Kevin Humphreys (Dublin South East, Labour)
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Question 108: To ask the Minister for Finance if it is his policy to check the tax compliance of companies and persons before they are awarded State contracts; if he will consider directing the Revenue Commissioners to investigate the tax compliance of all contractors and sub-contractors currently working on State contracts; and if he will make a statement on the matter. [30750/11]

Michael Noonan (Limerick City, Fine Gael)
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The policy of my Department, as set out in Circular 43/2006 "Tax Clearance Procedures, Public Sector Contracts" is that, in the case of all public sector contracts of a value of €10,000 (inclusive of VAT) or more within any 12-month period, the contractor (and agent as appropriate) is required to produce either a valid tax clearance certificate or a C2 certificate. The public sector includes all Government Departments and Offices, Local Authorities, the Health Service Executive and other Health Agencies, Educational Bodies and all State Bodies whether commercial or non-commercial (statutory or otherwise) and in general all authorities (agencies/entities/bodies) who finance contracts out of public funds. The Circular is to be interpreted to cover situations where public sector bodies are buying, hiring or leasing goods, services or property or generally expending public monies including, for example, contracts. It is not necessary that a contract be the subject of formal documentation or a tendering process for the tax clearance procedures to apply. Contracts awarded and payments made by public sector bodies to other public sector bodies are excluded from the scope of these procedures.

I am advised by the Revenue Commissioners that the tax compliance of all contractors and sub contractors currently working on State contracts has been verified through the tax clearance or C2 process as outlined above. Further monitoring on sub-contractors' compliance is carried out through the payments cards application process when the compliance status is reviewed before payments in excess of approved amounts can be made without deduction of Relevant Contracts Tax.

In addition, State Bodies, principal and sub contractors are all subject to Revenue's various compliance programmes which range from unannounced visits to sites to fully comprehensive audits. In that context they may be selected for intervention based on the presence of various risk indicators and other information available to Revenue.

In the future the new Relevant Contracts Tax system that is being introduced by Revenue from 1 January 2012 will ensure that Revenue has access to up to date real time information on-line which they can monitor, review and respond to immediately. The rate of RCT to be applied will change depending on the ongoing tax compliance of the sub contractors. In effect it introduces a system of real time and ongoing tax clearance.

Section 101 of the Minister and Secretaries (Amendment) Act 2011 has placed on a statutory basis the independence of the Revenue Commissioners in the exercise by the Commissioners of their statutory functions under the various taxation and customs enactments, including decisions relating to investigation. This has given effect to the recommendation of the Report of the Tribunal into Payments to Politicians and Related Matters (that is, the report of Mr. Justice Moriarty), that the principle or convention of the independence of the Revenue Commissioners be elevated to the more robust status of a legislative provision.