Written answers

Thursday, 4 November 2010

2:00 pm

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Question 122: To ask the Minister for Finance if he will oblige financial institutions which are financing private construction industry projects to seek the tax clearance and subcontractor certificates of contractors involved in these projects before releasing funds, as an effort to eliminate the black economy from the construction sector; and if he will make a statement on the matter. [40787/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The primary purpose of the tax clearance process, as operated by the Office of the Revenue Commissioners, is to ensure that persons who are in receipt of contracts or grants, subsidies and other payments from the State, or who derive an economic benefit from a licence or permit to conduct certain activities in the State, are in compliance with their tax obligations. In relation to the specific proposal that the banks seek tax clearance and subcontractor certificates before releasing funds for construction projects, this would potentially lead to delays in the flow of funds to business. Construction projects would cover a very large range of activities from large construction projects, commercial and residential, to small extensions and in many cases at the time of the drawdown of the funds the borrower may not have identified all of the specific contractors and subcontractors that will be employed in the work. In any event, hidden economy activity might be paid out of the borrowers' own resources.

However, the issue of the black or hidden economy continues to be of great concern, and I am informed by the Revenue Commissioners that specific measures are being implemented to tackle such issues in the construction sector, particularly in recent times in relation to one-off housing and self-builds. Revenue and the Department of Social Protection are working closely together and both organisations will include, in their priorities for 2011, actions specifically directed at mitigating hidden economy activity.

Currently Revenue has many initiatives in place to tackle hidden economy activity in the sector. These measures include: -

· Liaison with industry representative bodies to identify hidden economy trends.

· An ongoing focus on hidden economy activities by the Hidden Economy Monitoring Group.

· Liaising and sharing information with other relevant Departments and carrying out joint investigations where appropriate.

In addition, Revenue may also monitor the registration of contractors through the revised Form RCT 1 process, carry out unannounced visits to one-off housing and self-builds and examine planning applications. It also has a central non-resident unit based in Dublin to deal with all non-resident cases. Revenue uses confidential information and local intelligence to target suspect sites. This approach is most effective and anyone with information on hidden economy activity can report their concerns to their local, or indeed any, Revenue office. The Revenue Commissioners are continuing also to tackle the problem of the hidden economy through their routine audit and compliance activity.

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