Food producers have criticized the introduction of a new UK environmental tax, warning it will force them to raise prices for consumers at the risk of fueling inflation.

Several major food companies and industry representatives told the Financial Times that companies find the plastic packaging tax, which is due to take effect on April 1, challenging to understand and comply with.

The levy, announced in the 2018 budget by then-Chancellor Philip Hammond, aims to encourage companies to use recycled plastics in the production of plastic packaging.

Companies that produce or import 10 tonnes or more per year of plastic packaging containing less than 30 percent recycled plastic are taxed at £200 per tonne. Plastic packaging with at least 30 percent recycled material is exempt from the tax.

However, food producers said the government has made no exceptions for materials that come into contact with food and cannot be recycled. As a result, these companies had no choice but to pay the tax, leading to increased costs, which could potentially be passed on.

Nicki Hunt, director of sustainability at the Food and Drink Federation, said: “Food and drink manufacturers want to do the right thing and recycle more packaging – in line with the UK government’s environmental targets and our own environmental targets – but efforts are limited by restrictions around the materials that can come into contact with food, which cannot currently be recycled, and are subject to the new tax on plastic packaging.”

She added: “As a result, more costs are incurred for businesses, which could lead to higher prices for consumers. Our industry would favor government action to further support and encourage innovation in recyclable packaging materials.”

A source from a major food company said the way the tax had been introduced was “hugely contradictory because there would be no incentive to use recycled material – the very purpose of the plastic tax”.

Helene Roberts, chief executive of Robinson Packaging, an Aim-traded plastics recycling company, and head of the British Plastics Federation’s plastics and flexible packaging group, said inflation would be an unintended consequence of the tax.

Food-grade items that can’t use recycled plastic — such as soup pots — should have been exempted until the technology advances in a few years, she argued. “It will only lead to inflationary pressures within the supply chain.”

A large number of businesses would be affected by the new tax, advisers from accounting firm RSM said, including retailers that import items such as trash bags, drinking bottles and carrier bags, publishers that import plastic for book lamination and freight carriers that import plastic packaging such as bubble wrap. But food producers would be hardest hit.

Andrew Thurston, customs consultant at MHA, an accounting group, warned that importers would also find it “difficult and costly” to obtain proof from foreign suppliers of the recycled content of packaging. This could lead companies to ignore calls to use more sustainable materials, “negating the purpose of the tax,” he said.

The government said it had worked closely with industry, including the food packaging sector, to “ensure businesses get the information they need”.

“Tax exemptions have been minimized to encourage greater use of recycled plastic and boost the recycled plastic supply chain,” it said.

It added: “Food packaging makes up about 40 per cent of packaging in the UK, so excluding the tax would seriously mitigate its impact. Many types of food packaging already contain recycled plastic or use alternative materials to plastic.”

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