EPR System: High Fees and Additional Administration

Analysis

Bence Barta, director of Andersen Tax Advisory Zrt.

On July 1, radical changes will enter into force in Hungary’s waste management field. This is when the Extended Producer Responsibility (EPR) scheme will start to operate, imposing a new fee and a significant administrative burden on stakeholders for so-called circular products.

In December 2022, the Hungarian parliament adopted amendments to the law to comply with the European Union’s waste management directives. The detailed rules for implementation were published in the form of a government decree in March this year.

The new legislation is part of the EU’s measures to promote a green transition and a circular economy. The government’s priority is to ensure that this process is completed as quickly as possible in Hungary and that the national economy switches to an operating model in which fewer products become waste and the greatest possible proportion of waste is reused as raw materials.

At the heart of the concept is the notion of extended producer responsibility, which means that the responsibility and cost of waste management (collection, recycling, disposal) for the life cycle of so-called circular products falls on producers or, in the case of foreign production, on their first domestic distributors. Circular products include, among others, packaging, single-use plastic products, electrical and electronic equipment, batteries and accumulators, motor vehicles, tires, office and promotional papers, some textiles, wooden furniture, cooking oils and fats. This overlaps significantly with products subject to environmental product charges, but the overlap is not 100%.

The EPR scheme will enter into force on July 1. At the same time, the concession company for the reception, collection, transport, pre-treatment, trade and transfer for treatment of waste products will start its operational activities. This role will be performed by a newly formed subsidiary of the national oil and gas giant MOL, MOHU MOL Hulladékgazdálkodási Zrt., which, in this sense, is responsible for the operation of the EPR system.

Under the scheme, there are three primary obligations for the economic operators concerned. The first is that they must apply for registration with the national waste management authority (government offices) before starting their activities with circular products. Existing manufacturers and distributors had time to do so until May 1.

The second obligation is that businesses must keep a continuous and detailed record of their EPR activities (product codes, product movements, volumes etc.), which must be done site-by-site. This, together with quarterly reporting, represents a significant additional administrative burden for them and, in many cases, will require reorganizing their internal information and record-keeping systems.

The third obligation is the so-called EPR fee, which is the basis for financing the scheme. According to the ministerial decree published on June 2, the level of this fee will be many times higher than the environmental product charge for most product groups.

It is important to note that, according to the legislation, the environmental product charge existing with similar obligations will remain in place after the EPR scheme is launched, so the product charge will no longer need to cover waste management activities. This means that the product charge payable will be reduced or, for many product groups, eliminated by allowing the deduction of the EPR fee from the product charge liability.

The regulatory wave will not stop on July 1. Six months later, from January 1, 2024, a new deposit return scheme will arrive, essentially introducing a new deposit-fee solution for drinks bottles.

This article was first published in the Budapest Business Journal print issue of June 16, 2023.

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