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The most popular tax in Europe? Lessons from the Irish plastic bags levy

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There have been occasional ad hoc efforts to influence consumer behaviour by the imposition of product taxes that reflect external costs imposed by such products that are not initially included in their price. In the spirit of this idea, in 2002 Ireland introduced a 15 Euro cent tax on plastic shopping bags, previously provided free of charge to customers at points of sale. The effect of the tax on the use of plastic bags in retail outlets has been dramatic—a reduction in use in the order of 90%, and an associated gain in the form of reduced littering and negative landscape effects. Costs of administration have been very low, amounting to about 3% of revenues, because it was possible to integrate reporting and collection into existing Value Added Tax reporting systems. Response from the main stakeholders: the public and the retail industry, has been overwhelmingly positive. Central to this acceptance has been a policy of extensive consultation with these stakeholders. The fact that a product tax can influence consumer behaviour significantly will be of interest to many policymakers in this area. This paper analyses the plastic bag levy success story and provides insights and general guidelines for other jurisdictions planning similar proposals.

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  1. The term ‘plastic bag’ used in this paper is the same as defined in the Irish Waste Management (Amendment) Act 2001, Section 9. This Act describes a plastic bag as a bag which is inter alia: (a) made wholly or in part of plastic, and (b) which is suitable for use by a customer at the point of sale in a supermarket, service station or other sales outlet. For more see:

  2. Pearce and Turner (1992) assess a tax on packaging waste.

  3. ‘Levy’ is the official term used in the Waste Management (Amendment) Act (2001). In this paper, we use the words tax and levy interchangeably.

  4. Department of the Environment, Heritage and Local Government Press release 20/12/2001:

  5. Customers can purchase permanent bags at the point of sale in most retail outlets. The potential substitution from plastic to paper bags instead of permanent bags was not a concern when the tax was introduced since it was not in the interest of the retailers to provide this option; many retailers in the retail survey made the observation that the storage costs of paper bags are substantially higher than those of plastic bags.

  6. It could be argued that people whose behaviour was modified by the levy were not littering in the first place!

  7. In the act, there is provision for an on the spot fine of € 125 or a fine not exceeding € 3,000 if convicted in court (

  8. In personal communication with the DOELG (December 2002), officials indicated that the projects undertaken using these funds to finance inter alia recycling facilities and infrastructure as well as educational programmes were above and beyond the pre-existing level or the levels in the absence of such a fund. The extent of this is, however, unclear.

  9. There is, however, a large disparity in petrol and diesel prices between the two jurisdictions, because of much higher excise duties applied in the UK, and this does result in considerable leakage of consumption from Northern Ireland to the Republic of Ireland.

  10. UNEP (2005) recommends a seven-pronged approach that includes a levy on suppliers rather than on consumers. The rationale is that in Kenya, being a developing economy, the administrative burden is far less for the former policy than for the latter and there also exists a considerable ‘casual’ market in which it would be difficult to monitor and collect revenues from a consumer-based levy. This is not such an important consideration in developed countries.

  11. Interdepartmental agreement between the Department of Environment and Local Government and the Revenue Commissioners.

  12. Personal communication with the Department of the Environment, Heritage and Local Government and the Revenue Commissioners (December 2002).

  13. Personal Communication, Revenue Commissioners, Ireland (December 2004).

  14. The major UK department stores were initially reluctant to implement, because their centrally controlled and defined accounting systems needed to be adapted. However, after some delay, they are now fully compliant.


  16. Traces are defined as up to five items over a linear distance of 1 m.

  17. Retailer B was so pleased with the take up of its long life bags (that reduced its costs of providing plastic bags) that it advertised in its stores it was absorbing the 1% VAT increase which was introduced in 2002 because of its significant savings on plastic bags.

  18. The questionnaires of the surveys are available from the authors upon request.


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Correspondence to Simon McDonnell.

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Convery, F., McDonnell, S. & Ferreira, S. The most popular tax in Europe? Lessons from the Irish plastic bags levy. Environ Resource Econ 38, 1–11 (2007).

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