Brian Cowen (Laois-Offaly, Fianna Fail)

There is no complacency on my part or on the part of the Revenue Commissioners. The Finance Bill 2006 proposes a number of changes in relation to the legislation governing the administration of relevant contracts tax aimed at tightening control and discouraging fraud. First, the Bill provides a statutory basis for the limit that the Revenue currently applies administratively on the amount of gross payments that a principal contractor can pay to a subcontractor on foot of a relevant payments card. Second, the Bill contains provision to allow Revenue to refuse a certificate of authorisation to an applicant where a person connected to the applicant does not meet the compliance requirements of RCT legislation as regards payment of tax, making of returns and keeping of records. Third, the Bill provides for the Revenue to take into account an applicant's likely future tax compliance in determining whether a C2 should be issued.

Revenue has a continuous history of paying attention to the misclassification of building operatives as self-employed contractors. In 2004 Revenue devoted over 18.5% of audit programme activity to the industry and carried out 3,036 audits across all main programmes, out of a total of 16,321 audits. These audits yielded approximately €57 million which, out of a total audit yield of €549.6 million, amounts to approximately 10% of the total audit yield recovered that year. Approximately 45% of the audits were nil yielding, but that figure is not out of line with the percentage of nil-yielding audits across all programmes.

The focus on construction continued in 2005 with up to 20% of audit and compliance interventions being targeted on the construction sector. Up to the end of October 2005, the more than 4,400 compliance interventions that Revenue carried out in the sector yielded in excess of €73 million. Obviously, that total will rise when the annual figures are available.

The substantial increase in the level of Revenue's construction industry activities was enhanced in 2005 by a number of new special compliance initiatives. For example, in the east and south-east region significant audit resources were devoted to a special investigation of construction industry projects in the region. As part of this, in the first six months of 2005 the status of 500 subcontractors was examined. It was found that only three subcontractors should properly have been classified as employees.

As I said, we have undertaken an in-depth review and evaluation of the risks in the sector. A comprehensive action plan has been agreed by Revenue's management advisory committee to implement some technological and administrative changes and legislative proposals. These developments, together with the increased resources targeting the construction industry, will greatly increase tax compliance in the sector. Revenue will continue to refine risk evaluation and further target resources in the light of emerging results and insights from the 2005-06 results.

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