Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

327. To ask the Minister for Finance his views on the relevant contracts tax system being abused by certain building contractors to create a bogus self-employment situation; if this matter is being examined by the Revenue Commissioners; and if he will make a statement on the matter. [34749/14]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am informed by the Revenue Commissioners that the electronic relevant contracts tax (eRCT) system is a tax deduction at source system that applies to payments made under contracts in the construction, meat processing and forestry sectors.  The eRCT system was introduced in 2012 to bring, inter alia, more control and oversight to construction sector contracts.  Under the system, contractors are assigned rates of tax deduction at source of either 0%, or 20% or 35% depending on their tax compliance record.  Within the eRCT system, all contracts entered into by principal contractors, and all payments made on foot of those contracts, are notified to Revenue on a 'real-time' basis. This information is used to drive Revenue's risk assessment process and allows for more focused and effective interventions into abuses of the tax system.  However, the eRCT system, being a tax deduction system, does not create a self-employment situation, bogus or otherwise.   

As to claims of individuals in the construction sector being misclassified as self-employed such that the eRCT system, rather than the PAYE system, applies to payments made to them - I am further informed by the Revenue Commissioners that their officers work closely with the Department of Social Protection (DSP) and the National Employment Rights Authority (NERA) in assuring continued compliance on all fronts in the construction sector including addressing issues of employment misclassification and other concerns raised.  In this respect, a number of joint and multi-agency compliance visits have been made to selected sites and interviews conducted with all contractors and sub-contractors encountered. These joint investigations into possible misclassification of employment are on-going. 

As regards contracts entered into by persons in the construction sector, the criteria stipulated in the 'Code of Practice for Employment or Self-Employment Status of Individuals' will assist both parties in determining if a contract is, by its nature, either -

- a 'contract of service' (that is, an employer and employee arrangement) in which case the PAYE system applies to payments made; or

- a 'contract for service' (that is, not an employer and employee arrangement) in which case the eRCT system applies to payments made.

Employment misclassification issues form a very significant part of the work done by Revenue on construction contracts and they continue, in conjunction with other Departments and State Agencies, to be vigilant in that regard.  In addition, Revenue conducts a significant number of checks on real-time payment information to determine if VAT registration is required and it forms part of both desk-based and on-site checks on construction contracts.

If the Deputy has any information on abuses of the tax system, including on misclassification of employment status of individuals, it would be appreciated if he would pass such information to my officials who will direct same to the Revenue Commissioners.