Wednesday, 27 April 2005
Question 43: To ask the Minister for Finance the situation in respect of PAYE and PRSI contributions for workers brought here from a non-European country for the purpose of employment in the construction industry; if there is a mutual taxation agreement between Ireland and Turkey; if he intends to review these arrangements in view of reports concerning a company (details supplied); and if he will make a statement on the matter. [13465/05]
Taxpayer confidentiality requires that a Minister for Finance does not answer a parliamentary question about the tax affairs of an individual or company, other than when the Deputy is asking the question on behalf of the individual or company. I regret I cannot comment on the tax affairs of any taxpayer.
However, by way of general comment, the Revenue Commissioners inform me that the question of whether the deduction of tax under the PAYE system applies to emoluments paid to workers brought to Ireland from a non-European country for the purpose of employment in the construction industry, or any industry, depends on the facts and circumstances prevailing in any specific case. For example, the emoluments payable to an individual working here under an Irish contract of employment are subject to deductions of tax at source under the PAYE system. Where the foreign employing company has a subsidiary company in Ireland, emoluments paid by that Irish subsidiary to individuals working here are also subject to deduction of tax under the PAYE system.
On the other hand, an employee working here under a foreign contract of employment and who is paid outside of Ireland by that foreign employer does not pay tax here under the PAYE system but rather is personally responsible for payment of Irish tax under the self-assessment system on his or her salary.
Individuals resident here who are not Irish domiciled can avail of a long standing statutory tax relief, more commonly known as the "remittance basis", against their foreign source income including employment income.
In brief, individuals resident here who may avail of the "remittance basis" relief pay tax here on the full amount of their Irish and UK source income and on that amount of their non-Irish and non-UK source income, including employment income, brought into the State.
Ireland normally includes a specific provision in its double taxation agreements dealing with the remittance basis of taxation in Ireland. It provides that where an individual is subject to tax in Ireland by reference to the amount of income or gain remitted rather than the full amount, any exemption or relief required to be granted in the other country under the double taxation agreement will apply only to the income or gains remitted to or received in Ireland. This is aimed at avoiding a situation where the income or gains are not taxed in either country. There is no double taxation agreement between Ireland and Turkey. However, negotiations are ongoing to conclude such a treaty but it is not possible at this stage to state when these negotiations will be finalised.
Issues relating to PRSI are a matter for the Minister for Social and Family Affairs. However, my understanding is that exemption from payment of social insurance employment contributions, for a period not exceeding 52 weeks, can be granted in respect of the temporary employment of persons who are not ordinarily resident in the State. Such exemptions are subject to the employee in question having a valid work permit and confirmation by the employer that social insurance contributions are paid in the employee's home country. Employees granted exemptions have no entitlement to social insurance benefits in this country during the period of the exemption. Should an employee continue to work here after the period of the exemption, PRSI contributions are payable in the normal manner through the revenue system.
Is the Minister not concerned that of 1,900 exemptions issued since 2003 in respect of foreign workers in Ireland in the circumstances described by the Minister, 1,400 were issued to Gama, the Turkish construction company at the centre of controversy? Is the Minister not concerned that these 1,400 exemptions were issued on foot of permits and that they offer a complete exemption from PRSI, which represents approximately 20% of labour costs? They also offer a parallel exemption as outlined by the Minister in his reply from tax on a PAYE basis. This means that Gama is at an immediate labour cost advantage over other employers, including Irish companies, of at least 25%. Given the value of the public sector contracts availed of by this company, it has achieved an advantage of at least €5 million and perhaps up to €15 million. This is not only a scandal but also a scam and a fraud on the taxpayer.
Is the Minister not concerned that this is a back door way, presumably found by those clever accountants and lawyers employed by Gama, to undermine the PRSI system and, in parallel, the PAYE system? Were these arrangements originated by the Department of Enterprise, Trade and Employment? Were the Revenue Commissioners, who are responsible for collecting PRSI and PAYE tax from employers, aware of the special exemptions for this company? Will the Minister order the Revenue Commissioners to carry out as soon as possible an investigation into this undermining of the PRSI and PAYE structures? We have enough tax scams without the need to create more.
The remittance basis is one of the oldest reliefs found in tax law and obviously has a wider application than the specific case raised by the Deputy. Questions regarding employment law etc. are matters best directed to the Minister for Enterprise, Trade and Employment who can give a detailed reply and has already done so through the parliamentary question system since the matter first came into the public domain.
Regarding the views of the Revenue Commissioners and any lessons to be learnt from this case, obviously the Revenue Commissioners will examine the labour inspectorate report on the Gama employees working in the State. As soon as they consider the matter in the context of their own investigations, I am sure they will take whatever steps they deem necessary and advise me accordingly. As matters stand, we await that.
Will the Minister order an inquiry? I understand that neither the Department of Social and Family Affairs nor the Revenue Commissioners has been aware of the way in which this exemption from PRSI and PAYE tax has been operated for the benefit of this company. It gives a multi-million euro advantage to this company which is not enjoyed by Irish employers operating in the system and treating their workers decently. I want the Minister to undertake to have an inquiry carried out into what is essentially another part of the Gama scam in which its workers have been treated exceptionally badly by the employer. Not only has it been ripping off the workers, it has also been ripping us off as taxpayers.
Obviously everybody is concerned at what they have learnt about this matter since the latest issues were brought to our attention earlier this year. The Minister for Enterprise, Trade and Employment responded immediately with the labour inspectorate report which is now the subject of High Court proceedings as the Deputy will be aware. As soon as the Revenue Commissioners have an opportunity to examine the matter, I am sure they will make whatever recommendations they feel are necessary and we can take the matter from there. Until that examination takes place and we have received that advice, I am not in a position to say or do anything more than state the present position and recognise that this is an ongoing matter.