministry also proposes the introduction of the so-called deposit-tracking mechanism, which involves collecting deposits at each stage of the product’s circulation from the manufacturer to the consumer. According to the industry, this will prevent potential abuses in settling collected deposits with retail units and will guarantee financial resources to operators for settlements.

The deposit system in Poland is to cover single-use plastic bottles up to 3 liters with caps, reusable glass bottles up to 1.5 liters, and metal cans up to 1 liter. Large stores with an area exceeding 200 square meters will be required to accept such empty containers and refund the previously collected deposit to customers, while other retail outlets with smaller areas will be able to join the system voluntarily.

The deposit for packaging will be 50 groszy and 1 złoty for reusable glass bottles. To reclaim it, consumers will not need to show a receipt (unclaimed deposits will be allocated to finance the deposit system). The Ministry also proposed postponing by a year the inclusion of dairy drinks in the deposit system to give its participants more time to resolve sanitation issues.

“The planned date for the deposit system to come into force is January 1, 2025. There are many voices suggesting postponing this date by a year. However, given the preparations carried out by numerous entities, decisions made, and costs incurred, it seems that the deadline should not be postponed further. Retailers, waste management entities, and waste recovery entities had to start preparations in advance and have incurred certain costs in connection with it,” says Aleksander Traple.

According to future system operators, Poland is ready to implement it in the model proposed by the ministry. Several system operators are already known – formed by individual players or consortia composed of recovery organizations and packaging introducers – and more are announcing their entry into the market. These entities are building structures, information systems, investing in deposit machines, etc.

“Most entities are already intensively preparing for the implementation of this system. This applies to entities representing such as ours, which have obtained licenses from the Ministry of Climate and Environment, and others that are still waiting for them, as well as the retail industry, which is probably the most burdened by the entry into force of this law, as it has to prepare retail outlets for this. It is also intensively preparing for the launch of the deposit system, for example, by acquiring machines, the so-called deposit machines, or preparing collection points for these waste products,” lists the CEO of Zwrotka SA.

According to research by the Ministry of Climate and Environment, over 85 percent of Poles express support for the implementation of the deposit system, and 91 percent declare readiness to return recyclable containers. Postponing the implementation date may mean the risk of wasting this potential.

“There are many myths, distortions, and half-truths about the potential effects of the deposit system coming into force. These include, for example, information about the inclusion of VAT in deposits and the imposition of over PLN 3 billion in taxes on consumers. This is false information because in the planned amendment, the ministry already announced the exclusion of deposits from VAT. Another distortion is talking about how Polish society will incur huge costs. Of course, there will be certain costs associated with the implementation of this system, for the consumer it will be on average between 9 and 10 groszy per package, because that’s how much prices on the shelves may increase,” points out Aleksander Traple.

As he emphasizes, however, this argument overlooks the fact that society is already bearing the costs associated with the lack of a deposit system on the market today.

“We are all already bearing the costs of the so-called plastic tax, i.e., penalties for plastic waste that has not been selectively collected and recycled. We have to pay this tax to the European Union. As a result, packaging waste collected in the deposit system will allow us to reduce its amount,” explains the expert.

During a conference last week on changes in the deposit system, Deputy Minister of Climate and Environment Anita Sowińska pointed out that at the moment, every consumer pays for packaging three times: when buying a drink, in the waste collection fee, and in what comes from the state budget to the EU as penalties for unrecycled plastic packaging waste. Only in 2023, their amount exceeded PLN 2 billion. The deposit system is to minimize these costs, increase the level of selective waste collection and recycling of raw materials, and contribute to lower waste collection fees and environmental improvement.

“There are many negative voices, alarms, or even predictions of disaster appearing in the public space, but let’s not be fooled. Of course, at the beginning, we will probably incur some costs and there will be difficulties, inconveniences associated with the implementation of this regulation, but overall it will be a beneficial regulation, both in terms of the costs of the whole country and environmental protection,” emphasizes Aleksander Traple.

Check out our other content
Related Articles
The Latest Articles