Paul Kehoe (Wexford, Fine Gael)
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Question 285: To ask the Minister for Finance the status of the application for a refund of tax during unemployment in respect of a person (details supplied); when payment will be awarded; and if he will make a statement on the matter. [1631/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised by the Revenue Commissioners that they have arranged for an unemployment refund for 2008 to issue to the person in question. This should issue within the next ten days.

Paul Kehoe (Wexford, Fine Gael)
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Question 286: To ask the Minister for Finance his views on relevant contracts tax and self-employed people (details supplied); his further views on whether it is reasonable that as a result of a revenue audit in which it is found that no tax to the State has been lost, that the revenue should raise an assessment for RCT which is not a tax, only a method of collecting tax, and that this situation should arise; and if he will make a statement on the matter. [1688/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Starting in late 2005, Revenue conducted a national campaign of audit and site visits in the industry to establish the levels of tax compliance and to tackle abuse. One of the key problems identified was the fairly common failure to operate the construction industry withholding tax, known as RCT (Relevant Contract Tax). This tax should be operated by a principal contractor on payments to subcontractors. RCT has been in operation since the early 1970s. The tax provides a safety net against tax evasion by operating a withholding mechanism where there is a risk of non-compliance. It also creates an audit trail that allows money to be paid without deduction in suitable compliant cases. I am satisfied that RCT is an essential part of fiscal control of the construction industry.

It would appear from the limited facts given in the example quoted that the person who built and sold the two houses was in the business of land development. He was acting as a principal contractor when he engaged the builders to carry out the work as sub contractors and should therefore have operated the RCT system. Without further facts on the specific case it is not possible to give a definitive opinion on the RCT treatment of this farmer.

Some principal contractors faced with Revenue audits have argued that failure to withhold the RCT has not resulted in tax loss, as the sub-contractors in the case were fully compliant with tax law. However, the obligation on the principal to deduct the tax stands on its own and is separate from any claim for credit, or payment of due liability by the subcontractor.

I am advised by Revenue that they have proposed a mechanism that would allow the principal and sub-contractor to retrospectively adjust the tax liability between them so as to eliminate any double taxation provided the sub contractors are C2 holders. This option has been highlighted to tax practitioners in Revenue eBrief No. 10/2007 in February, with subsequent reminders in February 2008 & January 2009, prior to the Form RCT 35 filing deadline. Guidelines on RCT are available on www.revenue.ie under Construction Industry. This option may be available to the taxpayer mentioned by the Deputy. If he contacts his local Revenue office, the district manager can explain to him how this mechanism might work in his case.