Current Issue #477

Slings and Arrows: Passing the green buck

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Everyone knows that government is a bluff of parliamentarians, but it can also be a powerful mechanism for the operation of tax rackets.

Among the multitude of South Australian government bureaucratic games largely played out of public view is the one where the state imposes a tax on defenceless local councils but doesn’t deliver what the tax is supposed to fund. Worse, it hikes the tax rate mercilessly over a few short years, forcing local government to make up the loss through rates increases. This irritates the heck out of the people that local government serves, its commercial and residential ratepayers. Meanwhile, state politicians pretend that they know nothing about the angst it causes. Adelaide metro mayors are sick of the government tactic, and recently made their opinions heard.

There’s currently a crisis in local government waste collection and recycling. China doesn’t want to recycle our plastic rubbish anymore. Of course, it’s much more complicated than that, but it has brought into sharp relief a matter of a tax that few South Australians knew about. Put simply, given the way the tax is levied, but not fully directed to deliver tangible results, it’s a well-polished government racket. Despite a very clear analysis of the recycling problem faced by local government, and a sound understanding of short- and long-term solutions, the issue has been herded into a state parliament inquiry into the recycling industry. It will likely sit for some time before releasing its findings, but the issues and potential solutions are already known. This is often how parliamentary inquiries work. State politicians scratch their heads in faux bafflement as they ask for agency and industry advice. But key ministers will have already received comprehensive warnings and wise advice, sometimes for years, leading up to a crisis.

The problem

The South Australian government is sitting on more than $120 million of unspent waste levy fund payments (that’s the tax), held by what’s called the Green Industry Fund (SA). Green Industries SA (GISA) is a small agency, apparently committed to funding initiatives to improve green recycling. In 2017–18 it collected $31.7m under that tax, ostensibly making up most of GISA’s $35m budget. However, while its annual report claims it spent $23.5m of that figure, in reality it spent much less operationally because $13.79m of it had been hived off in transfers to other corners of government for “climate change initiatives”. GISA works to improve SA waste recycling. Most of the cheques it writes for recycling initiatives are for relatively small sums. They’re undoubtedly useful to local government and others. Meanwhile, however, that $120 million just sits there. The waste levy (the tax) falls on every metro council – likely yours.

Lately it’s been ruthlessly applied, jumping 125 per cent in only five years. In 2015–16 it was $52 per tonne of rubbish collected per council. In July 2020 it will be $140 per tonne. It’s not as if GISA operational costs are spiking. They’re not. The collection of this tax might be described as one of the state’s great rackets, because, as the City of Adelaide noted in its July 2019 submission to the parliamentary committee, “it has minimum impact on the creation of local recycling markets or incentives for more environmentally minded packaging and materials”. Meanwhile, the food and beverage packaging industry continues to do very nicely, irresponsibly creating a waste stream in which some elements are also non-recyclable and environmentally harmful. It creates the problem, but local government largely cops the consequences because it is charged with the job of coordinating recycling. Very recently, the news about the looming jump to $140/tonne prompted sound and fury among metro councils, many of which were forced, very late in their budget processes, to hike rates to cover it.

The solution

The city council’s proposals feature a mix of procedural fix-ups, but also confront the political tax question. “Spend the Waste Levy Fund [$120m] to support the strategic priorities of Green Industries SA, or reduce the waste levy accordingly,” say city council administrators. That’s a diplomatic way of saying ‘Stop taxing us rotten for no good reason, and seriously prod Green Industries SA into investing all the tax money in strategies that will address the crisis’. Before the latest crisis, GISA planned something in February 2018, writing a Waste and Resource Recovery Infrastructure Plan, but it clearly wasn’t enough to avoid a full-blown train wreck when China closed the doors.

Here are some other city council recommendations (with plain English interpretations below in parentheses). 1. “More support to transition Australia to a robust circular economy…” (That means pursuing a practicable recycling culture across all the states, and not just having a deposit only on pop and beer bottles and cans, and only very selectively in states like SA. That one will be the most difficult to achieve, given that our 1901 constitution created silos called states and territories that rarely agree on anything.) 2. Commence data acquisition. (Adopt a better systems-based approach, which will deliver a clearer picture of what’s going on.) 3. “Enhance resource recovery.” (Improve it by confronting the packaging industry, calling out its habit of using difficult-to-recycle, environmentally harmful packaging, which leads to uneconomic conditions for the recyclers.) 4. “Prioritise local reprocessing and market development”. (It has to return to local processors, but they won’t do it if it’s uneconomic. Right now, it’s uneconomic.)

Potential for optimism

The city council’s conclusion suggests a way forward, once the state government stops its tax-for-no-result racket. “This [council] approach will build the local economy [currently in major slowdown mode]; create ongoing employment [when unemployment and under-employment rates are much worse than the official figures]; foster business innovation [which emerges when there’s a real opportunity and a profitable motive to do so]; and remove the heavy reliance on international markets” [passing the buck to China and other countries was never clever; only opportunistic]. The parliamentary inquiry may now rise. These will be the recommendations. Just wait and see.

Ash Whitefly

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Ash Whitefly is Executive Director of the Adelaide Whitefly Institute of Diplomatic Studies.

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