Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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106. To ask the Minister for Finance his views that there is a need to investigate possibly large losses in tax revenue to the Exchequer because of abuses of the relevant contracts tax 1 system and instances of bogus self-employment, particularly in the construction industry; and if he will make a statement on the matter. [24599/15]

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Deputy Ruth Coppinger, who raised a similar issue today, and a number of other Members, including me, have for years been receiving allegations from construction workers, particularly bricklayers, plasterers and labourers, that there is widespread tax fraud taking place on building sites. Contractors and developers are abusing the so-called RCT 1 system by misclassifying people as "self-employed" when they are not in order to evade tax responsibilities and to underpay those workers. The ruling of the Labour Court in the JJ Rhatigan case, where workers were paid €100,000 to basically get lost, suggests that this is happening, and continues to happen, on other sites which I will mention in a minute.

Michael Noonan (Limerick City, Fine Gael)
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I thank Deputy Richard Boyd Barrett for his question. Bogus self-employment in the context of the Deputy's question is generally accepted as referring to a practice of employers erroneously describing or treating employees as self-employed contractors.  As the Deputy may be aware, a number of questions have been put down by other Deputies in recent times on this issue, especially as it might relate to the construction sector. Similar to the PAYE system, the electronic relevant contracts tax, or eRCT, system is a tax deduction at source system.

Neither system determines whether a person in the construction sector or, indeed, in any other sector is an employee or a self-employed contractor.  It is important to be clear, therefore, that the eRCT system does not determine whether a person is employed or self-employed. 

As with any contract of engagement in the construction sector, whether a person is engaged as an employee or as a self-employed contractor is determined by the facts and evidence of each case and guidance on that matter is provided in the code of practice for determining employment or self-employment status of Individuals which was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and relevant State agencies.

In regard to bogus self-employment and the RCT1 system, the Finance Act 2007 placed a statutory obligation on principal contractors in the construction, meat processing and forestry sectors to submit to the Revenue Commissioners the details of relevant contracts entered into by those principals and their subcontractors.  Up to 1 January 2012, such details were submitted to the Revenue Commissioners on a form known as a form RCT1.  Under the eRCT system, which came into effect as and from 1 January 2012, form RCT1 is no longer used but the same obligation on principal contractors remains, albeit the information is now supplied electronically rather than in paper format. 

Additional information not given on the floor of the House

There are safeguards built into the eRCT system for those individuals who may have concerns that they are caught up in "bogus self-employment". For example, I am advised by the Revenue Commissioners that when they receive from principal contractors, in real time, the details of relevant contracts in the construction sector, Revenue immediately informs the relevant subcontractor or subcontractors of those details.If a subcontractor is of the view that those details are incorrect, or if the subcontractor is of the view that she or he is not, in fact, a subcontractor but is an employee, then she or he can notify Revenue of those facts.  Revenue will then investigate the matter.

As to investigating what the Deputy describes as possibly large losses in tax revenue to the Exchequer because of abuses of the RCT1 system, the construction sector is an acknowledged area of high risk internationally and Ireland is no different.  I am informed by Revenue that monitoring of the construction sector for abuses of the tax and duty systems forms part of its ongoing compliance programmes to which it commits significant resources. If the Deputy has specific information relating to individuals or businesses groups in any sector who are involved in tax evasion, he should send that to Revenue.  Revenue has provided a tailored template on its website which facilitates reporting of tax evasion and the relevant links are provided for the Deputy's information:  and

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Will the Minister please get off the script and address what is a very serious issue? Currently, approximately 63,000 people are classified as being self-employed in construction, which accounts for about half of all construction workers. Are we seriously to believe that half of all those working in construction are entrepreneurs? I can tell the Minister they are not. If he wants examples, he should go out to the Gannon Homes site in Swords, a NAMA developer, where he will find people being misclassified as self-employed when they are not self-employed. They are not entrepreneurs; they are simply bricklayers being paid €100 a day. Similarly, this practice is going on at the Robswall site in Malahide just as it went on in Rhatigan's. It needs to be investigated but there seems to be no will on the MInister's part to ensure it is investigated. People who are clearly not self-employed subcontractors are being employed by builders in order for those builders to avoid paying PRSI, holiday pay and tax for those employees. The result of this practice is that Revenue is losing possibly hundreds of millions of euro in tax revenue each year because people are being misclassified. This is tax fraud. It is a criminal offence and the Minister has shown no interest in tackling it.

Michael Kitt (Galway East, Fianna Fail)
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Thank you, Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Minister just passes the buck; this is not Revenue's job and it does not come under the RCT system. These people are being misclassified as self-employed when they are not. It is an abuse of the system and the taxpayer is losing out, not to the mention the exploitation of workers.

Michael Noonan (Limerick City, Fine Gael)
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First, the Deputy's request for me to get off the script is rather inappropriate because the script is the prepared reply to the question the Deputy put down and if I did not did not reply to the question he put down, he would have another problem and another grievance.

A Deputy:

You may get off the stage.

Michael Noonan (Limerick City, Fine Gael)
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I have also informed the Deputy that the adjudication of whether somebody is an employee and-or self-employed is not a matter for the Revenue Commissioners. It is in accordance with the code of practice for determining employment or self-employment status of individuals and that document was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and the relevant State agencies. That is the document that decides between employees and self-employed people; it is not a matter for the tax authorities. The tax authorities collect the taxes but if, as the Deputy said, he has information that there is widespread abuse of the tax system, he should send the information to the Revenue Commissioners and I can assure him they will follow it up.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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No, I want the Minister to take responsibility for tax fraud. The allegations are that this is rampant in the construction industry and on sites involving big public contracts. We saw this happen in Rhatigan's and it had to pay €100,000. Did it have to pay it because everything was squeaky clean? No, it was because it was abusing the system. This is tax fraud. It is a crime. If contractors and subcontractors are misclassifying people as being self-employed when in fact they are employing those people directly, that is the business of Revenue and it is the business of the Government, collectively, to ensure inspections take place. I mentioned two sites. The inspectors need to be sent to those sites now. This practice is going on as we speak at the Gannon Homes site in Swords, a former NAMA site, and at the Robswall site in Malahide. Rhatigan's, which, as we know, was involved in such practice arising from the dispute in Kishoge, also has four or five other sites where it is currently building schools. This practice is rampant and the result is that €167 million was deducted last year in RCT but €139 million was given back. Therefore, only €27 million in being collected in tax from 63,000 employees. It is an absolute joke.

Michael Kitt (Galway East, Fianna Fail)
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Thank you, Deputy.

Michael Noonan (Limerick City, Fine Gael)
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As a responsible citizen and as a Deputy of this House, I have no doubt the Revenue will take any allegation the Deputy makes seriously. I will bring the record of the House today to the attention of the Revenue Commissioners and I will request them to follow up the allegations he has made, but I presume that if they contact him personally, he will try and give them more precise information to assist them-----

Ruth Coppinger (Dublin West, Socialist Party)
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This is Government policy.

Michael Noonan (Limerick City, Fine Gael)
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-----with their follow-up.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Government needs to follow it up.