Wednesday, September 12, 2018

How much money shops stand to lose by getting rid of plastic bags

South African retailers have started making a concerted effort to do away with wasteful plastics being used in their products, with both Woolworths and Pick n Pay announcing plans to do away with various practices.
Woolworths recently announced that it aims to be rid of single-use plastic bags by 2020, giving the group a timeline to wean shoppers off of ‘wasteful’ plastics and put them on to something more environmentally friendly.
Pick n Pay, meanwhile, is introducing 100% recyclable shopping bags by August 2018, also in a big push away from single-use bags.
While these may seem like small gestures in the greater scheme of things – they will come at a huge cost to both stores and government, who makes money from the status quo.
The South African government implemented a plastic bag levy in 2004 as a way to combat the growing pollution problem that had become prevalent in many large metro areas.
The levy launched at a rate of 3 cents a bag on some types of plastic shopping bags, and was subsequently increased to 4 cents a bag from April 2009 and then 6 cents a bag from April 2013 and finally to 8 cents a bag from April 2016.
According to the latest tax statistics for 2016/17, the government collected R232 million in levies from bag sales. At 8 cents a bag, that implies that 2.9 billion plastic bags were purchased during that financial year.
Ridding ourselves of plastic bags will effectively wipe this off of the government’s collection plate, but the loss to retailers is even bigger.
Considering the average shop charges around 50 cents for a carry bag at the till – 42 cents minus the 8 cents that goes to SARS – that’s R1.2 billion a year that retailers could potentially be throwing away in their bid to stop the waste.
While some costs will be recouped by the alternatives which will be put to consumers at a price, the fact remains that not as many will be sold – which is the point.
Does the tax work?
South Africa’s plastic bag tax has drawn criticism from both sides of the argument – with politicians saying that the tax should be eliminated altogether, as it negatively impacts consumers and particularly the poor.
Others have argued that the price point (35 cents to 75 cents) is simply not high enough to incentivise consumers to stop buying the wasteful carry bags, so it just blindly sends money into government coffers.
However, breaking the SARS tax data down, it’s clear that the tax does work – to a degree.
While 2016/17 tax collection implies the use of 2.9 billion plastic bags during the financial year, this is down from the 3.05 billion plastic bags used the year before – a drop of 5%. The hike in the levy may have had an impact.
A sharp drop after a tax hike was also seen when the tax increased to 6 cents in 2013, when usage went from 3.8 billion bags to 2.8 billion bags – though this drop was significantly higher at 25%.
The table below breaks down the use over the past 5 years.
YearRevenueTax ratePlastic bags
2012/13R151 billion4 cents3.78 billion
2013/14R169 billion6 cents2.82 billion
2014/15R174 billion6 cents2.90 billion
2015/16R183 billion6 cents3.05 billion
2016/17R232 billion8 cents2.90 billion

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