Jack Wall (Kildare South, Labour)
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Question 31: To ask the Minister for Finance if his attention has been drawn the concerns of board of managements of schools in regard to the recent changes by the Revenue Commissioners in regard to relevant tax contracts and the major increase in the volume of work that such changes are creating for the voluntary boards of such schools; if his further attention has been drawn to the cost to the boards that the increased auditing is causing for the boards; if he has had any meetings with the Department of Education and Skills regarding the stated changes; if so, the result of such meetings and if he will have the matter reviewed in regard to the concerns raised; and if he will make a statement on the matter. [28804/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that Relevant Contracts Tax (RCT) is a withholding tax system that operates in the construction, forestry and meat processing sectors. Principal contractors are defined in the legislation (section 530A of the Taxes Consolidation Act 1997) as including "any board or body established by or under statute ... and funded wholly or mainly out of funds provided by the Oireachtas". As such, school Boards of Management are principal contractors for the purposes of RCT.

Principal contractors, including school Boards of Management, are and always were required to deduct tax from the payments made to subcontractors and pay it over to Revenue. As it is recognised that it would be undesirable to deduct tax from compliant subcontractors, provision is made for compliant subcontractors to receive payments without deduction of tax. The need to ensure tax compliance by subcontractors is particularly important where the Exchequer is the ultimate source of the funds being paid out by school Boards of Management and other principal contractors. RCT plays an important role in ensuring tax compliance by subcontractors in these sectors.

From 1 January 2012, the Revenue Commissioners have made available a new online system for the operation of RCT that has significantly reduced the administrative burden associated with RCT. This new system offers a fast, efficient and paper free system, which has streamlined the process for the submission of information and payments to Revenue.

I am further informed by the Revenue Commissioners that they are aware of the difficulty some school Boards of Management may be having in fulfilling their obligations under the RCT system. Revenue has met with the Department of Education and Skills regarding the obligations of Boards of Management under the RCT system and that further meetings are planned. In addition, local Revenue offices have been contacting Boards of Management who are likely to be in receipt of State funding for construction projects with a view to assisting them with their RCT responsibilities. Detailed guidance notes regarding the operation of RCT by school Boards of Management are being prepared and will be made available on the Revenue website and also made available to the Department of Education and Skills.

Finally, having regard to the pressures on the public finances, it is important that the RCT system is implemented correctly in order to minimise tax evasion in the construction sector particularly involving substantial State funding. The new online administrative system introduced by Revenue has significantly simplified the RCT process for principal contractors, including school Boards of Management.