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Proposed Plastic Bag Levy - Extended Impact Assessment: Volume 1: Main Report


6 Administration of the Levy

The mechanism by which local authorities would administer the levy falls within an exception to the reservations in the Scotland Act 1998 (Section A1, Part II, Schedule 5 Fiscal, economic and monetary policy). This states that local taxes to fund local authority expenditure fall within devolved competence. It is this exception which is being investigated by Mike Pringle MSP. We have not considered the validity of this exception, but have considered some of the implications for administering the levy should the Bill proceed.

6.1 System Requirements

A system will be required which will allow for:

  • Monies to be collected from 'retailers' and held in a local authority account.
  • Keeping records of customer transaction.
  • Auditing and inspection.
  • System checks and interrogation re anticipated income, documentation files and generation of customer queries.
  • Development of an appeals system.
  • Development of systems to pursue debt and non-payment.

Businesses would need advice on:

  • How the levy would operate.
  • Definitions of what types of bags the levy covered.
  • What information they would be required to submit, e.g. stock of bags at outset, stock remaining at end of submission period and records of bags sold.
  • How and when the monies collected should be transferred (ideally electronically) to the administration body.
  • The penalties for non-compliance.

System in the Republic of Ireland

In the Republic of Ireland, businesses submit quarterly returns. There are separate and distinct roles and bodies for collection and enforcement. Payment is by electronic debiting of the retailer's bank account. An online system that allowed this, the Revenue Online System ( ROS), was in place prior to the introduction of the PlasTax.

So far, there has been one prosecution for non-compliance. Any retailer not complying with the legislation has been visited, their non-compliance verified and a warning issued. Warnings have been issued to a few hundred out of around 50,000 retailers [communication from Terry Sheridan, the Department of Environment, Heritage and Local Government, Republic of Ireland].

The basic administrative requirements are:

  • An opening stock take of plastic bags when the levy is introduced.
  • A record of plastic bag purchases.
  • A record of plastic bags supplied to customers where the levy applies.

The records must differentiate between:

  • Those plastic bags used to contain fresh meat, fish, poultry, fruit, vegetables and other foods that are not otherwise packed, or ice
  • Other plastic shopping bags.

The role of enforcement is separate and is undertaken by the local authorities. It involves:

  • Visiting retail outlets and talking to retailers.
  • Carrying out initial spot checks.
  • Monitoring implementation.
  • Ensuring that the levy is passed on in full to customers.
  • Ensuring that exemptions are not being abused.
  • Checking tills to confirm that customers are being charged the €0.15 levy for plastic bags where applicable.
  • Taking appropriate action where it has been established that the levy has not been charged to customers, e.g. issuing letters informing retailers of obligations under the regulations and following up where necessary. Following up on any complaints from the public.

The Revenue Commissioners are responsible for:

  • Identification of accountable persons 54.
  • Processing returns and payments received from accountable persons.
  • Carrying out verification checks relating to the accuracy of returns.
  • Pursuing accountable persons who fail to deliver returns and payments within the statutory time limits.
  • Raising estimates where returns are not received or where liability is under stated.
  • Dealing with appeals against estimates raised.

To minimise compliance costs on retailers, checks carried out by the Revenue Commissioners are, insofar as possible, incorporated with checks carried out in relation to tax liabilities.

6.2 Impact on Local Authorities

CoSLA has recorded its reservations about the duty of collection falling to the local authorities and its concerns regarding the magnitude and potential administrative costs of the levy, which it believes require a full investigation.

We consulted two local authorities and considered three options for implementation of the levy:

  • Option 1: Blanket application of the levy

    While applying the levy on a blanket basis ensures consistency of application, data from Australia [ DEH] suggest that the collection of the levy from small retailers could give marginal returns given the cost of collection and estimated segmentation of bag distribution. Consequently, we also considered:
  • Option 2: Selective application of the levy based on retailer size or function.
  • Option 3: Selective application of the levy based on rateable value.

As a possible option for making the best use of resources that would support the Scottish Executive's Efficient Government Initiative, we invited the local authorities consulted to consider the benefits and workability of setting up a central billing body to administer the levy on behalf of all authorities. It should be noted, however, that this is not presented as a formal proposal and it is one about which CoSLA has voiced concerns.

The results from these consultations should not be taken as the whole story for Scotland, but as indicative of the potential costs.

Option 1: Blanket Application of the Levy

The levy will apply to all retailers in Scotland (52,690) 55 and all other outlets distributing bags as part of a business transaction ( e.g. exhibiters). This will undoubtedly create a very significant administrative burden for local authorities, as they will have to administer the levy including collection, policing and penalising of defaulters.

Feedback from discussions with the Assessor to the Lothian Valuation Board has been made available to this study. In essence, a national billing body could establish a database of all subjects liable to the levy. Since this would be sourced to valuation roll data, any analysis of levies imposed and collected could be easily calculated for an individual local authority area. Businesses would need to account directly to the billing body. The most efficient process would be self-assessment similar to the collection of VAT, with legislation enabling the billing body to check the records of any individual businesses for accuracy, etc. The self-assessment would also need to be accompanied by payment to streamline the bureaucracy involved and again legislation would be required to encourage compliance, e.g. fines for late payment, etc. The main administrative efforts would be to keep name and address details up-to-date and to police the return of the prescribed information and levy payments.

CoSLA is also concerned that, if the levy were successful in its aim of reducing plastic bag usage, expenditure on collecting and enforcing the levy might exceed income and local authorities might have to look to the Executive to cover a funding shortfall. CoSLA believes that additional funding from the Scottish Executive would be required for start-up and has commented that the estimated costs would require detailed analysis.

In the absence of any available detailed analysis, we undertook a simplistic estimation of costs of this option using the assumptions given in Table 6.1. This suggests average indicative set-up costs of around £3 - 4 million, and enforcement and ongoing management costs of around £3.5 million per year.

Table 6.1 Simple cost estimates for option 1 (blanket application)


Cost calculation

Estimated cost

Education campaign

£1 - 2 million


1 person for 1 year plus support
(£60,000 x 32 local authorities)

~£2 million

Ongoing management

0.5 person/year/local authority
(0.5 x 32 x £40,000 = £0.64 million)

Billing body team
(4 x £40,000 = £0.16 million)

~£1 million


1 person/local authority plus support and travel
(£40,000 x 32) + (£20,000 x 32) = £1.92 million

Plus legal advice (£0.75 million)

~£2.5 million

Option 2: Selective Application of the Levy Based on Retailer Size or Function

A second option would be to apply the levy based on retailer size. One option for this is to use the EU definition of an SME as the defining point beyond which the levy is applied. The current EU definition of SME is a business with a turnover of €50 million or less. Although this presents a sound solution in terms of practicality, no data are unfortunately readily available to local authorities at present. It would, therefore, have to be sourced from UK Revenue and Customs (formerly HM Customs and Excise). It is also uncertain whether these data would be available at local authority level.

Making a simplistic estimation of costs again for discussion purposes, this option is estimated to require potentially lower set-up costs because less 'contact' will be required as a consequence of working with fewer retailers. Similar ongoing annual management costs and less policing and enforcement costs to option are anticipated, as we would expect the major retailers to comply readily with the legislation.

Table 6.2 suggests average indicative set-up costs of £1.5 - 2.5 million and enforcement and ongoing management costs of £1.75 million per year.

Table 6.2 Simple cost estimates for option 2 (selective application based on retailer size)


Cost calculation

Estimated cost

Education campaign

£1 - 2 million


0.25 person for 1 year plus support
(0.25 x £60,000 x 32 authorities)

~£0.5 million

Ongoing management

0.5 person/year/local authority
(0.5 x 32 x £40,000 = £0.64 million)

Billing body team
(4 x £40,000 = £0.16 million)

~£1 million


0.25 person/local authority plus support and travel
(0.25 x £40,000 x 32) + (£5,000 x 32) = £0.48 million

Plus legal advice (£0.25 million)

~£0.75 million

Option 3: Selective Application of the Levy Based on Rateable Value or Square Footage

Another option, which was suggested by the local authorities consulted, would be to apply the levy based on either the rateable value of the retail outlet or its square footage. These are data held by all local authorities and which could be used as the basis for allocating the levy. While the rateable value approach would allow small retailers to be exempt, it could present consistency difficulties in terms of varying rateable values both within and between local authority areas.

6.3 Revenue by Local Authority

Based on average use assumptions (see Table 4.2), each person in Scotland is predicted to pay the amounts shown in Table 6.3. This table also shows the calculated revenue for the whole of Scotland.

Table 6.3 Cost per person per year for levied carrier bags 56


Cost per person per year for all bags

Revenue total in Scotland per year



£7.75 million



£5.43 million



£8.14 million



£5.70 million

Revenues are slightly higher from scenarios 2A and 2B than from 1A and 1B because paper bags are also subject to the levy in these cases.

Table 6.4 shows the flow of revenue predicted in Table 6.3 against the costs incurred to set up and run a levy collection scheme. Option 1 (blanket levy) and associated costs have been used together with scenario 1A (the proposed levy) and associated revenue. Table 6.4 shows the set up costs in the year before introduction (year 0) and that from the first year of operation onwards, net revenue is estimated at £4.25 million per year. Under Mike Pringle's Bill, this would be available for environmental schemes across Scotland [Pringle].

Table 6.4 Estimated costs versus revenue in Scotland (Scenario 1A, Option 1)

Cash flow (£ million) in year:





Set-up costs 57





Annual costs




















Analysis for other scenarios and options shows that:

  • More revenue would be generated for scenario 2A because paper bags would be included. However, the costs (Option 1 blanket levy) would be the same, so the annual balance would be greater.
  • If SMEs were excluded (Option 2 and scenarios 1B or 2B), there would be lower set-up and ongoing management costs but also lower revenue.
  • If plastic carrier bag use fell to 5% of pre-levy volumes, half the revenue estimated in Table 6.4 would be generated. If it is assumed that the 90% reduction is for the first year of operation only and that consumption then drops to 95% of pre-levy amounts 58, revenue could be expected to fall to around £3.8 million per year. Likewise, if the reduction in carrier bag use is less than anticipated, the revenue generated will be greater.

By applying the costs per person given in Table 6.3 to population data by local authority, it is possible to get some feel for the amount of levy revenue likely to be raised by each authority under each of the scenarios (see Appendix 4) 59. As expected, the higher the population within a local authority, the more revenue it would collect from the levy. Hence, under all four levy scenarios, the City of Glasgow would raise by far the most revenue (from just under £620,000 per year under scenario 1B to just under £930,000 per year under scenario 2A). Some of the islands ( e.g. Orkney and Shetland) would collect as little as £21,000-24,000 per year under scenario 1B.

Comparing these figures with the costs outlined in Tables 6.1 and 6.2 shows that there would be disproportionate costs between local authorities, with a net financial gain to the larger ones but a net cost to the smaller ones. This disparity could be addressed by a national billing body.

6.4 Conclusions on the Administration of the Levy

Of the three options presented, Option 1 seems most complicated and will have the greatest resource and cost implications. It is also difficult to envisage a simple and cost-effective policing mechanism. Options 2 and 3 offer a simplified approach, involving less resources and an anticipated reduced requirement for policing. We predict there would be a net gain financially from a levy in all situations, whether or not coverage is restricted.

Having discussed the practical implementation of Option 1 (blanket application of the levy) with two local authorities, their view was that there are clear administrative difficulties and significant costs associated with this course of action. Blanket application was considered to require dedicated staff within each local authority area to administer the levy in terms of informing business of its existence and to carry out subsequent policing of the levy. Such staff would still be required even if a central billing body were set up to collect the revenue.

A discrete billing body was considered a logical option for collecting revenue. This body would be responsible for:

  • Collating returns from all retailers.
  • Collecting funds.
  • Allocating monies by local authority (money must be spent locally to satisfy the requirement in Mike Pringle's Bill for devolved competence).

The success of this model would depend on a high level of trust between retailers and the billing body, i.e. it is assumed that no responsible retailer would wish to be seen to be avoiding its tax liabilities. All businesses liable to pay the levy would be identified and informed of their new duty. The billing body would then expect to be provided, electronically, with information regarding the number of bags distributed and the subsequent levy owing. Most significant retailers in Scotland possess electronic stock systems, which should allow them to transfer information on bag usage easily to the billing body. Billing could be carried out on a monthly or quarterly basis, as required. Electronic data submission by smaller retailers may be more problematic.

It is expected that the cost of running a plastic bag levy collection scheme could be recouped from the revenue generated. It is therefore expected that this cost would not be added to local authority expenditure.

Such a model seems to sit well with local government efficiency initiatives by encouraging shared resources between councils. Discussions with the local authority representatives suggested that such a body could function with around four staff. This would allow the maximum benefit to be accrued from the levy. However, CoSLA is known to have concerns about the shared resource option and is unlikely to support this approach without a more detailed financial appraisal.

As each authority would generate different levels of revenue, a range of 'contributions' to the billing body might be necessary. Otherwise, some authorities would be paying disproportionately.