Carrier Bag Charge Means Another Slice of VAT for Treasury

10 February 2014, 17:16

What would you do with £19 million? That’s the question being asked of the Government at the moment, with an eye on the windfall they could receive once shops start charging 5p per carrier bag for all the bags required by customers.

The idea is to make sure as few carrier bags as possible are used, steering customers towards using reusable and eco-friendly bags instead. However many people have pointed towards the not inconsiderable windfall the Government would receive as a consequence of this.

Each carrier bag will be charged at 5p once the scheme begins in 2015. With the current rate of VAT set at 20%, this means the Treasury will get 1p from the sale of each bag. It may not sound like much, but the amount of bags that are expected to be sold put the VAT income for the Government at a whopping £19 million.

Some people are suggesting the VAT money should go to green charities. However the rest of the cash generated by the sale of the bags (estimated to be around £70 million every single year) will go to green charities. The additional cash would certainly come in useful if it went in the same direction. The question is what the Government will do with this VAT windfall if it does decide to keep it.

Another question worth asking here is whether charities will actually get all the proposed £70 million they should do. According to reports the Government will have no rules or regulations in place to ensure all the supermarkets will actually pass the cash on. You’d think most of them will in order to get the good publicity; any who do not do this are likely to hit the headlines and not in a good way.

So where should the £19 million go? It would certainly be good to see some use come of it. Since the whole charging scheme for carrier bags is being done to improve the environment, it makes sense to see the VAT money do some good as well. Of course it remains to be seen whether politicians think the same. Nothing has yet been said in terms of whether they will hang onto the VAT money or not. But it would certainly be a good bit of publicity for the Government if that cash went to a good cause, or helped the environment in another way too.

Either way, the charge on plastic bags is going to have several positive knock on effects on the environment. Hopefully the amount of VAT collected will go to a good home, but it remains to be seen whether it ends up staying with the Treasury. The next time you have to buy a bag when you go shopping, consider where all those pennies will go.