Levy Loopholes

Australian Landfill Owners Association Chief Executive Officer Colin Sweet highlights some of the potential loopholes that could see the interstate waste transport issue remain in Queensland, among numerous other financial and health risks for operators.

The issue of levy avoidance is not mutually exclusive in states that don’t have a landfill levy in place. As Waste Management Review reported on in its May 2018 issue, the Waste and Recycling Industry Association of Western Australia identified widespread occurrences of what they saw as levy avoidance outside the metropolitan area.

While levies should act as a market signal for reinvestment into recycling, the widely reported lack of a levy in Queensland led to the state becoming a “dumping ground” for interstate waste. Waste from interstate sources increased by 61 per cent in 2016-17, according to the 2017 Recycling and Waste in Queensland report.

The Palaszczuk Government’s investigation into interstate waste, undergone by Justice Peter Lyons QC led to the announcement of a new waste strategy yet to be developed and aided by the Recycling and Waste Management Stakeholder Advisory Group. Notably, the news accompanied a decision to introduce a waste levy at $70 a tonne on general waste in the first quarter of 2019 on 4 March. This will cover 38 local government areas out of 77 – more than 90 per cent of the state’s population.

At this stage in the process, the only information released to the general public is the Transforming Queensland Recycling and Waste Industry Directions Paper that was open for comment until 29 June. The paper indicates that $70 per tonne, which increases $5 per year, will be “high enough” to send a market signal to the waste industry for landfill diversion and act as an immediate incentive to divert construction and demolition materials. The paper says it’s arguably high enough without the “market shock” of NSW’s rate – $141.20 a tonne in metropolitan areas.

But the Australian Landfill Owners Association (ALOA), whose members represent almost three quarters of Australia’s landfilled waste, believes otherwise.

Colin Sweet, Chief Executive Officer, placed a submission to the Queensland Department of Environment and Science on 5 July. It notes that ALOA is supportive of programs that increase recycling in Queensland and recognises the levy will encourage increased diversion from landfill through higher disposal costs and hypothecation to provide funding for urgently needed recycling infrastructure and market development.

However, its concerns at present are that legal loopholes for levy evasion may not be fully closed. Its key reasons relate to the limited levy zone, early levy commencement date, introducing a levy before a waste strategy and other issues regulating exempt materials and the implications of stockpiling.

The Transforming Queensland Recycling and Waste Industry Directions Paper proposes levy portability for waste generated in the zone and moved outside of the levy zone if this waste is disposed of, including “interstate waste”. The directions paper highlights that further work is needed to determine the infrastructure and regulatory requirements to apply this and may require further infrastructure at non-levy zone sites.

On the issue of legal loopholes, Colin notes that if a “recycling facility/transfer station” in the non-levy zone takes waste from the levy zone, or from NSW, the levy won’t apply as it wasn’t received in a landfill.

From there, it’s possible for the recycling facility to take its residual waste to a third party landfill in the non-levy zone, where it would be classed as waste generated in the non-levy zone and not liable for the levy. Colin says the Queensland town of Goondiwindi, a non-levy zone, is one of the main arterial routes from NSW, which could be used to continue to move waste over the border.

A spokesperson for the Department of Environment and Science (DES) in August told Waste Management Review that the waste disposal levy does not restrict the legal interstate disposal of waste and is no barrier to free trade. They said the levy is therefore consistent with Section 92 of the Australian Constitution.

“There is no ‘loophole’ in the legislation,” they said.

“Detailed legislative provisions are proposed for recycling facilities or transfer stations in the non-levy zone if they accept waste from interstate or within the levy zone. These will cover reporting requirements with penalties for misreporting or levy evasion.”

Colin says a key issue is that smaller operations were responsible in the past for carting waste over the border to Queensland and they will continue to be largely working in the levy-free zone.   

He says a levy must be put in place across the board to prevent perverse outcomes.

“As an example, you could set up your establishment in Goondiwindi and bypass the Queensland levy.

“Is that going to be a 100,000, 10,000, 1000 or zero tonne problem? I couldn’t say.

“But if you asked me years ago about whether people in NSW would take waste to Queensland to avoid the levy – I couldn’t have anticipated that.”

He says that $70,000, the savings afforded by avoiding a levy on 1000 tonnes, would be enough to buy a second truck – savings that cannot be underestimated. Colin says that on the surface a $71.20 saving from NSW’s $141.20 levy versus Queensland’s $70 would be enough to put to bed the issue, but this doesn’t take into account operating costs.

He says the total cost in South East Queensland for construction and demolition waste disposal, including an approximate operating cost of $30 and the levy is $100 – compared with NSW’s $72 operating cost equating to a total cost of $213.20. He says that while the levy may assist in preventing interstate waste, it is quite likely it won’t.

The DES spokesperson says Queensland’s $70 per tonne waste levy compares favourably with similar levies in other states. They noted gate fees are determined by landfill site operators and reflect operating costs.

The directions paper acknowledges higher gate fees in NSW, which include site management and disposal costs, competition and relative scarcity of landfill space in Sydney may maintain the incentive for interstate transport.

“This is why the new waste management strategy is also proposing companion measures, such as landfill disposal bans, to further reduce incentives for the transport of interstate waste,” it says.

“Further work will be informed through the Stakeholder Advisory Group and public consultation processes to develop the detailed levy model.”

Colin says perverse outcomes come as a result of poor planning.

According to Colin, introducing the levy in the first quarter of 2019 will not allow enough time for industry to budget for it.

He says this is because most companies operate on a 12-month budget and need time to budget for it in 2019-20.

“A greater problem is transferring the cost of the levy to customers. This isn’t a landfill issue because we charge people as they come in the gate. The issue is for the transporters, how they then transfer the cost of the levy through to their clients,” Colin says.

“There’s a whole process in that market of negotiating prices and settling on a price. As we discovered in the period of the carbon tax – it’s not an easy process.”

The DES spokesperson in response to questions of a 2019 first-quarter commencement date said that if the previous Queensland waste disposal levy had not been dismantled in 2012, the state would have been able to respond to the current recycling crisis and it would not have hundreds of thousands of tonnes of waste trucked from interstate.

“The Queensland Government has been working with the waste industry since it announced its proposal to reintroduce a waste disposal levy in Queensland to ensure that they can be ‘levy ready’.”

Another one of Colin’s concerns is that the levies have been introduced prior to a waste strategy and environmentally relevant activity framework – core processes linked to the planning of new facilities. He adds that perverse outcomes come as a result of poor planning and the levy is only one tool of many.

He notes that in an earlier consultation draft, the DES had indicated that environmentally relevant regulations would be extended to the whole waste industry. The current plan is for them to only apply to regulated waste transport, but not general waste transport, which means less accountability on the drivers to collect and pay the levy. The first commercial transaction, including levy collection, occurs between the waste generators and the collector. If the transporter then takes that to a non-levy-paying area or illegally disposes of it, they could pocket the $70 a tonne.

“Our solution is to licence the provider of waste transportation so they have to be registered with the DES,” Colin says.

“Without visibility and effective powers of enforcement as a deterrent to levy evasion, Queensland will potentially follow the same mistakes made by NSW in creating conditions vulnerable to waste crime.”

Colin says ALOA members are also concerned that the DES will allow exemptions for waste stockpiled before the levy is introduced and thus exempt from paying it once it goes to landfill. The end result is an increased risk of fires, asbestos-containing dust or leachate.

He says if the department doesn’t remove this exemption, it should be a priority of its compliance section to proactively police stockpiles on licenced sites.

On questions of the government policing stockpiling prior to the levy, the DES spokesperson says the levy cannot and does not apply to industry “stockpiling” waste at its own facilities.

“Other than delaying the levy payment when the waste is actually disposed of, there would be no financial incentive for industry to stockpile waste. The Queensland levy will differ from the NSW levy in that no levy rebate will be given for recyclables. Separation is encouraged to occur offsite or within a designated resource recovery area on-site. The levy is only paid on material going to landfill.”

Colin says compliance is also under threat from a number of unlicensed waste disposal facilities, who have established disused mining quarries and sand pits as “clean earthen material” sites – a definition exempt from the department’s environmentally relevant activity framework. He says it’s important that these sites are not granted default landfill licences under the new environmentally regulated framework, which he argues should be introduced well before the introduction of the levy.

The DES in response to whether “clean earthen material” will become an environmentally regulated framework said natural earthen materials (“clean earth” such as soil, gravel and rock) are exempt from the waste disposal levy.

“Earthen materials that contain any form of regulated waste must be transported and disposed of in accordance with strict environmental requirements.

“Illegal operators across the waste industry are given notice that as the state’s environmental regulator, the DES takes any non-compliance very seriously and significant penalties apply for proven non-compliance with environmental laws.”

When asked whether environmentally relevant regulations should be extended to the whole waste industry, the DES spokesperson said waste levy legislation includes requirements for those transporting and disposing of levy-applicable waste to give the department 24 hours’ notice before delivering commercial quantities of such waste from interstate, or from the levy zone to a recycler, transfer station or landfill in the non-levy zone.

“While this will go some way to discourage efforts to evade paying the levy, the Queensland Government recognises the need for further action at the national level, which could include general waste tracking systems and/or waste transport licencing.”

Importantly, levy hypothecation should encourage recycling.

While the directions paper highlights local government will be a beneficiary of the levy proceeds for funding available for waste disposal infrastructure upgrades and education and awareness, Colin says the remaining funds should go to industry programs, enforcement for levy avoidance, low interest loans for recycling infrastructure and other grants for product research and verification.

Read ALOA’s submission in full here:

https://bit.ly/2vJhF5H


This article was originally published in the September edition of Waste Management Review.